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In focus today

In the US, the May Jobs Report is set to conclude an eventful week. We forecast nonfarm payrolls to increase by 130k, average hourly earnings rising at 0.3% m/m SA, and the unemployment rate to remain steady at 4.2%, aligning well with consensus.

In the euro area, focus turns to the third estimate of the national accounts data for the euro area in Q1. The estimate will include details on how exports and private consumption fared in Q1 as well as the ECB's preferred wage measure, compensation per employee, which will be interesting to watch following the decline in negotiated wages in Q1.

Also, in the euro area we receive the April retail sales data, which will be important to follow to see if the lower consumer confidence has translated into lower spending.

Economic and market news

What happened overnight

In geopolitics, Russia has launched a large-scale drone and missile attack on Ukraine, including residential areas in Kyiv. Earlier this week, President Putin warned of Kremlin's retaliatory actions against Kyiv in response to Ukrainian strikes on Russian air bases.

What happened since Wednesday:

In the global trade war, Presidents Trump and Xi Jinping have agreed to initiate a new round of trade talks between the US and China following a long-awaited phone call on Thursday. The conversation, primarily focused on trade, made progress on critical rare earth minerals, according to Trump. Both leaders have accepted invitations for presidential-level visits in the coming months. The call came ahead of Trump's meeting with German Chancellor Merz at the White House, where discussions on trade, defence commitments, and the Russia-Ukraine war set a positive tone for future US-German relations.

In the US, the ADP employment report came in weaker than expected with an increase of 37k private sector jobs (cons: 110, prior: 62). The Leisure & hospitality remained the most important driver of employment growth (+38k), consistent with trends seen in recent years. Meanwhile, the ISM services printed 49.9 (cons: 52.0, prior: 51.6), indicating contraction within the economy. The subcomponents painted a mixed picture as business activity and new orders weakened, while price pressures increased to 68.7 (prior: 65.1).

Jobless claims exceeded expectations, reaching 247k (cons: 235, prior: 240), indicating softening labour market conditions. Prior to the release, the May Challenger report showed a continued decline in layoff announcements of 94k, down from 105k in April and significantly lower than the DOGE-driven peak of 275k in March. This trend supports the notion that overall labour market conditions remain relatively steady, despite the ADP pointing towards a cooling in hiring.

In the euro area, the ECB cut its policy rates by 25bp, as widely expected bringing the deposit rate to 2.0%. The inflation forecast was revised downward, projecting 2.0% for this year and 1.6% for next year. While the announcement initially suggested potential for further rate cuts, ECB President Lagarde's remarks during the press conference were to the hawkish side, indicating the rate cutting cycle may be nearing its conclusion. Following today's hawkish communication, we have revised our forecast, removing the July cut and targeting a final cut in September with a terminal rate at 1.75% (prior: 1.50%). Read more in ECB review - In a good position, close to or at the end, 05 June.

Also in the euro area, the final services PMI for May was revised up to 49.7 compared to the flash release of 48.9 and 50.1 in April. The upward revision was due to France and Italy. The service sector was thus in contractionary territory in May but not as deeply as the flash print suggested. The PMI data for Q2 point to an economic stagnation in the euro area, following stronger than expected growth in Q1.

In Sweden, services PMI increased to 50.8 in May (prior: 48.7), indicating a modest return to expansion. This is encouraging news, as the service sector has previously been weaker than manufacturing, staying below the 50-mark for two consecutive months.

Sweden inflation figures for May were also released and slightly lower than expected. CPI came in at 0.0% m/m and 0.2% y/y, while CPIF printed 0.1% m/m and 2.3% y/y, and CPIF excl. energy printed 0.2% m/m and 2.5% y/y, all below consensus. This prompted the money market to add to its easing bets for the June meeting, with pricing now at 18 bp (prior: 15). Although we agree that yesterday's outcome has increased the probability of a cut already at the June meeting, we still see August as the most probable option and see market pricing as slightly excessive. Details will be released next week.

In Canada, the Bank of Canada left policy rates unchanged. The press release presented a balanced view, highlighting persistent trade uncertainties.

In China, the Caixin PMI revealed stronger services growth in May inching higher to 51.1 (prior: 50.7), despite concerns over US tariffs. The index indicates expansion, with robust new orders, although export orders faced headwinds. Positive sentiment persists, with companies increasing hiring to meet rising demand, while maintaining an optimistic outlook for the year ahead.

Equities: Equities ended the day lower yesterday, with losses led by the U.S., while European indices managed to stay in positive territory. Once again, despite a session packed with meaningful macro releases and central bank decisions, market attention was hijacked by a rather extraordinary public exchange between the President of the world's largest economy and the CEO of one of its largest corporations - mostly playing out on social media. If in doubt, just look at the performance dispersion among individual stocks - the impact is hard to miss. Defensive stocks generally outperformed cyclicals, which can be viewed through the lens of a multi-factor environment. Notably, despite a small uptick in the VIX yesterday, it remains below levels seen on April 1st - and at around 18.5 this morning, we still view sub-20 volatility as surprisingly low given the multitude of uncertainties globally. In the US yesterday, Dow -0.3%, S&P 500 -0.5%, Nasdaq -0.8% and Russell 2000 -0.1%. Developments in Asia remain mixed overnight, while European equity futures point slightly lower and U.S. futures marginally higher this morning.

FI & FX: In a choppy day for risk appetite - and by extension currency markets - the ECB decision to cut policy rates by 25bp took centre stage. While the decision was well anticipated the fairly hawkish Lagarde rhetoric at the press conference temporarily sent EUR/USD close to 1.15 before the cross erased most of its gains during the US session. The NOK enjoyed higher oil prices while the SEK largely disregarded lower-than-consensus Swedish CPI in the morning. Global yields ended the session higher with a slight continued flattening pressure from recent sessions extending. The anticipated 1:1 Danish rate cut from Danmarks Nationalbank had no impact on EUR/DKK.

Daily Pivots: (S1) 1.3645; (P) 1.3665; (R1) 1.3694; More...

Intraday bias in USD/CAD stays on the downside as decline from 1.4791 is in progress. . Next target is 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. Firm break there will pave the way to 100% projection at 1.3349. On the upside, above 1.3741 minor resistance will turn intraday bias neutral and bring consolidations first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

There was a fleeting uptick in sentiment overnight after US President Donald Trump spoke by phone with Chinese President Xi Jinping, calling the conversation “very positive” and announcing renewed lower-level trade talks. However, the initial optimism quickly faded, with major US indexes reversing early gains to end the session lower.

The Chinese readout was more cautious, stressing that the US should “withdraw negative measures” and warning Washington to handle Taiwan “prudently.” The divergence in tone reinforces the sense that the two sides remain far apart. The agreement to more talks appears to be little more than a tactical delay rather than genuine progress.

Elsewhere, US Treasury called on BoJ to continue policy tightening to support a normalization of Yen and correct bilateral trade imbalances. The statement, part of the Treasury’s semiannual currency report, suggested Tokyo had more to do on the policy front.

However, Japan’s Finance Minister Katsunobu Kato offered a restrained response, reiterating that monetary decisions lie with the BOJ and avoiding direct comment on the US call for further tightening. Yen, meanwhile, barely reacted, continuing its technical consolidation as it drifts slightly lower against Dollar.

In currency markets, Dollar remains the worst performer of the week heading into Friday’s crucial non-farm payrolls release. With a string of weak labor-related indicators earlier this week—ADP, ISM employment components, and initial claims—markets are bracing for a soft headline. Yen and Swiss Franc are also lagging this week, underperforming alongside the greenback

On the other hand, Kiwi leads the pack, while Aussie and Sterling also posted modest gains Euro and Loonie Dollar are positioning in the middle. However, all these standings remain subject to sharp realignment depending on the tone of the upcoming US employment data and its interplay with broader market sentiment.

In Asia, at the time of writing, Nikkei is up 0.51%. Hong Kong HSI is down -0.09%. China Shanghai SSE is down -0.06%. Singapore Strait Times is up 0.16%. Japan 10-year JGB yield is flat at 1.462. Overnight, DOW fell -0.25%. S&P 500 fell -0.53%. NASDAQ fell -0.83%. 10-year yield rose 0.029 to 4.394.

Looking ahead, Germany will release industrial production and trade balance in European session. Swiss will publish foreign currency reserves while Eurozone will release retail sales and GDP revision. Later in the day, Canada will also release job data along with US non-farm payrolls.

US NFP: Muted Hiring or Major Miss?

Markets are awaiting today’s US non-farm payrolls release, with little doubt that hiring had slowed meaningfully in May amid heightened tariff threats and elevated uncertainty. The key question now is just how sharp the slowdown was.

Consensus forecasts see NFP at 130K, unemployment steady at 4.2%, and average hourly earnings rising 0.3% mom. Recent labor indicators have painted a dismal picture. ADP private employment came in at just 37k, a stark miss. ISM Manufacturing employment stayed subdued at 46.8 and the Services component barely rose back into expansion territory at 50.7. Meanwhile, 4-week average of jobless claims has crept up to 235k.

While a modest softening in job growth would likely be tolerated as a natural response to macro headwinds, any significant downside surprise could reignite recession fears. An NFP reading below 100K could provoke a sharp risk-off response in equities. However, such a result would likely weigh further on Dollar, as markets would begin pricing in earlier Fed rate cuts in response to labor market deterioration.

Technically, S&P 500 extended the near term rise from 4835.04 this week, but continued to lose upside momentum as seen in D MACD. This rise is seen as the second leg of the corrective pattern from 6147.43. Hence, while further rise cannot be ruled out, given that S&P 500 is now close to 6000, upside potential is limited. On the other hand, break of 5767.41 support will signal that a short term top was already formed. Deeper pull back should be seen back to 38.2% retracement of 4835.04 to 5999.70 at 5554.79, with risk of bearish reversal.

Fed's Kugler: Tariffs may entrench inflation via expectations, pricing power, and productivity

Fed Governor Adriana Kugler cautioned that disinflation "has slowed" and that tariffs are beginning to exert upward pressure on prices, a trend she expects to continue into 2025. Speaking overnight, Kugler emphasized that the balance of risks has tilted, with “greater upside risks to inflation” now emerging, even as downside risks to employment and growth loom on the horizon. As a result, she reaffirmed support for holding the current policy rate steady.

Kugler outlined three channels through which tariffs could entrench inflationary pressures. First, she noted that rising short-term inflation expectations may grant businesses "more leeway to raise prices", thereby increasing inflation persistence.

Second, she flagged the risk of "opportunistic pricing", where firms use tariff headlines as cover to hike prices even on unaffected goods. This, combined with higher costs on intermediate goods, could generate "second-round effects" on inflation.

The third concern relates to "lower productivity". As firms contend with elevated input costs and weaker demand, they may reduce capital investment and resort to less efficient production methods, reinforcing inflationary pressure through lower productivity.

Fed’s Schmid: Tariff impact uncertain, policy must stay nimble

Kansas City Fed President Jeff Schmid acknowledged in a speech overnight that monetary theory may suggest to "looking through a one-time price shock", he would be "uncomfortable staking the Fed’s reputation and credibility on theory alone."

Despite the expected drag from tariffs, Schmid remains “optimistic” about the economy’s momentum. However, he acknowledged that both the inflationary and growth implications of tariffs are highly uncertain.

As a result, he argued that Fed will "need to remain nimble", and be prepared to adjust its stance as needed to maintain both price stability and maximum employment.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3645; (P) 1.3665; (R1) 1.3694; More...

Intraday bias in USD/CAD stays on the downside as decline from 1.4791 is in progress. . Next target is 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603. Firm break there will pave the way to 100% projection at 1.3349. On the upside, above 1.3741 minor resistance will turn intraday bias neutral and bring consolidations first.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

Key Highlights

• USD/JPY started a fresh decline below the 144.00 level.
• A connecting bullish trend line is forming with support at 143.40 on the 4-hour chart.
• EUR/USD is now gaining pace and might clear the 1.1500 resistance zone.
• GBP/USD is also rising and testing the 1.3600 resistance.

USD/JPY Technical Analysis

The US Dollar started a fresh decline from 145.50 against the Japanese Yen. USD/JPY declined below the 144.20 and 144.00 support levels.

Looking at the 4-hour chart, the pair settled below the 144.00 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even tested the 142.50 level and recently started a recovery wave.

The bulls pushed the pair above the 143.20 and the 50% Fib retracement level of the downward move from the 144.38 swing high to the 142.52 low.

On the upside, the pair could face resistance near the 144.00 level. The next key resistance sits near the 144.40 level. The first major resistance sits at 145.00. A close above the 145.00 level could set the pace for another increase.

In the stated case, the pair could even clear the 145.50 resistance. The next major stop for the bulls could be near the 146.20 resistance.

On the downside, immediate support sits near the 143.50 level. There is also a connecting bullish trend line forming with support at 143.40 on the same chart. The next key support sits near 143.00. Any more losses could send the pair toward the 142.50 pivot level in the near term. The main support could be near 141.50.

Looking at EUR/USD, the pair started another increase, but the bulls seem to be facing hurdles near the 1.1480 level.

Upcoming Economic Events:

• US nonfarm payrolls for May 2025 – Forecast 130K, versus 177K previous.
• US Unemployment Rate for May 2025 - Forecast 4.2%, versus 4.2% previous.

Markets are awaiting today’s US non-farm payrolls release, with little doubt that hiring had slowed meaningfully in May amid heightened tariff threats and elevated uncertainty. The key question now is just how sharp the slowdown was.

Consensus forecasts see NFP at 130K, unemployment steady at 4.2%, and average hourly earnings rising 0.3% mom. Recent labor indicators have painted a dismal picture. ADP private employment came in at just 37k, a stark miss. ISM Manufacturing employment stayed subdued at 46.8 and the Services component barely rose back into expansion territory at 50.7. Meanwhile, 4-week average of jobless claims has crept up to 235k.

While a modest softening in job growth would likely be tolerated as a natural response to macro headwinds, any significant downside surprise could reignite recession fears. An NFP reading below 100K could provoke a sharp risk-off response in equities. However, such a result would likely weigh further on Dollar, as markets would begin pricing in earlier Fed rate cuts in response to labor market deterioration.

Technically, S&P 500 extended the near term rise from 4835.04 this week, but continued to lose upside momentum as seen in D MACD. This rise is seen as the second leg of the corrective pattern from 6147.43. Hence, while further rise cannot be ruled out, given that S&P 500 is now close to 6000, upside potential is limited. On the other hand, break of 5767.41 support will signal that a short term top was already formed. Deeper pull back should be seen back to 38.2% retracement of 4835.04 to 5999.70 at 5554.79, with risk of bearish reversal.

Kansas City Fed President Jeff Schmid acknowledged in a speech overnight that monetary theory may suggest to "looking through a one-time price shock", he would be "uncomfortable staking the Fed’s reputation and credibility on theory alone."

Despite the expected drag from tariffs, Schmid remains “optimistic” about the economy’s momentum. However, he acknowledged that both the inflationary and growth implications of tariffs are highly uncertain.

As a result, he argued that Fed will "need to remain nimble", and be prepared to adjust its stance as needed to maintain both price stability and maximum employment.

Fed Governor Adriana Kugler cautioned that disinflation "has slowed" and that tariffs are beginning to exert upward pressure on prices, a trend she expects to continue into 2025. Speaking overnight, Kugler emphasized that the balance of risks has tilted, with “greater upside risks to inflation” now emerging, even as downside risks to employment and growth loom on the horizon. As a result, she reaffirmed support for holding the current policy rate steady.

Kugler outlined three channels through which tariffs could entrench inflationary pressures. First, she noted that rising short-term inflation expectations may grant businesses "more leeway to raise prices", thereby increasing inflation persistence.

Second, she flagged the risk of "opportunistic pricing", where firms use tariff headlines as cover to hike prices even on unaffected goods. This, combined with higher costs on intermediate goods, could generate "second-round effects" on inflation.

The third concern relates to "lower productivity". As firms contend with elevated input costs and weaker demand, they may reduce capital investment and resort to less efficient production methods, reinforcing inflationary pressure through lower productivity.

Full speech of Fed's Kugler here.

Bitcoin: ⬇️ Sell

• Bitcoin broke support zone
• Likely to fall to support level 98,000.00

Bitcoin cryptocurrency recently broke the support zone located between the key support level 102150.00 (which reversed the price multiple times from the start of May) and the 50% Fibonacci correction of the upward impulse from last month.

The breakout of this support zone accelerated the active short-term ABC correction 2, which started earlier from the major multi-month resistance level 110,000.00.

Bitcoin cryptocurrency can be expected to fall to the next support level 98,000.00 (former strong resistance from February).

Ethereum had a rough beginning of 2025—failing to reach new all-time highs, while Bitcoin smashed through its own ATH multiple times. Solana, providing a cheaper alternative to ETH services, also held stronger than the Ether throughout the latter part of 2024 and beginning 2025.

ETH performance is key to the overall crypto market performance; the past Altcoin cycles have always been led by ETH performance over BTC.

ETH/BTC is a great cryptocurrency spread for a crypto trader to spot relative performance, provide a direction for which crypto to choose, and track the appetite for altcoins.

Through this Crypto Market Update, you will see how ETH/BTC rising helped altcoin bull-runs in the past cycle, something that many crypto traders have been awaiting and is yet to materialize again.

ETH/BTC and its Correlation to total Market Performance

ETH/BTC and Total Crypto Market Cap, 2017 to End 2021 - Source: TradingView

This 2017 to 2021 chart of ETH/BTC contains essential information about understanding the Crypto Market.

Through 1 and 2 we observe how the first bull run in ETH and ETH/BTC led to the 2017 Total Crypto Market bull run - taking the Market Cap from $20B-$30B average to highs of $620B in November 2017.

Number 3 on the chart shows how a drop in ETH/BTC leads to a significant cool down of the Crypto Market, going back towards a total market cap between $100 to $250B from 2018 to the end of 2020.

From end 2020 to the end of 2021, number 4 shows the same correlation of ETH/BTC and Crypto markets rallying.

This Covid-Era bull run introduced crypto for an ever-bigger number of investors, and led to the flurry of altcoins and cryptocurrency projects such as Doge, Avax, Solana. The Crypto Market cap went from $300B to $2.86T, this level only got reached again in November 2024.

Finally, number 5 shows similarly to number 3 how the drop in Market Cap correlates with a drop in the ETH/BTC spread.

ETH/BTC from 2020 to Today

ETH/BTC and Bitcoin, 2020 to June 5, 2025 - Source: TradingView

We take a closer look at the 2021 Bull Run and how the December 2021 top in ETH/BTC led again a significant correction in the Crypto Market.

2023 was all about Bitcoin Dominance as its rally from $14,475 to its record highs of $112,030 left Ethereum and all other altcoins lagging.

We are seeing a breakout from the descent that started at the same level as the 2020 ETH/BTC bullish breakout - we will see if the spread continues upward and if it generates another Bull Run for altcoins.

ETH Daily Chart

ETH Daily Chart, June 5, 2025 - Source: TradingView

ETH had a consequent rally after a significant drop between $4,000 highs in December 2024 to $1,363 lows in April 2025.

Prices are consolidating between $2,300 and $2,600 - The key is to see if Bitcoin prices that are also stagnating above the $100,000 Mark leads to rallies in other cryptos as the same phenomenon happened in past bull cycles.

Levels to watch:

Support Zones:

• S1: 2,385 to 2,525
• S2: 2,035 to 2,167
• S3: 1,700 to 1,825

Resistance Zones:

• R1: 2,600 to 2,750
• R2: 3,225 to 3,363
• R3: 3,660 to 3,800

ETH 4H Chart

ETH 4H Chart, June 5, 2025 - Source: TradingView

Safe Trades!

US-China trade tensions keep abating as the leaders from the two most powerful nations conclude their talk.

Both expressed positive comments on their own media outlets as Xi Jinping and Donald Trump hang up after a 1 and a half hour long call.

Donald Trump expressed on his Truth Social media that the call "resulted in a very positive conclusion for both countries. [...] The conversation was focused almost entirely on trade".

Xi Jinping expressed on the CCTV that they agreed to start a new round of talks and that both the US and China should increase cooperation on their economy, reduce misunderstandings.

Both Xi and Trump invited each other for an encounter though the location has yet to be disclosed - it though seems that Xi is reluctant to go to the United States.

Markets had been on a risk-on sentiment in the anticipation of the conversation from the leaders of the biggest nations, and still found material to rally on - the USD and Equities, particularly the Nasdaq are rallying on the headlines

Nasdaq 100 Intra-Day Chart

Nasdaq 100 30m Chart, June 5, 2025 - Source: TradingView

The Nasdaq which was already on a decent week is up above 0.70% as we speak, with very strong bullish candles.

The Tech-focused Index is less than 400 points (and 2%) from its all-time highs, located at 22,248.

The broadly positive sentiment is giving another leg to the rally that had started since the middle of April in what now looks like a flash recovery.

This is giving even more importance to the Non-Farm Payroll report tomorrow, expected at 130K, as a beat on expectations could easily lead to new all-time Highs.

Zones for support and resistances:

Support Zones (+/- 25 points)

• 21,700 S1
• 21,400 S2
• 21,100 S3

Resistance Zones

• 22,000 (psychological Level)
• 22,077 to 22,150 (Fib Projections)
• 22,248 (all-time highs)

Dollar Index Intra-Day Chart

DXY 30M Chart, June 5, 2025 - Source: TradingView

The Dollar which had been having a tough week rallied from its post-ECB press conference lows - The forex outlook is risk-on overall.

The sharp reversal towards the last support now turning into Immediate Pivot Zone (between 98.65 to 98.73) will be essential for both bulls and bears.

A break above points toward the 99.00 psychological level, then the 99.25 to 99.35 Resistance Zone.

Prices will have to breach the 30m MA 50 and downtrend, though momentum is strong and RSI is still far from overbought.

A rejection of today's highs points to a retest of today's lows at 98.40, and a further break to the 98.00 psychological level.

Safe Trades!