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Daily Pivots: (S1) 162.57; (P) 163.41; (R1) 163.84; More...

Intraday bias in EUR/JPY stays neutral at this point. On the upside, above 164.24 will bring retest of 165.19 resistance first. Firm break there will resume while rise from 154.77 to 166.67 resistance. On the downside, however, break of 161.06 will resume the decline from 165.19 instead.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 0.8411; (P) 0.8421; (R1) 0.8436; More...

Intraday bias in EUR/GBP remains neutral for the moment. On the upside, above 0.8448 will resume the rebound to 38.2% retracement of 0.8737 to 0.8354 at 0.8500. On the downside, however, break of 0.8401 minor support will bring retest of 0.8354 low.

In the bigger picture, price actions from 0.8221 medium term bottom are merely forming a corrective pattern. There is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

Daily Pivots: (S1) 1.7541; (P) 1.7590; (R1) 1.7637; More...

Intraday bias in EUR/AUD remains neutral. On the upside, firm break of 38.2% retracement of 1.8554 to 1.7245 at 1.7745 will solidify the case that fall from 1.8554 has completed as a correction. Next target is 61.8% retracement at 1.8054. On the downside, however, break of 1.7460 support will bring retest of 1.7245 instead.

In the bigger picture, as long as 1.7062 resistance turned support (2023 high) holds, up trend from 1.4281 (2022 low) should still be in progress. Break of 1.8554 is expected after the whole corrective pattern from there completes. However, sustained break of 1.7062 will bring deeper fall back to 1.5963 support.

Daily Pivots: (S1) 0.9329; (P) 0.9355; (R1) 0.9371; More....

Intraday bias in EUR/CHF remains neutral. Rise from 0.9218 might continue, either as a correction to fall from 0.9660, or the third leg of the pattern from 0.9204. On the upside, above 0.9419 will target 0.9445 resistance and above. Nevertheless, on the downside, firm break of 0.9291 will bring retest of 0.9218 low.

In the bigger picture, prior rejection by long-term falling channel resistance (now at 0.9527) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. This will remain the favored case as long as 0.9660 resistance holds.

Daily Pivots: (S1) 1.1371; (P) 1.1403; (R1) 1.1449; More...

Intraday bias in EUR/USD remains neutral for the moment. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

Daily Pivots: (S1) 142.10; (P) 143.25; (R1) 143.88; More...

USD/JPY is still bounded in range trading and intraday bias remains neutral. On the upside, above 146.27 will target 148.64 resistance first. Firm break there will resume the rebound from 139.87. Nevertheless, break of 142.10 will bring deeper fall back to 139.87 low.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.3511; (P) 1.3545; (R1) 1.3590; More...

Intraday bias in GBP/USD remains neutral as it's still bounded in range below 1.3592. With 1.3389 support intact, further rise is expected. On the upside, firm break of 1.3592 will resume larger up trend to 100% projection of 1.2706 to 1.3442 from 1.3138 at 1.3874. However, decisive break of 1.3389 will turn bias back to the downside for 1.3138 support instead.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2866) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8153; (P) 0.8202; (R1) 0.8233; More….

Range trading continues in USD/CHF and intraday bias stays neutral. Fall from 0.8475 could extend lower, and break of 0.8156 will target 0.8038 low. But strong support should be seen from there to bring rebound, at least on first attempt. On the upside, break of 0.8346 resistance will extend the corrective pattern from 0.8038 with another rising leg.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8732) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 0.6460; (P) 0.6483; (R1) 0.6514; More...

Range trading continues in AUD/USD and intraday bias remains neutral. With 0.6406 support intact, further rally is expected. On the upside, firm break of 0.6536 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, decisive break of 0.6406 will confirm short term topping, and turn bias back to the downside for 38.2% retracement of 0.5913 to 0.6536 at 0.6298.

In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6441) cleanly, and outlook is mixed. Sustained trading above 55 W EMA will indicate that rise from 0.5913 is at least correcting the down trend from 0.8006 (2021 high), with risk of trend reversal. Further rise should be seen to 38.2% retracement of 0.8006 to 0.5913 at 0.6713. However, rejection by 55 W EMA will revive medium term bearishness for another fail through 0.5913 at a later stage.

Markets

Markets and Fed governors are still in the process of navigating the implications of the ‘stagflationary dichotomy’ for policy going forward. Fed’s Kashkari in an interview held the line that, at least for now, the Fed has the time to assess the impact on inflation that hasn’t returned to target yet, even as uncertainty via several channels (e.g. investment) might weigh on activity at some point in the future. Markets yesterday switched attention to growth rather than to inflation risks. ADP growth slowed sharply (37k vs 114k expected), followed by a disappointing services ISM. The headline index dropped below the 50 mark (49.9) and poor new orders (46.4) suggest more trouble ahead. At the same time, a better reading for employment (50.7) and a further rise in the prices paid subseries (68.7) were ignored. US yields dropped 8.5 bps (2-y) to 10.4 bps (30-y). Aside from softening Fed rate cut expectations, the strong performance at the long end of the curve also caught the eye. For now, investors don’t feel the need to further push the deficit theme. Shorts at the long end of the curve apparently took some chips off the table. The real reality check will come with tomorrow’s US payrolls. German yields this time fully disconnected from the US with investors in wait-and-see modus ahead of today’s ECB meeting. Yields change less than 2 bps across the curve. The dollar suffered from the combined ADP/ISM miss, but the damage could have been bigger. No technically important barriers were challenged (DXY close 98.78; EUR/USD 1.1417). US equities simply maintained recent gains, even as the stalemate in trade negotiations between the US and most of its main trading partners persists.

This morning, the focus in Asian markets was on a Japanese 30-y bond auction. Bonds rally after the sale even as the bid-cover ratio was far from convincing. As in the US yesterday, this suggests that the pressure at the long end of the curves(s) might be easing, at least temporarily. US markets probably face an ‘interludium ahead of tomorrow’s payrolls, with only the trade balance data and jobless claims scheduled for release. Question is whether the ECB policy decision will bring some more inspiring insights for European investors. Anything different from a 25 bps cut to 2.0% would be a huge surprise. The market focus will be on the now ECB staff projections and the press conference from ECB’s Lagarde. Staff projections will probably confirm that the ECB will meet its inflation target over the policy horizon. Interesting to see the assessment on growth, as recent hard data mostly were better than expected. With the ECB now ‘deep’ in neutral territory, we expect chair Lagarde to switch to a highly data/tariffs depended bias with little directional guidance. With still more than one additional 25 bps cut discounted, we expect the downside in European yields be rather well protected.

News & Views

The Bank of Canada kept its policy rate for second consecutive meeting unchanged at 2.75% yesterday. Growth was slightly stronger than the BoC had forecast in Q1. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. The economy is expected to be considerably weaker in Q2 as these effects reverse. The labour market has softened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The BoC’s preferred measures of core inflation moved up while the elimination of the federal consumer carbon tax reduced headline inflation by 0.6 ppt (1.7% in April instead of 2.3%). Household inflation expectations are rising over tariff treats with many businesses saying they’ll pass on higher costs. The BoC holds a wait-and-see approach as it balances the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. The Canadian dollar extended gains against the USD as some expected a rate cut or at least a softer signal from the BoC. USD/CAD closed at its lowest level since October (1.3678). Canadian money markets discount another 25 bps rate cut after Summer.

The US Congressional Budget Office (CBO) calculated that US President Trump’s big beautiful bill would increase budget deficits by $2.4tn over the next 10 year compared with doing nothing. The bill would lower tax revenues by $3.75tn while cutting spending by around $1.3tn. In a separate report, the CBO said that the tariffs in place as of May 13 would reduce budget deficits by $2.8tn over a decade if they remain, or more than the deficit increase from the bill. They didn’t take into account macro-economic effects with import duties expected to lift inflation by an average of 0.4% this year and next while reducing growth by 0.6% by 2035. Those estimates are obviously subject to significant uncertainty.