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Here’s a fun fact: the iShares MSCI All World Index just hit a fresh all-time high yesterday, only a few hours after the OECD cut the global growth forecast, citing global trade uncertainties, tighter monetary conditions, and weakened consumer and business sentiment.

Add to that the rising worries around some major economies’ ability to finance their ballooning debt and the recent spike in long-maturity sovereign bond yields, and you've got a pretty murky picture.

Even Elon Musk is growing frustrated with Trump’s ‘Big Beautiful Tax Bill’, reportedly saying he realized that the carnage at DOGE — and the hit to his reputation — were simply not worth it. In today’s context, the U.S. deficit is expected to grow by another $2.5 trillion over the next decade. But we’ll likely reach the $40 trillion mark well before that, probably around 2030.

Yet investors couldn’t care less. Dips in equity markets are still seen as opportunities to buy cheaper. And while the data is fun to watch (and sometimes useful to dilute Trump headlines), it remains secondary to the blind bullishness. That’s the takeaway from the post–April 2nd rally: the world may be wobbling, but markets march on.

On the trade and data front, the news is less than ideal. The latest headlines suggest that US–EU negotiations could be getting back on track, but with few details. Meanwhile, US–China talks are going nowhere, with Xi unwilling to talk unless Trump makes concessions.

Trump is visibly frustrated with China’s resilience but China holds a powerful card: rare earth metals. They supply around 90% of global rare earth elements, essential for carmakers and tech producers. These metals aren’t rare like gold or platinum — they’re found in many places, but not in concentrated form. You need to mine and refine them, and China excels at doing that cheaply.

That’s why we all depend on China for these 17 elements, and it’s said that it would take the US 5–10 years to build the necessary refining capacity. China knows it. A restriction in rare earth exports could have serious economic consequences. But Xi isn’t sitting down without real concessions — on tech, on tariffs, you name it. Even the UK, temporarily exempt from the 50% steel and aluminium tariffs, is back at the table, warning that uncertainty isn’t going anywhere.

Markets, for now, are ignoring it. But for how long?

Because yesterday’s ISM services data showed a surprise contraction, and the ADP jobs report was weak, just 37,000 new private jobs last month. Over the past four months, three readings came in under 100K, and one under 50K. Historically, a string of sub-50K prints often signals recession is knocking.

But weak data just boosts rate-cut hopes. Markets now expect two Federal Reserve (Fed) rate cuts by year-end, the first likely in September. The US 2-year yield fell below 3.90%, limiting equity downside — the S&P 500 closed flat.

That’s the magic, right? Good data = optimism on growth. Bad data = optimism on rate cuts.

The only problem is: the Fed says it won’t cut until it sees tariffs affect inflation. That part... goes unheard.

Interestingly, the US dollar is one of the few assets reflecting trade pessimism, and its weakness helps stabilize European inflation. The flash CPI for May suggests eurozone headline inflation dipped below the European Central Bank’s (ECB) 2% target.

That gives the ECB breathing room to cut rates with confidence today — a 25bp cut is expected, marking the seventh consecutive meeting with a cut, and the eighth since early last year. Combined with fiscal stimulus plans, the easing bolsters the European growth story — and the euro. The single currency still needs a strong catalyst to break above the 1.1450/1.15 resistance. But it feels like a matter of time.

Across the Pacific, the Bank of Canada (BoC) paused its rate cuts, but that didn’t stop USDCAD shorts from pushing the pair below a key long-term Fibonacci level — the 38.2% retracement of the 2021–2025 rally. The USDCAD is now consolidating in the long-term bearish zone, with prospects of further downside toward 1.30–1.33.

And that’s despite oil prices coming under pressure. WTI crude remains above its 50-DMA, but is losing momentum. Even escalating tensions between Russia and Ukraine, and a 4 million barrel drop in US weekly inventories, couldn’t drive prices higher. The failure to rally past $64/barrel suggests the recent uptrend may have peaked, and a new wave of weakness may be on the horizon.

Daily Pivots: (S1) 1.3645; (P) 1.3688; (R1) 1.3724; More...

USD/CAD's decline from 1.4791 is still in progress and intraday bias stays on the downside. 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, outlook will stay bearish as long as 1.3860 resistance holds, in case of recovery.

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.

The US markets remain remarkably steady overnight despite a string of soft US economic releases overnight. Disappointing job and services data failed to trigger any meaningful selloff in equities, while Dollar edged slightly lower. Market pricing for Fed policy remains broadly unchanged, with a 96% chance of a hold at the upcoming meeting and a 70% probability for no change in July. Still, Friday’s non-farm payrolls report looms as a potential catalyst for repricing should the labor market disappoint more sharply than expected.

On the trade front, tensions are simmering as the US formally doubled its tariffs on imported steel and aluminum. Canada is now openly preparing retaliatory measures should ongoing negotiations with Washington break down. Prime Minister Mark Carney told lawmakers that Canada is engaged in “intensive negotiations” but is also preparing reprisal tariffs in parallel.

Meanwhile, EU-US trade talks appear to be moving in a more constructive direction. After a meeting in Paris, EU negotiator Maros Sefcovic and US Trade Representative Jamieson Greer described the discussions as productive and advancing “at pace.” Sefcovic noted the talks are now “very concrete,” and Greer echoed that sentiment, signaling genuine willingness from both sides to achieve a reciprocal agreement.

Attention now turns to ECB’s policy decision later today. A 25 bps rate cut is fully priced in, with the real focus on whether President Lagarde signals a pause for July. Given the subdued market response to recent central bank events and the current range-bound conditions, it remains to be seen whether today’s meeting will break the stalemate .

In weekly performance terms, Dollar is currently the worst performer, followed by Swiss Franc and Loonie. At the other end of the spectrum, Kiwi leads gains, with the Aussie and Sterling also modestly firmer. Euro and Ten are trading in the middle of the pack. Yet, almost all major pairs and crosses remain trapped within last week’s ranges.

In Asia, at the time of writing, Nikkei is down -0.53%. Hong Kong HSI is up 0.60%. China Shanghai SSE is up 0.08%. Singapore Strait Times is up 0.10%. Japan 10-year JGB yield is down -0.039 at 1.466. Overnight, DOW fell -0.22%. S&P 500 rose 0.01%. NASDAQ rose 0.32%. 10-year yield fell -0.095 to 4.365.

Looking ahead, German factory orders, UK PMI construction and Eurozone PPI will be released in European session, but the main event is defintely ECB rate decision and press conference. Later in the data, Canada will release trade balance and Ivey PMI. US will release jobless claims and trade balance.

ECB to cut, focus on Lagarde’s signal for a July pause

ECB is set to lower its deposit rate by 25 bps to 2.00% today, marking the eighth cut of this easing cycle and bringing policy deep into neutral territory. With inflation falling back below the 2% target in May, the case for further easing is clear in the near term. However, the main focus will be on President Christine Lagarde's forward guidance, particularly whether she signals a July pause in rate cuts, and the ECB’s updated economic projections.

The case for caution is clear. The Eurozone faces a highly uncertain backdrop with multiple crosscurrents. Trade war remain front and center, with US President Donald Trump’s tariff agenda weighing heavily on confidence and investment. Retaliatory moves from the EU could compound the hit to activity. At the same time, the surprised surge in Euro risks exerting additional downward pressure on inflation. Amid this uncertainty, ECB is expected to lower both its 2025 growth and inflation forecasts, acknowledging the softening outlook.

At the same time, medium-term fundamentals could provide some support. The EU’s major rearmament plans and Germany’s fiscal pivot to expansion are likely to bolster investment and domestic demand over time. That said, these structural measures will take time to feed through.

A July pause would allow policymakers to evaluate how these domestic tailwinds and external headwinds ultimately shape the outlook, particularly as geopolitical and policy unpredictability continues to cloud the picture.

Technically, EUR/CHF's near term price actions from 0.9445 are more likely than not a triangle consolidation pattern. That is, rise from 0.9218 is in favor to resume, even as a corrective move. Break of 0.9389 minor resistance will be a bullish sign and further break of 0.9419 should sent EUR/CHF through 0.9445 resistance.

Japan’s real wages fall -1.8% yoy in April, down for the fourth month

Real wages in Japan fell by -1.8% yoy in April, marking the fourth consecutive month of decline as persistent inflation continued to erode household purchasing power.

While nominal wages rose 2.3% yoy, slightly below the expected 2.6%, gains were outpaced by a still-elevated consumer inflation rate of 4.1%, driven by rising food and energy costs. The inflation metric used by the labor ministry has remained near 4% for five straight months, keeping real income in negative territory.

On the positive side, base salaries rose 2.2% yoy, the fastest increase in four months and well above March’s 1.4% yoy gain. This also marked the 42nd consecutive month of growth in regular pay. Overtime pay rebounded with a modest 0.8% yoy rise, while special payments grew 4.1% yoy.

China’s Caixin PMI composite falls to 49.6, contracts for first time since 2022

China’s Caixin PMI Services rose modestly from 50.7 to 51.1 in May, aligning with expectations. However, the gain in services was not enough to offset the drag from manufacturing, as PMI Composite slipped into contraction at 49.6, its first reading below 50 since December 2022.

Wang Zhe of Caixin Insight Group noted that the manufacturing slump was weighing heavily on the overall market, with new export orders remaining "sluggish" across both goods and services. Although input costs rose slightly, firms were unable to pass these on to customers, with selling prices continuing to fall and compressing profit margins.

Caixin flagged "unfavorable factors remain relatively prevalent", with growing external trade uncertainty and "noticeable weakening" in macro indicators at the start of Q2. The "significantly intensified"downward pressure raises the urgency for further targeted policy support.

Fed's Beige Book: General tone slightly pessimistic and uncertain

Fed's Beige Book report paints a picture of slowing US economy marked by pervasive caution and subdued sentiment.

Economic activity was reported to have “declined slightly” overall, with half of the twelve Districts seeing slight to moderate declines, while three reported no change and three noted slight growth. The general tone remains “slightly pessimistic and uncertain,” echoing the previous report, as elevated policy and economic uncertainty continues to weigh on both business and household decision-making.

Consumer spending trends were mixed, with most Districts reporting little change or modest declines. However, in some cases, spending picked up on goods expected to be affected by tariffs—suggesting front-loading behavior amid trade concerns. Employment levels were largely stable, while price pressures persisted, rising at a moderate pace.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3645; (P) 1.3688; (R1) 1.3724; More...

USD/CAD's decline from 1.4791 is still in progress and intraday bias stays on the downside. 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, outlook will stay bearish as long as 1.3860 resistance holds, in case of recovery.

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.

ECB is set to lower its deposit rate by 25 bps to 2.00% today, marking the eighth cut of this easing cycle and bringing policy deep into neutral territory. With inflation falling back below the 2% target in May, the case for further easing is clear in the near term. However, the main focus will be on President Christine Lagarde's forward guidance, particularly whether she signals a July pause in rate cuts, and the ECB’s updated economic projections.

The case for caution is clear. The Eurozone faces a highly uncertain backdrop with multiple crosscurrents. Trade war remain front and center, with US President Donald Trump’s tariff agenda weighing heavily on confidence and investment. Retaliatory moves from the EU could compound the hit to activity. At the same time, the surprised surge in Euro risks exerting additional downward pressure on inflation. Amid this uncertainty, ECB is expected to lower both its 2025 growth and inflation forecasts, acknowledging the softening outlook.

At the same time, medium-term fundamentals could provide some support. The EU’s major rearmament plans and Germany’s fiscal pivot to expansion are likely to bolster investment and domestic demand over time. That said, these structural measures will take time to feed through.

A July pause would allow policymakers to evaluate how these domestic tailwinds and external headwinds ultimately shape the outlook, particularly as geopolitical and policy unpredictability continues to cloud the picture.

Technically, EUR/CHF's near term price actions from 0.9445 are more likely than not a triangle consolidation pattern. That is, rise from 0.9218 is in favor to resume, even as a corrective move. Break of 0.9389 minor resistance will be a bullish sign and further break of 0.9419 should sent EUR/CHF through 0.9445 resistance.

China’s Caixin PMI Services rose modestly from 50.7 to 51.1 in May, aligning with expectations. However, the gain in services was not enough to offset the drag from manufacturing, as PMI Composite slipped into contraction at 49.6, its first reading below 50 since December 2022.

Wang Zhe of Caixin Insight Group noted that the manufacturing slump was weighing heavily on the overall market, with new export orders remaining "sluggish" across both goods and services. Although input costs rose slightly, firms were unable to pass these on to customers, with selling prices continuing to fall and compressing profit margins.

Caixin flagged "unfavorable factors remain relatively prevalent", with growing external trade uncertainty and "noticeable weakening" in macro indicators at the start of Q2. The "significantly intensified"downward pressure raises the urgency for further targeted policy support.

Full China's Caixin PMI services release here.

Real wages in Japan fell by -1.8% yoy in April, marking the fourth consecutive month of decline as persistent inflation continued to erode household purchasing power.

While nominal wages rose 2.3% yoy, slightly below the expected 2.6%, gains were outpaced by a still-elevated consumer inflation rate of 4.1%, driven by rising food and energy costs. The inflation metric used by the labor ministry has remained near 4% for five straight months, keeping real income in negative territory.

On the positive side, base salaries rose 2.2% yoy, the fastest increase in four months and well above March’s 1.4% yoy gain. This also marked the 42nd consecutive month of growth in regular pay. Overtime pay rebounded with a modest 0.8% yoy rise, while special payments grew 4.1% yoy.

Fed's Beige Book report paints a picture of slowing US economy marked by pervasive caution and subdued sentiment.

Economic activity was reported to have “declined slightly” overall, with half of the twelve Districts seeing slight to moderate declines, while three reported no change and three noted slight growth. The general tone remains “slightly pessimistic and uncertain,” echoing the previous report, as elevated policy and economic uncertainty continues to weigh on both business and household decision-making.

Consumer spending trends were mixed, with most Districts reporting little change or modest declines. However, in some cases, spending picked up on goods expected to be affected by tariffs—suggesting front-loading behavior amid trade concerns. Employment levels were largely stable, while price pressures persisted, rising at a moderate pace.

Full Fed's Beige Book report here.

Key Highlights

• GBP/USD started a fresh increase above the 1.3500 resistance zone.
• A connecting bullish trend line is forming with support at 1.3530 on the 4-hour chart.
• EUR/USD is now gaining pace and might clear the 1.1450 resistance zone.
• USD/JPY extended losses and traded below the 143.50 level.

GBP/USD Technical Analysis

The British Pound formed a base above 1.3350 and started a fresh increase against the US Dollar. EUR/USD cleared the 1.3450 resistance to enter a positive zone.

Looking at the 4-hour chart, the pair traded settled above the 1.350 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour).

The bulls pushed the pair above the 1.3550. On the upside, the pair could face resistance near the 1.3580 level. The next key resistance sits near the 1.3620 level. The first major resistance sits at 1.3650. A close above the 1.3650 level could set the pace for another increase.

In the stated case, the pair could even clear the 1.3800 resistance. The next major stop for the bulls could be near the 1.4000 resistance.

On the downside, immediate support sits near the 1.3530 level. There is also a connecting bullish trend line forming with support at 1.3530 on the same chart. The next key support sits near 1.3480. Any more losses could send the pair toward the 1.3400 pivot level in the near term. The main support could be near 1.3350.

Looking at EUR/USD, the pair started another increase, but the bulls seem to be facing hurdles near the 1.1450 level.

Upcoming Economic Events:

• US Initial Jobless Claims - Forecast 235K, versus 240K previous.
• US Goods and Services Trade Balance for April 2025 - Forecast $-94.0B, versus $-140.5B previous.

The USDJPY pair has exhibited a bearish sequence since its high on July 3, 2024, signaling potential for further downside. In the near term, the cycle from the May 13, 2025, high is unfolding as a double three Elliott Wave structure, a complex corrective pattern. From the May 13, 2025, peak, the initial decline, labeled wave ((a)), concluded at 144.91. It is then followed by a corrective bounce in wave ((b)) to 146.1. The subsequent drop, wave ((c)), completed at 142.10, finalizing the larger wave W, as illustrated on the 1-hour chart below.

Following this, the pair entered a corrective phase, wave X, structured as a zigzag. From the wave W low, wave ((a)) advanced to 144.46 and wave ((b)) pulled back to 143.84. Wave ((c)) rallied to 146.28, completing wave X in the higher degree. This zigzag correction temporarily halted the bearish momentum. The pair has now turned lower, initiating wave Y, which is also unfolding as a zigzag structure with sub-waves ((a))-((b))-((c)).

From the wave X high, wave (i) of ((a)) declined to 142.37, and the corrective wave (ii) of ((b)) reached 144.39. The pair is expected to continue lower in wave (iii) of ((a)). As long as the pivot high at 146.28 remains intact, any rally is likely to fail in a 3, 7, or 11 swing pattern, setting the stage for further declines. A break below the wave (i) low at 142.37 and the wave W low at 142.10 would reinforce the bearish sequence from the May 29 and May 13 peaks, respectively. Such a move would further confirm and validate the bearish outlook, strengthening the case for continued downside in the USDJPY pair.

USDJPY 60-Minute Elliott Wave Technical Chart

USDJPY Elliott Wave Technical Video

https://www.youtube.com/watch?v=jXvwB7XqepU

The Dollar index is consolidating below the 100.00 level for the second consecutive week as Tuesday’s rally in the USD was not strong enough to hold. The DXY is trading at 98.80 and hasn’t crossed above 100 this week.

Between renewed menaces and the actual delay in implementing tariffs, US President Trump is making sure that the ongoing trend of USD selling doesn’t stall.

The announcement in the middle of last week from the US Federal Court boosted the USD initially, though the appeal of the court decision just added to more uncertainty.

Overall mixed US Data hasn't helped to add demand for the Greenback.

Manufacturing PMI and JOLTS beat while ADP Employment and Services PMI, entering into contraction, missed - everybody looking to price in cuts would focus more on the negatives, especially with 70% of the US Economy being service oriented, and the JOLTS data being a month-old (as the data released is from the past month).

Equity Indices Snapshot

US and Canadian Indices have had quite a positive week with a generally positive sentiment from Markets, also propelling Industrial Metals, Oil and traditionally more risk-on currencies like the AUD and NZD.

I would take a look at the S&P 500 for a guide to this week's appetite for buyers as we approach the 6,000 Milestone - Momentum will find a few hurdles as traders brace for the upcoming Non-Farm Payroll report on Friday 6th.

Breaking the level before the data gets released will show that markets are looking at other themes like the de-escalation of trade tensions (i.e. Taco Trump).

Still, expect a lot of volatility as all eyes are on the upcoming NFP report.

Bank of Canada June Meeting

There was the Bank of Canada rate decision this morning, the BoC held rates at 2.75% and are still waiting for more insights on the impact of US Tariff policies.

There has been a bounce in Canadian consumption and hiring, but the Central Bank would like to see more - in the meantime, there is still a cut about halfway priced in for the July meeting, which won't materialize if the data holds.

The May headline inflation report came in at 1.7%, below the 2% Target though the BoC's favourite Core CPI is still at 2.5%.

There isn't any particular citation from Macklem or Rogers to note.

US Dollar Mid-Week Performance vs Majors

USD vs other Majors, June 4, 2025 - Source: TradingView.

The Greenback is onto another losing week, down against all majors.

There has been some particular strength from Asian-Pacific currencies, boosted from the pushback of US import tariffs on many Chinese goods all the way to August 31.

Canadian Dollar Mid-Week Performance vs Majors

CAD vs other Majors, June 4, 2025 - Source: TradingView.

The Loonie got somewhat dragged down by the USD and is losing the most against the strong APAC currencies. The Canadian Dollar is still broadly unchanged against European Majors.

The absence of a cut this morning gives the CAD some fundamental strength, though markets will be looking at Canadian employment data coming at the same time as the NFP before moving the currency forward.

Intraday Technical Levels for the USD/CAD

USD/CAD 1h Chart, June 4, 2025. Source: TradingView

USDCAD broke below the past week's lows and has started to form a downward channel with decent selling momentum.

Currently trading around 1.3680, there isn't much to retain the USDCAD from stabilizing below the 1.37 level and moving down further towards the 1.36 psychological level.

The hourly RSI is back to neutral from oversold and EMA 20 and 50 are acting as Resistance.

There are rumours of a trade deal coming up between the US and Canada, potentially next week.

I would focus on the current trend before the data, though do be cautious on the double Employment report on Friday.

US and Canada Economic Calendar for the Rest of the Week

As discussed before, all eyes are on the double employment report coming in on Friday at 8:30 A.M E.T.

US Non-Farm Payrolls are expected at 130K and Canada is expecting a drop of 15K.

The CAD tends to move on the Ivey PMI Data that gets released tomorrow at 10:00 A.M., therefore keep this one in check. It's expected at 48.3, already in contraction territory with last month's report at 47.9.

For the rest, a few FED Speakers with only Kugler being a voter for 2025 and the weekly Jobless Claims report coming up tomorrow.

Safe Trades!