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FTSE 100 index: ⬇️ Sell

• FTSE 100 index reversed from key resistance level 8800.00
• Likely to fall to support level 8650,00

The FTSE 100 index recently reversed from the key resistance level 8800.00 (which has been steadily reversing the index from the start of February).

The resistance area near the resistance level 8800.00 was strengthened by the upper daily Bollinger Band.

Given the overbought daily Stochastic, FTSE 100 index can be expected to fall to the next support level 8650,00 (former top of wave (1) from the start of May).

Markets

After a bullish correction yesterday, bond investors at the long end of the curve kept their cool today as well. A closely watched Japanese 40-y bond auction again met with mediocre demand, but the collateral damage on the broader market was limited. After jumping higher immediately after the sale, the Japanese 40-y yield closed at 3.36% (+3.3 bps) but remains well off last week’s top near 3.70%. The focus toward the performance of the long end of the curve (and debate on fiscal sustainability) is here to stay, but last week’s tentative ‘panic’ has subsided for now. It’s a calm day for now also on European bond markets. German yields add 1- 2 bps across the curve. Inflation expectations at the ECB April consumer survey for the next 12 months rose to 3.1% from 2.9%, despite a softening in the actual measure over the previous months (2.2% EMU HICP in April, new flash reading Tuesday next week). However, markets clearly don’t see this as a reason for the ECB to backtrack on an further ‘pre-emptive’ 25 bps cut next week. With the ECB moving further into neutral territory, we are keen to see whether an uncertain (inflation) outlook also causes the ECB to shift from a proactive to a more reactive approach, as did many other central banks. Except for the Richmond Fed and Dallas Fed confidence measures, which usually are no market movers, US markets later today look out for the Minutes of the Fed’s May policy meeting, a $70bn 5-y Treasury action and Nvidia earnings. US bonds after yesterday’s rally are rising about 2 bps across the curve (2-y benchmark change). NY Fed President Williams overnight warned that policy makers should not only aim to anchor long tern consumer inflation expectations, but the whole curve to avoid that ‘highly persistent’ inflation can become ‘permanent’. On equity markets, European indices fail to build on yesterday’s strong WS close (Eurostoxx 50 -0.4%). Nvidia results after the close might decide whether there is a case to revisit the top levels reached in February. After a reversal/rebound yesterday, the dollar remains better bid as high profile negative drivers for the US currency (trade war, debt sustainability) temporary move to the background.. DXY rises from 99.53 to 99.55. USD/JPY gains modestly (144.9). EUR/USD eased from 1.133 to trade near 1.1300. Sterling fails to extend a solid performance of late. EUR/GBP still struggles to sustainably break below the 0.84 handle.

News & Views

European consumer inflation expectations for the year ahead rose for a second month straight in April. The ECB’s consumer expectations survey showed the gauge quickening from 2.9% to 3.1%, the highest since February 2024. It’s the first time since July 2021 that inflation seen for the upcoming year was not lower than the perceived one over the last 12 months (3.1%). It’s a sign (and therefore warning signal to the ECB) of households no longer assuming disinflation. Expectations for three years ahead remained unchanged at 2.5%, similarly matching the numbers seen early last year. The longest-term measure (5 year) for a fifth time straight came in at 2.1%. European households expect nominal spending growth of 3.7% in the coming year, up from the 3.4% in March, but anticipate their income to grow slightly slower (0.9% from 1%). Economic growth expectations for the next 12 months became more negative, falling to -1.9% in April from -1.2% in March but consumers remain fairly optimistic on the labour market. They see an only slightly higher unemployment rate compared to the recent past. They are more bullish on the housing market, believing their home prices will rise 3.2%, up from 3.1% in March. Access to credit is expected to become more difficult: the net percentage assuming a tightening rose from 15.5% to 20.8%.

Belgian inflation fell 0.16% m/m to 2.01% y/y in May. That’s down from 2.55% in April and the fourth y/y decline in a row. Core inflation (ex. unprocessed food and energy products) slowed from 2.82% to 2.59% and services CPI eased from 3.96% to 3.65%. The most significant price increases in May were registered for, amongst others, meat, private rents, hotel rooms and mobile telephone services. The top three decliners were natural gas (-6.2% m/m), electricity (-4% m/m) & plane tickets. Motor fuels fell 0.5% m/m. Inflation according to the European harmonized method (HICP) amounts to 2.8%.

Daily Pivots: (S1) 1.1299; (P) 1.1353; (R1) 1.1382; More...

Intraday bias in EUR/USD stays neutral at this point, and further rise is still in favor as long as 1.1255 support holds. Above 1.1417 will bring retest of 1.1572 high first. Decisive break there will resume larger up trend to 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, however, break of 1.1255 will turn bias back to the downside to extend the corrective pattern from 1.1572 with another falling leg.

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 1.0858) holds.

Daily Pivots: (S1) 1.3476; (P) 1.3531; (R1) 1.3563; More...

Intraday bias in GBP/USD remains neutral for consolidations below 1.3592. Further rise is expected as long as 1.3389 minor support holds. On the upside, firm break of 1.3592 will resume larger rally for 100% projection of 1.2706 to 1.3442 from 1.3138 at 1.3874. However, decisive break of 1.3389 will confirm short term topping, and 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 1.2870) holds, even in case of deep pullback.

Daily Pivots: (S1) 142.83; (P) 143.64; (R1) 145.17; More...

Intraday bias in USD/JPY stays mildly on the upside at this point. Fall from 148.64 might have completed as a correction at 142.10. Sustained break of 55 D EMA (now at 145.83) will affirm this case and target 148.64 resistance and above. Nevertheless, break of 142.10 will turn bias back to the downside for 139.87 low instead.

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) 0.8214; (P) 0.8247; (R1) 0.8306; More….

Range trading continues in USD/CHF and intraday bias stays neutral. Another fall is in favor as long as 0.8305 minor resistance holds. Below 0.8187 will target a retest on 0.8038 low first. Firm break there will resume larger down trend. Nevertheless, sustained break of 0.8305 will argue that pullback from 0.8475 has completed, and turn bias back to the upside to extend the 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 0.8713) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Dollar’s near-term rebound is still intact as markets head into US session. But appears to be fading as traders await fresh catalysts. While the greenback has benefited from stabilizing sentiment, there’s a lack of conviction behind the move, particularly with no data releases of note today. Markets are now turning their attention to the upcoming FOMC minutes, though expectations for a clear policy signal remain low.

The minutes from the May 6–7 FOMC meeting are expected to show a divided Fed grappling with increased volatility and an unpredictable policy backdrop, largely stemming from trade tensions. A key point of debate within the Fed may have been how to respond if elevated tariffs return and remain in place. While some officials may view tariff-driven inflation as transitory and argue for policy support to counteract the drag on growth, others may be more concerned about a shift in inflation expectations and the risk of persistent price pressures. Despite those differences, there is likely consensus around two core ideas: that tariffs are inherently stagflationary, and that it's too early to commit to rate adjustments amid current uncertainty.

As a result, today’s release is unlikely to shift the market narrative in a meaningful way. Trading may remain subdued unless there’s an unexpected shift in tone or language around inflation risks or rate sensitivity. With Fed still firmly in a no-hurry, data-dependent mode, the market may continue to drift until the next major inflation print or employment report.

Looking across the broader currency markets, Dollar remains the week's strongest performer so far. Kiwi follows as second, receiving a boost after RBNZ delivered a 25bps rate cut with a surprising dissent. Euro also finds modest support, ranking third on the performance board. In contrast, Yen remains the weakest major, weighed down by falling super-long JGB yields. Aussie and Swiss Franc also trail, while Sterling and Loonie remain in the middle.

Technically, Ethereum might be ready to complete the near-term triangle consolidation pattern from 2737.57. Firm break of this resistance will resume the rally from 1382.55. Next target is 61.8% projection of 1382.55 to 2737.57 from 2507.39 at 3344.79. However, break of 2507.39 support will extend the corrective pattern with another falling leg instead.

In Europe, at the time of writing, FTSE is down -0.06%. DAX is down -0.45%. CAC is down -0.13%. UK 10-year yield is up 0.012 at 4.683. Germany 10-year yield is down -0.001 at 2.541. Earlier in Asia, Nikkei closed flat. Hong Kong HSI fell -0.53%. China Shanghai SSE fell -0.02%. Singapore Strait Times rose 0.41%. Japan 10-year JGB yield rose 0.052 to 1.518.

ECB survey shows short-term inflation expectations climb as growth outlook worsens

ECB’s latest Consumer Expectations Survey for April showed a modest but notable uptick in short-term inflation expectations.

Median expectations for inflation over the next 12 months rose to 3.1%, the highest since February 2024. However, medium- and long-term inflation expectations remained steady, with the three-year outlook unchanged at 2.5% and the five-year projection holding at 2.1% for the fifth straight month.

Alongside the rise in short-term inflation forecasts, the survey revealed an increase in uncertainty about inflation over the coming year, matching levels last seen in June 2024.

More concerning, however, is the deepening pessimism around growth and employment. Expectations for economic growth over the next 12 months dropped sharply to -1.9% from -1.2% in March. Expected unemployment ticked up slightly from 10.4% to 10.5%.

RBNZ cuts OCR to 3.25%, one member favors holding steady

RBNZ lowered the Official Cash Rate by 25 basis points to 3.25%, in line with market expectations. The decision was not unanimous, passed by a 5-1 vote.

The central bank emphasized that inflation is now within the target band and is "well placed" to respond to both domestic and international developments.

Meeting minutes revealed that some committee members favored holding the rate steady at 3.50%, citing a desire to monitor elevated global uncertainty and potential inflation risks stemming from recent tariff increases.

Maintaining the OCR, they argued, could have helped anchor inflation expectations more firmly around the 2% midpoint.

In its accompanying Monetary Policy Statement, RBNZ revised down its rate path projections slightly. The OCR is now expected to fall to 3.12% by September 2025 (previously 3.23%), and to 2.87% by June 2026 (previously 3.10%).

Australia’s monthly CPI unchanged 2.4%, core inflation edges higher

Australia’s monthly CPI held steady at 2.4% yoy in April, slightly above expectations of 2.3% yoy, marking the third consecutive month of unchanged headline inflation.

However, underlying inflation measures moved higher, with CPI excluding volatile items and holiday travel rising to 2.8% yoy from 2.6% yoy. Trimmed mean CPI also tickd up from 2.7% yoy to 2.8% yoy.

These developments suggest that while headline inflation appears stable, price pressures beneath the surface remain persistent.

Key contributors to the annual inflation rate included food and non-alcoholic beverages (+3.1%), recreation and culture (+3.6%), and housing (+2.2%).

BoJ's Ueda highlights focus on short- and medium-term rates

BoJ Governor Kazuo Ueda told parliament today that shifts in short- and medium-term interest rates have a more pronounced impact on economic activity than movements in super-long yields.

He explained that corporate and household debt is more concentrated in those shorter maturities, making the economy more sensitive to changes in that segment of the yield curve.

However, Ueda also acknowledged the spillover effects of volatility in super-long bond yields, noting that sharp moves in that part of the curve can ripple through to shorter maturities and influence overall financial conditions.

"We'll carefully watch market developments and their impact on the economy, he emphasized.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8214; (P) 0.8247; (R1) 0.8306; More….

Range trading continues in USD/CHF and intraday bias stays neutral. Another fall is in favor as long as 0.8305 minor resistance holds. Below 0.8187 will target a retest on 0.8038 low first. Firm break there will resume larger down trend. Nevertheless, sustained break of 0.8305 will argue that pullback from 0.8475 has completed, and turn bias back to the upside to extend the 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 0.8713) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

As expected, the Reserve Bank of New Zealand cut its key rate by 25 basis points to 3.25%. This cycle was the sixth easing since August last year, totalling 125 b. p.

In an accompanying statement, the central bank said inflation accelerated to 2.5% y/y and inflation expectations among companies and households have risen. On the other hand, the decline in core inflation gives confidence that inflation will return to the middle of the 1-3 per cent target range in the medium term. Separately, the RBNZ noted the beginning of the economic recovery from the contractionary period.

From higher actual and expected inflation to GDP growth, this is all bullish news supporting the New Zealand dollar against the US dollar despite the widening spread between the key rate in New Zealand and the US.

NZDUSD added 0.9% to the lows before the rate decision, rising to 0.5970. These levels near the area of highs since late April and a sequence of increasingly shallower local lows over the last couple of weeks are setting up imminent fresh attempts to break 0.6030.

The decline within this month looks like a temporary correction after a 10% rally off the April lows. A move above 0.6000 would give a range entry with resistance at 0.6360, which has remained impregnable since early 2023.

The New Zealand and Australian dollar trade near year-end levels, behind the three-year highs of the euro and pound against the dollar. However, recent softening in US and Asian tariff rhetoric is inflating the sails of the NZD and AUD.

Cable remains at the back foot on Wednesday after Tuesday’s pullback from new multi-month high (1.3593) cracked psychological 1.3500 support.

Price dipped to 1.3561 this morning, but quick bounce to 1.3500 zone points to headwinds that fresh bears face.

Today’s action was so far shaped in Doji candle (indecision) with short-lived probe below initial Fibo support at 1.3486 (23.6% of 1.3195/1.3593 upleg) adding to potential bear-trap formation, in scenario of very shallow pullback preceding fresh attempts to extend larger uptrend.

Daily studies remain in full bullish configuration and support the notion.

Alternatively, loss of 1.3486/61 triggers would keep the downside vulnerable and risk attack at pivotal 1.3420 support (10DMA / Fibo 38.2%).

Res: 1.3544; 1.3564; 1.3593; 1.3643.
Sup: 1.3486; 1.3461; 1.3420; 1.3400.