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GBP/USD rebounded to 1.3508 last week but turned sideway since then. Initial bias remains neutral this week first. On the upside, above 1.3508 will extend the rebound from 1.3300 to 1.3657 resistance first. On the downside, below 1.3300 will bring deeper fall back to 1.3158 support instead.

In the bigger picture, price actions from 1.3867 are a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is in favor for a later stage, towards 1.4248 key resistance (2021 high). However, firm break of 1.3008 will at least bring deeper fall to 38.2% retracement of 1.0351 to 1.3867 at 1.2524, with increased risk of bearish reversal.

In the long term picture, as long as 1.4248/4480 resistance zone holds (38.2% retracement of 2.1161 to 1.0351 at 1.4480), the long term outlook will remain bearish. That is, price actions from 1.0351 are seen as a corrective pattern to down trend from 2.1161 (2007 high) only. Nevertheless, decisive break of 1.4248/4480 will be a strong sign of long term bullish reversal.

The late break of 0.7807 support suggests that USD/CHF's corrective rebound has completed. Initial bias is back on the downside this week for retesting 0.7760 first. Firm break there will resume the fall from 0.8041. Next target will be 61.8% projection of 0.8041 to 0.7774 from 0.7898 at 0.7733. Risk will now stay on the downside as long as 0.7898 resistance holds, in case of recovery.

In the bigger picture, as long as 55 W EMA (now at 0.8028) 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's late break of 0.7183 resistance suggests that pullback from 0.7277 has already completed at 0.7076, after defending 55 D EMA. Initial bias is back on the upside this week for retesting 0.7277 high first. Firm break there will resume larger up trend. For now, risk will stay on the upside as long as 0.7076 support holds, in case of retreat.

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 0.6804) holds.

USD/CAD retreated after rising to 1.3868 last week. Initial bias remains neutral this week first. Further rise is expected with 1.3729 support intact. Rise from 1.3549 is seen as the third leg of the pattern from 1.3480. Above 1.3868 will target 1.3965 resistance next. Break of 1.3729 will suggest that the rebound has completed, and turn bias back to the downside.

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 1.3588) 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 edged higher to 214.66 last week but retreated since then. Initial bias remains neutral this week first. On the upside, above 214.66 will extend the rebound from 210.43 to retest 216.58 high. Strong resistance is expected there to bring reversal to extend the corrective pattern from 216.58 with another falling leg. On the downside, below 213.25 support will bring deeper fall back to 211.23.

In the bigger picture, while the fall from 216.58 was 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 205.97) 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's rally from 182.01 resumed and continued last week despite interim retreat. Initial bias is back on the upside this week for retesting 187.93 high. Strong resistance would be seen from there to bring reversal, to extend the corrective pattern from 187.93 with another falling leg. For now, risk will stay on the upside as long as 184.42 support holds, in case of retreat.

In the bigger picture, the pullback from 187.93 was steep, there is no sign of reversal yet. Uptrend from 114.42 (2020 low) 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 178.53) 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 178.53) holds.

EUR/GBP continued to engage in sideway trading last week and outlook is unchanged. Initial bias remains neutral this week first. On the downside, decisive break of 0.8610 support will revive the case of bearish trend reversal. On the upside, break of 0.8728 resistance will bring stronger rally back towards 0.8740 resistance.

In the bigger picture, focus is staying on 38.2% retracement of 0.8821 to 0.8863 at 0.8618. Strong rebound from there will retain medium term bullishness. Rise from 0.8221 should resume through 0.8863 at a later stage. Nevertheless, sustained break of 0.8618 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.

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 stayed in sideway taring between 1.6108/6381 last week and outlook is unchanged. Initial bias remains neutral this week first. Rise from 1.6108 is seen as the third leg of the corrective pattern from 1.6125. . Above 1.6381 will bring stronger rebound to 55 D EMA (now at 1.6411) and above. Nevertheless, firm break of 1.6108 will resume the larger down trend from 1.8554.

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 1.6983) 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 1.6578) will confirm this bearish case, and pave the way back towards 1.4281.

EUR/CHF attempted for recovery last week but failed after rejection by 55 D EMA (now at 0.9159). As downside is contained above 0.9094 temporary low, initial bias stays neutral this week first. Outlook is unchanged that rebound from 0.8979 should have completed at 0.9264. Break of 0.9094 will bring deeper fall back to retest 0.8979 low. For now, risk will stay on the downside as long as 0.9169 resistance holds, in case of recovery.

In the bigger picture, the rejection by 55 W EMA (now at 0.9252) suggests that the down trend from 0.9928 (2024 high) is still in progress. Firm break of 0.8979 will confirm down trend resumption. Outlook will stay bearish as long as 0.9394 resistance holds, in case of another rebound.

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.

Canadian Highlights

• Markets swung on hopes of a Middle East truce, but the outlook remains fragile.
• Canada’s economy has stalled out over the past two quarters, with weak domestic demand and patchy investment pointing to subdued momentum.
• The upcoming CUSMA review is now central, as Canada looks to pair greater trade clarity with an energy led investment strategy.

U.S. Highlights

• Renewed hopes of a U.S.-Iran ceasefire extension pushed WTI prices 9% lower this week to $88 per barrel.
• Consumer spending remained resilient in April, amid rising inflationary pressures and dwindling household savings.
• More Fed officials are joining the chorus of sounding increasingly hawkish, with Fed futures 60% priced for a rate hike by year-end.

Canada – Canada’s Economy Stalls Ahead of Trade Negotiations

Hope for a peace deal to end the conflict between Iran and the U.S. and open the Strait of Hormuz dominated markets this week. While optimism around a possible 60-day truce has pushed oil prices sharply lower (down roughly nine percent relative to late last week), volatility remains elevated. Markets continue to respond quickly to shifting headlines, underscoring the fragility of the outlook. For Canada, this volatility comes at a time when market access to the U.S. remains an open question and continues to weigh on domestic activity.

The first quarter GDP report showed the economy effectively stalled (-0.1% quarter-on-quarter annualized, q/q), undershooting expectations. The weakness was broad-based. Strong import growth dragged down the top line figure, but final domestic demand declined again (-0.4% q/q), and continues to proceed in fits and starts (Chart 1). Looking through the volatility final domestic demand is up 1.3% year-on-year (y/y), but this is still a below-trend figure, and consistent with an economy operating below capacity.

Household spending grew 1.5% q/q, supported by services, but momentum eased from Q4. On the investment side, good growth in machinery, equipment and intellectual property products were offset by another large contraction in residential investment (-7.9% q/q) and weaker outlays on engineering structures. Government investment also reversed after gains in late 2025.

Overall, the economy continues to muddle along with limited forward momentum. While early Q2 indicators suggest some rebound (with April GDP tracking higher), the broader trend still points to slack in the economy and subdued growth.

Canada’s lackluster growth performance puts the focus squarely on the upcoming CUSMA review. The economy has operated under the cloud of uncertain U.S. market access ever since the first tranche of tariffs were announced last year. On Monday the three countries are due to notify each other of what changes they want in the agreement, with discussions to follow. The United States and Mexico have already scheduled formal negotiating rounds. Minister for U.S.-Canada Trade Dominic Leblanc is expected to travel to Washington next week, but the timelines for negotiations remain unclear.

To find some insights on the negotiations, Prime Minister Mark Carney’s speech in New York this week highlighted Canada’s strategy. He called for a “new partnership” with the United States, while simultaneously positioning Canada’s goal to establish itself as “an energy superpower”.

Recent foreign direct investment data suggest there might be something to the strategy. First quarter inflows were reported at $22 billion ($4 billion less than in Q4), and investments in the energy and mining sector were $14.7 billion in the quarter (Chart 2). While these data are volatile, they align with Canada’s strategy to leverage its resource base and attract long-term capital.

The Canadian economy continues to muddle along under a cloud of trade uncertainty. The hope is that in the coming months, clarity and stability on the trade relationship with the U.S. emerges. Increased economic certainty, together with the push to attract global capital to invest in Canada, can lay the foundation for productivity-powered economic growth.

U.S. – Makings of a Deal

It’s been three months since the U.S. and Israel launched the initial attack on Iran. Hopes for a longer-term peace resolution rose this week following President Trump’s comments that a peace deal had been “largely negotiated”. Oil prices fell sharply on the news, though renewed attacks from both sides by mid-week briefly faded the optimism. But by Thursday evening, news outlines were reporting that the two sides had reached an agreement on a 60-day memorandum of understanding to extend the ceasefire, pending President Trump’s approval. Oil prices traded 9% lower on the week and the WTI benchmark currently sits at $88 per barrel. Meanwhile, economic data out this week reinforced a more cautious but still resilient consumer amid renewed inflationary pressures. The S&P 500 edged 1.3% higher on the week, while the 10-Year Treasury yield drifted lower by 12 basis points and currently sits at 4.44%.

This week’s release of the April personal income & spending data offered a fresh dose of reality on the pain being inflicted on American households because of the energy shock. PCE inflation rose to a three-year high of 3.8% year-on-year and is likely to push north of 4% in May alongside a continued rise in gasoline prices. The picture didn’t look much better once the effects of food & energy were removed, with core PCE inflation edging up to 3.3%. Three-and-six-month measures are even hotter, each up 3.8% (Chart 1).

Despite the rise in inflation, the consumer has remained reasonably resilient. Nominal spending rose 0.5% m/m in April, following a stronger gain of 1% in March. After accounting for inflation, April’s gain looked less stellar, but still edged higher by 0.1% m/m. Hotter inflation is also working to erode consumer purchasing power, with real disposable income declining for a third consecutive month. This has left households increasingly reliant on savings to fuel spending. But with the savings rate having slipped to a four-year low, the buffer is looking increasingly thin.

According to a recent survey conducted by the Conference Board, households are reporting softer spending intentions in the months ahead. Fewer households are planning to purchase big-ticket items while two-thirds of consumers plan to reduce overall spending due to higher prices. While the survey metrics have been a less reliable predictor of actual spending post-pandemic, we can’t completely disregard the signal. The energy shock has further strained affordability for lower-and-middle income households, who have not benefited to the same degree from past year’s gains in home and equity prices.

And there’s an increasing risk that affordability pressures could worsen if the energy shock is sustained much longer. A growing chorus of Fed officials are sounding increasingly hawkish amid rising inflationary pressures. Board member Lisa Cook said this week that if disinflation doesn’t soon resume, she would be “prepared to raise rates”. Meanwhile, Fed President Kashkari reiterated that the inflation fight takes priority as the labor market now appears to be in decent shape. This suggests next week’s employment report will play second fiddle to the May CPI numbers due on June 10th. Fed futures are now 60% priced for a rate hike by year-end, but a hotter inflation report could pull forward expectations for a rate hike.