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Daily Pivots: (S1) 1.1383; (P) 1.1415; (R1) 1.1458; More...

EUR/USD bounced in early US session but stays below 1.1494 resistance. Intraday bias remains neutral first. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

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 1.0894) holds.

Daily Pivots: (S1) 1.3444; (P) 1.3510; (R1) 1.3563; More...

Range trading continues in GBP/USD and intraday bias stays neutral. With 1.3414 support intact, further rally remains in favor. On the upside, break of 1.3615 will resume the rally from 1.2099 and target 100% projection of 1.2099 to 1.3206 from 1.3138 at 1.3813. Considering bearish divergence condition in 4H MACD, break of 1.3414 support should confirm short term topping, and bring deeper correction to 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 1.2913) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8197; (P) 0.8213; (R1) 0.8234; More….

USD/CHF Is still bounded in range above 0.8156 and intraday bias stays neutral. Price actions from 0.8038 are seen as a corrective pattern to decline from 0.9200. While fall from 0.8475 might extend lower, downside should be contained by 0.8038 to bring rebound. Break of 0.8436 resistance will suggest that it's already in the third leg of the correction, and target 0.8475.

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 0.8696) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 144.44; (P) 144.86; (R1) 145.33; More...

USD/JPY dips mildly today but stays in established range. Intraday bias stays neutral. On the upside, above 146.27 resistance will argue that price actions from 148.64 has completed as a corrective pattern. Intraday bias will be back on the upside for 148.64 resistance and above to resume the rebound from 139.87 low. However, firm break of 142.10 will bring retest of 139.87 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.

Dollar fell broadly following weaker-than-expected US inflation report for May, reinforcing the narrative that consumer prices have not yet felt the full brunt of tariff pressures. The data offered some relief that the feared pass-through from tariffs to end consumers hasn’t materialized, at least not yet.

However, it wasn’t enough to shift expectations for the June and July Fed meetings, where markets still overwhelmingly anticipate the central bank to hold steady. What did shift slightly was the probability of a September rate cut. According to fed funds futures, the odds of a cut in Q3 have now climbed above 55%. Nonetheless, the Fed is unlikely to act preemptively without more confirmation.

On trade, President Trump declared this week’s talks with China a success, albeit with no rollback of existing tariffs. While the 55% tariff rate remains in place, Trump noted that China has committed to supplying key items such as magnets and rare earths “up front,” with the US reciprocating on non-economic terms like student access.

In the broader FX market, Dollar is now the weakest performer for the week, followed by Sterling and Yen. The Pound remains weighed down by soft UK labor market data. On the other hand, Euro is gaining the upper hand, while commodity Aussie and Kiwi are benefiting from improved risk sentiment. Swiss Franc and Loonie sit in the middle.

In Europe, at the time of writing, FTSE is up 0.22%. DAX is up 0.41%. CAC is up 0.10%. UK 10-year yield is up 0.008 at 4.552. Germany 10-year yield is down -0.006 at 2.521. Earlier in Asia, Nikkei rose 0.55%. Hong Kong HSI rose 0.84%. China Shanghai SSE rose 0.52%. Singapore Strait Times fell -0.37%. Japan 10-year JGB yield fell -0.019 to 1.461.

US CPI ticks up to 2.4%, core unchanged at 2.8%, undershoot expectations

US consumer inflation data for May came in softer than expected, offering some relief to markets concerned about price pressures from tariffs and broader cost pass-throughs.

Headline CPI rose just 0.1% mom, below consensus of 0.2% mom. Core CPI, which excludes food and energy, also surprised to the downside with a 0.1% mom rise against an expected 0.3% mom. The gains in overall prices were primarily driven by shelter (0.3% mom) and food (0.3% mom), while energy posted a -1.0% monthly drop.

On an annual basis, headline CPI rose slightly from 2.3% yoy to 2.4% yoy, still undershooting the forecasted 2.5% yoy. Core CPI held steady at 2.8% yoy, also missing expectations of 2.9% yoy.

ECB’s Lane: Last week's rate cut aimed at anchoring expectations, avoiding prolonged undershoot

ECB Chief Economist Philip Lane emphasized that last week’s rate cut was a strategic step to ensure inflation remains on track toward the 2% target over the medium term. He argued that, without this move, the "projected negative inflation deviation" over the next 18 months could have risked becoming entrenched.

In a speech today, Lane also stressed the importance of clarity in ECB’s reaction function. By cutting the deposit facility rate to 2.00%, the central bank signaled that "we are determined to make sure that inflation returns to target in the medium term". This helps "underpin inflation expectations and avoid an unwarranted tightening in financial conditions."

On the other hand, holding the rate at 2.25% could have sent the wrong signal, Lane warned, potentially triggering a market repricing that would reinforce a "more pronounced and longer-lasting undershoot of the inflation target."

ECB’s Kazaks: Further fine-tuning cuts likely

Latvian ECB Governing Council member Martins Kazaks signaled openness to further interest rate cuts, suggesting that while ECB has already delivered significant easing, "fine-tuning" adjustments could be needed depending on how the economy evolves.

He noted that current market pricing for one more cut is “not out of the realm of the baseline,” but stressed that any additional moves must be carefully calibrated to keep inflation anchored near the 2% target.

Kazaks warned against complacency, highlighting risks of a persistent inflation undershoot. While not yet leaning toward accommodative territory, he emphasized the importance of vigilance, particularly amid the uncertain impact of global trade tensions. So far, deflationary effects seem to dominate, but the final outcome remains highly uncertain and must be watched closely.

Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

AUD/USD Mid-Day Report

Daily Pivots: (S1) 0.6497; (P) 0.6515; (R1) 0.6540; More...

Intraday bias in AUD/USD is mildly on the upside with breach of 0.6536 resistance. Rise from 0.5913 could be resuming for 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6478 support will turn bias back to the downside for 55 D EMA (now at 0.6410) and possibly below.

In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) 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 fall through 0.5913 at a later stage.

Daily Pivots: (S1) 0.6497; (P) 0.6515; (R1) 0.6540; More...

Intraday bias in AUD/USD is mildly on the upside with breach of 0.6536 resistance. Rise from 0.5913 could be resuming for 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6478 support will turn bias back to the downside for 55 D EMA (now at 0.6410) and possibly below.

In the bigger picture, AUD/USD is still struggling to sustain above 55 W EMA (now at 0.6443) 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 fall through 0.5913 at a later stage.

US consumer inflation data for May came in softer than expected, offering some relief to markets concerned about price pressures from tariffs and broader cost pass-throughs.

Headline CPI rose just 0.1% mom, below consensus of 0.2% mom. Core CPI, which excludes food and energy, also surprised to the downside with a 0.1% mom rise against an expected 0.3% mom. The gains in overall prices were primarily driven by shelter (0.3% mom) and food (0.3% mom), while energy posted a -1.0% monthly drop.

On an annual basis, headline CPI rose slightly from 2.3% yoy to 2.4% yoy, still undershooting the forecasted 2.5% yoy. Core CPI held steady at 2.8% yoy, also missing expectations of 2.9% yoy.

Full US CPI release here.

ECB Chief Economist Philip Lane emphasized that last week’s rate cut was a strategic step to ensure inflation remains on track toward the 2% target over the medium term. He argued that, without this move, the "projected negative inflation deviation" over the next 18 months could have risked becoming entrenched.

In a speech today, Lane also stressed the importance of clarity in ECB’s reaction function. By cutting the deposit facility rate to 2.00%, the central bank signaled that "we are determined to make sure that inflation returns to target in the medium term". This helps "underpin inflation expectations and avoid an unwarranted tightening in financial conditions."

On the other hand, holding the rate at 2.25% could have sent the wrong signal, Lane warned, potentially triggering a market repricing that would reinforce a "more pronounced and longer-lasting undershoot of the inflation target."

Full speech of ECB's Lane here.

Latvian ECB Governing Council member Martins Kazaks signaled openness to further interest rate cuts, suggesting that while ECB has already delivered significant easing, "fine-tuning" adjustments could be needed depending on how the economy evolves.

He noted that current market pricing for one more cut is “not out of the realm of the baseline,” but stressed that any additional moves must be carefully calibrated to keep inflation anchored near the 2% target.

Kazaks warned against complacency, highlighting risks of a persistent inflation undershoot. While not yet leaning toward accommodative territory, he emphasized the importance of vigilance, particularly amid the uncertain impact of global trade tensions. So far, deflationary effects seem to dominate, but the final outcome remains highly uncertain and must be watched closely.

The USD/JPY pair remains in an uptrend, trading around 145.00 on Wednesday and nearing a two-week low for the yen. The Japanese currency is under continued pressure as demand for safe-haven assets fades, fuelled by growing optimism over US-China trade negotiations.

Trade optimism undermines yen demand

Positive signals from the US-China trade talks have eased market tensions. After two days of meetings, both delegations described the dialogue as productive, with discussions expected to continue today. Reports suggest that diplomats have reached a preliminary agreement on implementing the Geneva Consensus. Under the agreement, China could ease export restrictions on rare earth metals, while the US might loosen controls on advanced technology sales to China.

This improving external backdrop has diminished the appeal of the yen as a safe-haven asset, contributing to the continued strength of the dollar against it.

Domestically, Japan’s producer price inflation rose 3.2% y/y in May, marking the slowest growth in eight months. This suggests easing cost pressures in production, which could reduce the urgency for aggressive monetary tightening.

Still, Bank of Japan Governor Kazuo Ueda reaffirmed in parliament on Tuesday that the central bank remains prepared to implement a new rate hike, provided there is confidence in the sustainability of core inflation around the 2% target.

Technical analysis of USD/JPY

On the H4 chart, USD/JPY is moving upwards from support at 144.00, targeting 145.50, which is expected to be reached today. After hitting this level, a pullback to 144.00 is anticipated. Should the pair break below 144.00, the next move may extend to 142.20, with the possibility of continuing further to 140.50. A breakout above 145.50 would open the door to 146.25. The MACD indicator supports the bullish view, with its signal line above zero and pointing sharply upwards within the histogram zone.

On the H1 chart, the pair is building an upward wave structure towards 145.50, which is likely to be fulfilled today. A corrective move to 144.00 is expected to follow. The pair remains in a broad consolidation range around these levels. The Stochastic oscillator also confirms this scenario, with its signal line above 50 and heading towards 80, indicating continued upward momentum in the short term.

Conclusion

USD/JPY continues to rise as risk appetite grows, and trade-related optimism diminishes the appeal of the yen. While positive domestic data and a willing BoJ support the yen longer term, the near-term technical setup remains bullish. Key resistance lies at 145.50 and 146.25, while a potential pullback could find support at 144.00, with deeper levels at 142.20 and 140.50 if the trend reverses.