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In focus today

Focus today turns to euro area inflation for May which is due 11.00 CET. After German and Spanish headline HICP came in slightly stronger than consensus, we see slight risks of a topside surprise to the euro area headline HICP consensus of 2.5% y/y. We expect headline HICP to print 2.5-2.6% y/y. As for the core HICP we expect this to be unchanged from April at 2.7% y/y, as the recent momentum in services inflation has been too strong, and we expect this to be the case for May too. Ahead of the euro area print, we receive inflation figures from France (08.45 CET), Austria (09.00 CET), Portugal (10.30 CET), and Slovenia (10.30 CET).

In the US we get Fed's favourite price gauge in the form of the PCE print for May at 14.30 CET. Consensus expectations by Reuters have analysts expecting the headline figure at 2.7% y/y, whereas they expect core PCE to print 2.8% y/y, both unchanged from the month prior.

In Norway we get May NAV unemployment figures at 10.00 CET which we expect to stand at 1.9% seasonally adjusted slightly down from April's 2.0% seasonally adjusted.

Economic and market news

What happened overnight

In the US, Donald Trump became the first ever former president to be convicted in a criminal case, as he was found guilty of all 34 charges in the so-called 'hush-money' case. Sentencing is set to take place 11 July. A January poll conducted by Bloomberg and Morning Consult found that 53% of voters in swing states said they would be unlikely to vote for him if convicted of a crime. A more recent poll by the Quinnipiac University conducted in May found 6% of Trump supporters would be less likely to vote for him if convicted of a crime. In a tight race between the former president and the incumbent president Biden, such figures could potentially mean a great deal at the 5 November election.

In China, PMIs for May disappointed to the low side, as the official PMI for the manufacturing sector dropped into retracting territory (below the 50 mark), standing at 49.5. Both March and April had seen expansions to the figure, and economists polled by Reuters had expected an unchanged print from April at 50.4. The non-manufacturing PMI stood at 51.1 (prior 51.2), and composite came in at 51.0 (prior 51.7), hence both remain in expansionary territory despite slight retractions.

In Asia, equity markets are in the green this morning, with Hong Kong in front. US equity futures look set to continue yesterday's session however, as they are in the red this morning, indicating lower prices by opening bell today.

Oil is down around 0.4% this morning with Brent trading around USD 81.6/bbl.

What happened yesterday

In the euro area, the unemployment rate declined to its all-time lowest level in April. The unemployment rate stood at 6.4% in April, with the number of unemployed persons down by 100k, to below 11m for the first time in the euro area's history. Notably, half of this decline came from Italy where the unemployment rate now stands at 6.9%. The biggest economy and country in the euro area, Germany, saw the number of unemployed persons unchanged for the fourth consecutive month.

The strong labour market combined with rising incomes and decent amounts of savings point to an uptick in private consumption this year. However, these factors also put upward pressure on domestic inflation. It is therefore natural, also considering how growth has returned to the euro area economy, that the ECB is in less of a hurry deciding on when to cut interest rates after 6 June, as the ECB has all but promised a cut at this Governing Council meeting.

In the US, growth for Q1 2024 was revised lower to 1.3% q/q (down from 1.6%) in line with market consensus as per Reuters. The downgrade came after recent soft readings in retail sales and equipment spending.

Jobless claims continued edging up in line with market expectations, as initial claims rose to 218k seasonally adjusted whereas 219k had been expected by economists according to Reuters.

In South Africa, the ruling party ANC looks set to come out of the general election as the biggest party once again, however they appear to have also lost their majority which they have held the previous 30 years. As of this morning more than 50% of the votes had been counted, and ANC stood to receive around 42% down from the 57.5% they won in the 2019 election. The new parliament will elect South Africa's next president once it has been formally constituted, and incumbent president, Ramaphosa (ANC leader), is likely to land another term, although the ANC will most likely have to form an alliance with other parties this time around.

Daily Pivots: (S1) 198.80; (P)199.63; (R1) 200.50; More...

Intraday bias in USD/JPY remains neutral at this point. Firm break of 199.00 support will suggest short term topping, on bearish divergence condition in 4H MACD. Rise from 191.34, as the second leg of the corrective pattern from 200.53, might have completed too. Deeper fall should then be seen to 197.07 resistance turned support next.

In the bigger picture, a medium term top could be in place at 200.53 after breaching 199.80 long term fibonacci level. As long as 55 W EMA (now at 185.01) holds, price actions from there is seen as correcting the rise from 178.32 only. However, sustained break of 55 W EMA will argue that larger scale correction is underway and target 178.32 support.

Daily Pivots: (S1) 169.14; (P) 169.79; (R1) 170.52; More...

Intraday bias in EUR/JPY remains on the downside at this point. Fall from 170.78 will target 167.31 support first. Firm break there will confirm that corrective pattern from 171.58 has started the third leg, and target 164.01 support next. For now, risk will stay on the downside as long as 170.78 resistance holds, in case of recovery.

In the bigger picture, a medium top could be formed at 171.58 after brief breach of 169.96 (2008 high). As long as 55 W EMA (now at 159.10) holds, price actions from there is seen as correcting the rise from 153.15 only. However, sustained break of 55 W EMA will argue that larger scale correction is underway and target 153.15 support.

Daily Pivots: (S1) 0.8500; (P) 0.8509; (R1) 0.8516; More...

Intraday bias in EUR/GBP remains neutral at this point. Further decline is expected as long as 0.8531 minor resistance holds. Decisive break of 0.8491/7 will resume larger down trend to 0.8376 projection level next. On the upside, break of 0.8531 will turn bias back to the upside for stronger rebound.

In the bigger picture, outlook remains bearish as EUR/GBP is capped below medium term falling trendline. That is, down trend from 0.9267 (2022 high) is still in progress. Firm break of 0.8491/7 will target 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376.

Daily Pivots: (S1) 1.6307; (P) 1.6338; (R1) 1.6363; More...

Range trading in EUR/AUD continues and intraday bias stays neutral at this point. On the downside, firm break of 1.6211 support will resume the whole decline from 1.6742, as the third leg of the correction from 1.7062. On the upside, above 1.6403 will resume the rebound from 1.6211 instead.

In the bigger picture, fall from 1.7062 medium term top is seen as a correction to the up trend from 1.4281 (2022 low). In case of deeper fall, strong support is expected around 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.7062 is in favor as a later stage.

Daily Pivots: (S1) 0.9750; (P) 0.9817; (R1) 0.9853; More....

Intraday bias in EUR/CHF remains on the downside at this point. Firm break of 0.9728 support will carry larger bearish implications and target 38.2% retracement of 0.9252 to 0.9928 at 0.9670. On the upside, above 0.9816 minor resistance will turn intraday bias neutral first. But risk will stay mildly on the downside as long as 0.9928 resistance holds, in case of recovery.

In the bigger picture, as long as 0.9728 support holds, rise from 0.9252 medium term bottom is still in favor to continue. Next target is 38.2% retracement of 1.2004 (2018 high) to 0.9252 (2023 low) at 1.0303, even just as a correction to the down trend from 1.2004. However, firm break of 0.9728 will raise the chance of bearish reversal and turn focus to 0.9563 support for confirmation.

Daily Pivots: (S1) 1.0798; (P) 1.0822; (R1) 1.0855; More....

Intraday bias in EUR/USD stays neutral as range trading continues. On the upside, firm break of 1.0894 will resume the rise from 1.0601 towards 1.0980 resistance next. However, sustained trading below 38.2% retracement of 1.0601 to 1.0894 at 1.0782 will argue that rebound from 1.0601 has completed. Deeper fall would be seen to 61.8% retracement at 1.0713.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern. Fall from 1.1138 is seen as the third leg and could have completed. Firm break of 1.1138 will argue that larger up trend from 0.9534 (2022 low) is ready to resume through 1.1274 high. On the downside, break of 1.0601 will extend the corrective pattern instead.

Daily Pivots: (S1) 156.23; (P) 156.96; (R1) 157.54; More...

Focus stays on 156.57 minor support in USD/JPY. Decisive break there will confirm short term topping at 157.70, on bearish divergence condition in 4 H MACD. Intraday bias will be back on the downside for 153.59 support. Firm break there will target 151.86 and below as the third leg of the corrective pattern from 160.20.

In the bigger picture, a medium term top might be formed at 160.20. But as long as 150.87 resistance turned support holds, fall from there is seen as correcting rise from 150.25 only. However, decisive break of 150.87 will argue that larger correction is possibly underway, and target 146.47 support next.

Daily Pivots: (S1) 1.2693; (P) 1.2721; (R1) 1.2760; More...

Intraday bias in GBP/USD remains neutral at this point and some more consolidations could be seen. Further rise is expected as long as 1.2670 support holds. Above 1.2799 will resume the rally from 1.2298 and target 1.2892 resistance. However, break of 1.2670 will indicate short term topping, and turn bias back to the downside for deeper pullback.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern. Fall from 1.2892 is seen as the third leg which might have completed already. Break of 1.2892 resistance will argue that larger up trend from 1.0351(2022 low) is ready to resume through 1.3141. Meanwhile, break of 1.2445 support will extend the corrective pattern with another decline instead.

Daily Pivots: (S1) 0.8995; (P) 0.9070; (R1) 0.9110; More....

Intraday bias in USD/CHF remains on the downside at this point. Fall from 0.9157 is seen as the third leg of the pattern from 0.9223. Deeper fall would be seen to 0.8987 support. Break will target 100% projection of 0.9223 to 0.8987 from 0.9157 at 0.8921. On the upside, above 0.8904 minor resistance will turn intraday bias neutral first.

In the bigger picture, price actions from 0.8332 medium term bottom are tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Rejection by 0.9243 resistance, followed by sustained break of 38.2% retracement of 0.8332 to 0.9223 at 0.8883 will strengthen this case, and maintain medium term bearishness. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146.