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Daily Pivots: (S1) 157.16; (P) 157.44; (R1) 157.94; More...

Immediate focus is now 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.

The Swiss franc has posted strong gains on Thursday after Switzerland’s GDP was hotter than expected. USD/CHF is down 0.83% on the day and is trading at 0.9056 early in the North American session. In the US, second-estimate GDP grew 1.3% in the first quarter, below the first-estimate of 1.6% and much weaker than the 3.4% gain in Q4 2023.

Switzerland’s economy expands by 0.5%

Switzerland’s GDP grew by 0.5% q/q in the first quarter, after a 0.3% gain in each of the prior two quarters and higher than the market estimate of 0.3%. This was the fastest pace of growth since the second quarter of 2022 and was driven by the services and retail sectors. On an annualized basis, GDP grew by 0.6%, up from a revised gain of 0.5% in the fourth quarter of 2023 and in line with market expectations.

The US dollar has had its way with the Swiss franc this year, gaining an impressive 7.9%. The sharp depreciation of the Swiss franc has not been an unwelcome development for the Swiss National Bank, as it makes Swiss exports more competitive on world markets. The Swiss franc was at high levels late last year and this helped keep inflation in check at a time when the central bank was concerned that inflation might breach the 0% to 2% target.

Has the Swiss franc’s sharp fall this year become too much of a good thing? Swiss National Bank Thomas Jordan said earlier today that the weak franc is the most likely source of Swiss inflation and the SNB could counteract the currency’s downturn by “selling foreign exchange”. This is not the kind of announcement we would see from other central bankers but the SNB has not shied away from currency intervention as a tool to achieve its goals and keep inflation at a suitable level.

The SNB lowered interest rates in March, the first major central bank to do so. The SNB meets next on June 20th and today’s stronger-than-expected GDP release will support the central bank lowering rates at the June meeting.

USD/CHF Technical

• USD/CHF pushed below support at 0.9128 and 0.9098 and is putting pressure on support at 0.9048
• 0.9178 is the next resistance line

Daily Pivots: (S1) 0.9116; (P) 0.9130; (R1) 0.9147; More....

USD/CHF's fall from 0.9157 accelerates lower today, and the development suggests that rebound from 0.8987 has completed already. Fall from 0.9157 is now seen as the third leg of the pattern from 0.9223. Intraday bias is back on the downside for 0.8987 support first. 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.

As US session commences, Swiss Franc and Japanese Yen are trading as the day's strongest currencies, fueled by risk aversion in US markets. While major European indices exhibit only modest fluctuations, US futures indicate notably lower opens, reinforcing the cautious sentiment among investors.

Swiss Franc's additional strength can be traced to comments made by outgoing SNB Chairman Thomas Jordan overnight, who pointed to its depreciation as a catalyst for unexpected inflationary pressures in Switzerland. In response, Jordan highlighted the possibility of the SNB intervening in the currency market by selling foreign currencies to stabilize the Franc.

Contrary to typical market behavior during periods of uncertainty, Dollar is underperforming, marked as the weakest performer of the day. Nevertheless, it's still maintaining its ground above last week's lows against most counterparts—excluding Swiss Franc. There is no significant momentum suggesting an imminent breakthrough. Dollar's next decisive move may hinge on the forthcoming US PCE data tomorrow.

Elsewhere in the currency markets, New Zealand Dollar trails behind Dollar as the second weakest, followed by Canadian Dollar. Australian Dollar ranks as the third strongest. The Euro and British Pound are positioned in the middle.

Technically, immediate focus on 156.57 minor support in USD/JPY. Decisive break there should confirm short term topping at 157.70. More important, that will argue that rebound from 151.86 has completed with three waves up to 157.70. Fall from there could then be developing into the third leg of the corrective pattern from 160.20. In this, case deeper decline would be seen to 153.59 support next.

In Europe, at the time of writing, FTSE is up 0.36%. DAX is up 0.15%. CAC is up 0.35%. UK 10-year yield is down -0.0394 at 4.371. Germany 10-year yield is down -0.017 at 2.676. Earlier in Asia, Nikkei fell -1.30%. Hong Kong HSI fell -1.34%. China Shanghai SSE fell -0.62% Singapore Strait Times rose 0.01%. Japan 10-year JGB yield fell -0.0206 to 1.060.

US initial jobless claims rises to 219k, slightly above expectation

US initial jobless claims rose 3k to 219k in the week ending May 25, slightly above expectation of 218k. Four-week moving average of initial claims rose 2.5k to 222.5k.

Continuing claims rose 4k to 1791k in the week ending May 18. Four-week moving average of continuing claims rose 6k to 1786k.

Eurozone economic sentiment rises to 96, EU up to 96.5

Eurozone Economic Sentiment Indicator ticked up from 95.6 to 96.0 in May, matched expectations. Employment Expectations Indicator fell -0.3 pts to 101.3. EU ESI rose 0.3 pts to 0.6.5. EU EEI fell -0.4 to 101.2.

For the largest EU economies, the ESI improved significantly for France (+1.5) and the Netherlands (+1.1) and more moderately for Germany (+0.8) and Italy (+0.8), while it deteriorated markedly for Spain (-3.2) and Poland (-1.5).

Eurozone unemployment rate falls to 6.4%, EU steady at 6.0%

Eurozone unemployment rate fell from 6.5% to 6.4% in April, below expectation of 6.5%. EU unemployment rate was unchanged at 6.0%.

Eurostat estimates that 13.149 million persons in the EU, of whom 10.998 million in Eurozone, were unemployed in April 2024.

Swiss GDP grows 0.3% in Q1, services sector Leads

Switzerland's GDP, adjusted for sporting events, grew by 0.3% qoq in Q1, meeting expectations.

The industrial sector's overall value added stagnated. Manufacturing declined slightly by -0.2%, and chemical and pharmaceutical industries fell by -0.9%. Construction industry grew modestly by 0.3%, while energy sector saw solid growth of 2.1%.

Services sector drove GDP growth despite uneven performance. Financial services declined by -0.2%, and business-related services contracted by -0.3%. Transport and communication sector was flat.

However, accommodation and food services sector grew by 1.3%, health and social care services increased by 0.8%, and public administration rose by 0.2%. Retail sector grew strongly by 1.4%, leading to a 1.3% overall increase in trade.

Swiss KOF falls to 100.3, signals modest economic momentum

Swiss KOF Economic Barometer fell from 101.9 to 100.3 in May, falling short of expectations of 102.2. This year, the barometer has managed to stay only slightly above its medium-term average. KOF noted, "Although the Swiss economy is robust, it is not showing much vigour beyond that."

Indicators for manufacturing, financial and insurance services, and foreign demand all slowed down after positive developments in the previous month. However, indicators for private consumption and the construction industry helped cushion the decline with increases.

RBA's Hunter cautious on persistent inflation despite wage trends

At a conference today, RBA Chief Economist Sarah Hunter highlighted the central bank's intense focus on inflation, which continues to exceed the target band.

Discussing the latest CPI data, Hunter noted, "Yesterday's data did confirm that there's still strength in a number of categories that we've seen up until this point that's still there." The latest CPI figures, which show a slight increase from 3.5% to 3.6% in April, underline ongoing inflationary pressures across various sectors.

"So clearly there's still some strength in inflation, and that's a key consideration for the board in their decision-making," Hunter added.

While wage growth appears to have peaked, Hunter expressed concerns about productivity which remains weak: "We can see some components of wages growth coming off already, particularly individual agreements," she said. However, she also pointed out, "But equally, we are seeing that there's a bit of a productivity challenge over the last few years."

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9116; (P) 0.9130; (R1) 0.9147; More....

USD/CHF's fall from 0.9157 accelerates lower today, and the development suggests that rebound from 0.8987 has completed already. Fall from 0.9157 is now seen as the third leg of the pattern from 0.9223. Intraday bias is back on the downside for 0.8987 support first. 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.

Economic Indicators Update

US initial jobless claims rose 3k to 219k in the week ending May 25, slightly above expectation of 218k. Four-week moving average of initial claims rose 2.5k to 222.5k.

Continuing claims rose 4k to 1791k in the week ending May 18. Four-week moving average of continuing claims rose 6k to 1786k.

Full US jobless claims release here.

• Pound gains as BoE seen cutting rates late
• Economy improves but inflation may further slow
• A Labor victory could make the BoE’s job easier
• As rate cuts come forward, pound may weaken

Sticky core inflation weighs on rate cut bets

We are nearly halfway through 2024 and the pound is holding the first place among the major currencies in terms of year-to-date performance.

This is because up until recently the BoE was seen as the major central bank that could be forced to press the rate cut button last, and fewer times than others. However, the dovish stance of the BoE at its latest gathering prompted investors to reconsider their view and even assign a decent chance for a first quarter-point cut in June, at a time when the stickiness in US inflation and the Fed’s ‘higher for longer’ mantra pushed the timing of the first expected rate cut by the Fed beyond September.

That didn’t last for long though as the hotter-than-anticipated UK inflation data for April, and especially the stickiness in underlying price pressures, prompted investors to scale back again their BoE rate cut bets. Currently, they are pricing in around 30bps worth of reductions by December, with the probability of a 25bps cut rising above 50% only in September.

PMIs point to further cooling in price pressures

What may have also helped market participants to keep the BoE implied path higher than some other central banks, and thereby the pound supported, was the improvement in economic activity. After slipping into recession during the second half of 2023, the UK economy rebounded by 0.6% in Q1, with the UK PMIs suggesting that the recovery likely continues at a decent pace in Q2.

However, the PMIs also revealed that prices charged inflation fell to its lowest level since February 2021 in May, which suggests that the upcoming CPI numbers, due out on June 19, could reveal further softening in inflation. This may encourage participants to bring forth their rate cuts again, and thereby hurt the pound.

Just the day after the data, the BoE gathers to decide on monetary policy and investors will be eager to see whether they will get signs for an earlier rate cut, especially if the CPIs indeed reveal a further slowdown.

Pound awaits elections as well

Nonetheless, with the general elections scheduled just two weeks after the decision, the Bank is unlikely to rock the boat. Policymakers may prefer to wait for the outcome of the election, as the two opposing sides hold different views on fiscal policy. For example, the Conservatives are advocating lower taxes, while the Labor party has been portraying itself as the party of fiscal responsibility.

Therefore, a Labor victory, as the opinion polls are currently suggesting, could make the BoE’s work easier, allowing it to cut interest rates much earlier than currently expected. According to remarks by the Chief Business Economist at S&P Global Market Intelligence, the latest PMI readings support the view that the BoE will start cutting interest rates in August if upcoming data continues to move in the right direction.

Is sterling running out of fuel?

Ergo, combining all the above, the pound’s rally may be at its final stages. The British currency may eventually come under selling pressure, especially against the aussie, as the RBA is not expected to press the cut button this year. On the contrary, due to the stickiness in Australian inflation, the market is assigning an around 20% chance for a quarter-point rate hike by September.

From a technical standpoint, pound/aussie has been in a recovery mode after testing the key zone of 1.8900. However, the pair continues to trade below the short-term downtrend line drawn from the high of March 5, which means that there is a decent chance for the bears to take charge again soon and push the action back down to 1.8900.

If they do so and manage to overcome that hurdle, they may dive all the way down to the low of December 27 at around 1.8600. For the outlook to turn bullish again, traders may need to lift the price above the 1.9515 barrier, which acted as a temporary ceiling between February 13 and March 20.

Market picture

The crypto market has lost almost 2% of its capitalisation in the last 24 hours to $2.51 trillion. Bitcoin is holding up better than the market, pulling back only 0.7% to $67.6K. Many top coins have deeper drawdowns. Ethereum loses almost 3%, BNB loses 1.6%, and Solana loses 2.6%. Meme coins are under fiercer pressure. With no meaningful drivers of its own, the crypto market has come under indirect pressure due to the stock market.

So far, there are more indications that Bitcoin is moving within a pullback scenario from the upper end of the range. In the most bearish scenario, the price could roll back to $60K. A more optimistic scenario suggests a decline to the $65K area, where the 50-day moving average lies.

Glassnode recorded signs of a recovery in buyer interest in Bitcoin. Long-term BTC holders (those holding the asset for more than 155 days) have resumed accumulation for the first time since December 2023 after months of selling.

News background

BlackRock’s spot bitcoin ETF outperformed Grayscale’s BTC-ETF (GBTC) in terms of assets under management. The Wall Street investment giant’s fund was the largest in the segment at $19.68bn, with total net inflows into US spot bitcoin-ETFs totalling $45.14m.

According to The Block, the gap in trading volumes on the Bitcoin and Ethereum spot market has narrowed to $1.3bn, a difference that was as high as $15bn in March.

The SEC has withdrawn its lawsuit against mining company Digital Licensing, also known as DEBT Box. A U.S. federal court ordered the regulator to pay about $1.8 million in case costs. In August 2023, the SEC accused DEBT Box of fraudulently raising $50 million in cash as well as unnamed amounts in BTC and ETH. In December, the court found that the agency’s lawyers had misled it in an attempt to block DEBT Box’s funds.

Payment giant Mastercard announced the pilot launch of its Crypto Credential service for cryptocurrency transfers between users (P2P transfers).

PayPal, the PYUSD issuer, has launched its stablecoin on the Solana network. The choice of SOL is due to the high speed and low fees of this blockchain.

The Grayscale survey showed that 47% of Americans are willing to allocate a share of their investment portfolio to cryptocurrency. At the end of last year, only 40% of respondents were going to invest in digital assets.

The commodity market, struggling to maintain its upward momentum, frequently slips into sell-offs. On Thursday, the price of Brent crude oil fell to 83.60 USD per barrel.

On Wednesday evening, Brent lost almost 1% of its value due to expectations regarding lending costs. Market discussions revolved around the possibility that the Federal Reserve's interest rates could remain high for an extended period. This outlook is detrimental to the demand prospects for energy resources.

The yield on US government bonds increased on Wednesday, dragging the USD along and exerting significant pressure on the entire spectrum of commodity assets, including oil. This development raises concerns as commodities become less attractive to investors who pay in US dollars. Market participants speculated on the consequences if the Federal Reserve postpones the beginning of the easing cycle or decides not to lower rates at all this year.

According to the API, fresh statistics showed that crude oil inventories in the US fell by 6.490 million barrels for the week. Gasoline stocks decreased by 0.452 million barrels, while distillate reserves rose by 2.045 million.

With June approaching, concerns grow regarding the upcoming OPEC meeting this Sunday.

Brent technical analysis

On the H4 chart, Brent made its first upward impulse towards 84.66. Today, a corrective wave is developing towards 82.55, with an anticipated formation of a consolidation range above this level. An upward breakout from this range is expected to initiate a new growth wave towards 84.70. Breaking through this level could extend the trend to 86.50, representing a short-term target. Technically, this scenario is confirmed by the MACD indicator. Its signal line is above zero and is pointing strictly upwards.

On the H1 chart, Brent completed a growth impulse structure to 84.66. It is currently correcting to 83.60. A consolidation range has formed below this level. An upward breakout from this range will signal the start of a growth wave towards 85.00 while breaking downwards will open up the potential for a correction to 82.55. After this correction, a new growth wave towards 85.00 could develop. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is above the 20 mark. A new growth structure to the 80 mark is expected.

Eurozone unemployment rate fell from 6.5% to 6.4% in April, below expectation of 6.5%. EU unemployment rate was unchanged at 6.0%.

Eurostat estimates that 13.149 million persons in the EU, of whom 10.998 million in Eurozone, were unemployed in April 2024.

Full Eurozone unemployment release here.

Eurozone Economic Sentiment Indicator ticked up from 95.6 to 96.0 in May, matched expectations. Employment Expectations Indicator fell -0.3 pts to 101.3. EU ESI rose 0.3 pts to 0.6.5. EU EEI fell -0.4 to 101.2.

For the largest EU economies, the ESI improved significantly for France (+1.5) and the Netherlands (+1.1) and more moderately for Germany (+0.8) and Italy (+0.8), while it deteriorated markedly for Spain (-3.2) and Poland (-1.5).

Full EZ ESI release here.