Sample Category Title

• USDJPY reversed from key support level 156.50
• Likely to rise to resistance level 160.00

USDJPY currency pair recently reversed up from the key support level 156.50, former resistance which stopped the previous minor impulse wave i at the start of May.

The upward reversal from the support level 156.50 continued the active minor impulse wave iii.

Given the clear daily uptrend and the strong yen sales, USDJPY currency pair can be expected to rise further to the next resistance level 160.00 (top of wave 1 and the target for the completion of the active impulse wave iii).

The Euro recently encountered resistance at the 1.0890 level against the US Dollar, prompting a downside correction. This decline was marked by a break below a key bullish trend line, with support situated at 1.0860 on the hourly chart of EURUSD. Meanwhile, the USDCHF pair is demonstrating positive momentum, trading above the 0.9110 resistance zone. Notably, there is a connecting bearish trend line forming with resistance at 0.9130 on the hourly chart. Given these conditions, USDCHF may continue its upward trajectory, potentially targeting the 0.9155 resistance level.

AUDUSD – H4 Timeframe

AUDUSD on the 4-hour timeframe is currently trading within a wedge pattern with a possibility of a breakout below the support trendline based on the recent break of structure as highlighted on the chart. Following this, I expect to see a retest of the supply zone that engineered the break of structure, in order for price to resume the bearish momentum. It should be noted that the overlap of the trendline resistance with the supply zone serves as a crucial confirmation of the bearish trend.

Analyst’s Expectations:

• Direction: Bearish
• Target: 0.65442
• Invalidation: 0.66854

EURUSD – H4 Timeframe

EURUSD has recently been rejected off the supply zone and the trendline resistance. The rejection broke structure downwards, indicating a likelihood of a continued bearish move. I expect to see a break below the trendline support, leading to a retest of the supply zone and the confluence of the trendline resistance.

Analyst’s Expectations:

• Direction: Bearish
• Target: 1.07465
• Invalidation: 1.08960

GBPUSD – H4 Timeframe

GBPUSD on the 4-hour timeframe as seen on the chart has just been rejected off the supply zone around the 88% of the Fibonacci retracement of the previous swing. In light of this, I anticipate a break below the immediate low, which will make room for price to retest the supply zone that engineered the break of structure. In simple terms, this means that my sentiment on GBPUSD is bearish as soon as price breaks below the most recent low.

Analyst’s Expectations:

• Direction: Bearish
• Target: 1.25674
• Invalidation: 1.28092

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.

Germany's inflation rate is expected to be 2.4% in May 2024, measured by the year-on-year change in the consumer price index (CPI). Consumer prices are anticipated to rise by 0.1% compared to April 2024. Core inflation, excluding food and energy, is projected at 3.0%. Despite the removal of the energy price brake, a higher carbon price, and the end of the temporary VAT reduction for gas and district heating, energy prices in May 2024 were 1.1% lower than a year earlier. Food prices increased by 0.6%, which is significantly lower than the overall rate of price increase.

EURAUD – H4 Timeframe

EURAUD on the 4-hour timeframe has recently broken above the previous high, indicating a bullish trend. I expect to see price sweep the liquidity from the immediate low before the bullish trend resumes around the 88% of the Fibonacci retracement tool. The trendline support is also an additional confluence to the bullish sentiment.

Analyst’s Expectations:

• Direction: Bullish
• Target: 1.63669
• Invalidation: 1.62030

EURGBP – D1 Timeframe

The Daily timeframe of EURGBP seems to be printing a QMR pattern. The previous low was swept just before the break of structure. In line with the break of structure, the plotted Fibonacci retracement presents an ample opportunity for a bullish entry from the 88% of the Fibonacci tool. The drop-base-rally serves as the final confirmation for the bullish entry.

Analyst’s Expectations:

• Direction: Bullish
• Target: 0.90255
• Invalidation: 0.83284

EURNZD – D1 Timeframe

On the Daily timeframe of EURNZD, we see price break above the previous high, creating an opportunity to plot a Fibonacci retracement. The 76% and 88% of the Fibonacci present the most reliable areas of entry for the bullish sentiment based on the presence of the rally-base-rally demand, and the trendline support.

Analyst’s Expectations:

• Direction: Bullish
• Target: 1.80247
• Invalidation: 1.74310

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.

• Hopes that PCE inflation will point to some further moderation
• But would that be enough for the Fed to ease its hawkish stance?
• US dollar drifts lower ahead of the crucial data due Friday, 12:30 GMT

The stakes are high as Fed meeting approaches

After months of hotter-than-expected inflation prints, there was finally some good news in the latest CPI report. Both the headline and core measures of the consumer price index (CPI) edged lower in April, raising hopes that the Fed will be able to stay on course to cutting rates later in the year.

But with the Fed traditionally putting more weight on the alternate inflation metric of the personal consumption expenditures (PCE) for assessing price pressures, Friday’s numbers could set the tone for Fed policymakers as well as for the markets before the blackout period begins at the weekend in the runup to the June 12 policy decision.

Hoping for a cooldown

The core PCE price metric that the Fed aims to keep near 2.0% stood unchanged at 2.8% in March. The forecasts indicate core PCE will hold at 2.8% for the third straight month in April, while the headline figure is also projected to stay steady at 2.7%. Month-on-month, both the core and headline rates are expected at 0.3%.

However, some forecasters are putting the month-on-month pace for core PCE at 0.2% while the S&P Global business surveys for the month also suggest the risks are tilted to the downside. A softer-than-expected reading in one or more of the PCE price indices would likely add to bets that the Fed will cut rates sooner rather than later.

Aside from PCE inflation, personal income and spending figures will also be watched in the same report.  Personal income is forecast to have risen by 0.3% m/m in April, down from 0.5% in the prior month. More importantly, consumer spending is expected to have slowed, growing by just 0.3% m/m versus 0.8% in March.

What will it take for the Fed to change its tune?

Expectations of two rate reductions rose on the back of the CPI numbers before being pared back again after Fed officials maintained their hawkish posture despite the encouraging data. There is a risk of the same thing happening again if there is some cooling off in PCE prices - any initial euphoria could fade if the Fed does not adopt a less hawkish stance at its June policy meeting.

But the core PCE price index is not the only indicator on investors’ radar ahead of the FOMC decision. The May payrolls data is out on June 7, while there will be another CPI report on Fed Day. In between the PCE data and the NFP report, the ISM PMIs will additionally be released. Hence, unless there is a big surprise, investors will likely opt not to overact to a slight improvement in the inflation picture and instead wait for the other upcoming events.

Dollar defies hawkish Fed

Yet, for the US dollar, growing doubts about two rate cuts have barely provided a boost as Fed Chair Powell seemingly ruling out a rate hike has put a lid on gains. The dollar’s surprise underperformance comes even as other central banks such as the ECB are poised to cut rates in June.

The euro recently broke above its descending trendline, gaining support from a strengthening economic recovery in the Eurozone. The single currency may well test the $1.09 handle in the coming days if Friday’s data does not change much about the US outlook.

Investors in wait-and-see mode

In case of stronger-than-expected numbers, the euro could take a dive towards the $1.0790 region, which lies near the 50% Fibonacci retracement of the October-December 2023 uptrend as well as the 200-day moving average.

However, there’s likely to be more dollar weakness if the inflation numbers miss the expectations, with the euro potentially aiming for the March peak of $1.0980.

Summing up, with an elevated risk of Fed rate cut bets for 2024 being trimmed to just one or even none, markets will be sensitive to any sharp deviations in the PCE readings from the forecasts. Otherwise, traders will prefer to form a more complete picture with the help of the June FOMC meeting and the other releases due until then before deciding on the next direction.

Markets

German bunds underperformed US Treasuries today. We should speak in the conditional tense though because there’s still the $44 bn 7-yr auction scheduled after the European close. A mediocre 2-yr and 5-yr sale yesterday triggered additional losses for Treasuries and was the reason for European/German yields to catch up straight at the open. German rates then dipped again on the release of regional inflation numbers. The m/m readings in most cases varied between flat and +0.1%, showing a clear easing of price momentum in May. The yearly print (HICP), published a few hours later, reaccelerated nonetheless due to unfavorable base effects. The 2.8%, up from 2.4%, was even slightly higher than expected (2.7%). As the session evolved, yields found a bottom and eventually fully erased the inflation-induced dip. Perhaps this tells something about the underlying trend. Data of this kind could have easily propelled ECB easing bets from currently two to three rate cuts this year, but it barely did. The ECB release of credit developments (April) may have helped the process as well, showing that the drag on spending from credit provision continues to ease. It at the very least suggests there is no need for the ECB to cut rates aggressively to avert some kind of a credit crunch. German rates currently add between 3.5 (2-yr) and 7.3 bps (30-yr) bps. The 10-yr yield (+7.2 bps) moved towards a new YtD high. US rates rise up to 5.5 bps at the long end of the curve.

The climb in yields weighs on equity markets (EuroStoxx50 -1.4%, WS opens between 0.8 and 0.95% lower), outweighing the effect of narrowing interest rate differentials for the US dollar. EUR/USD loses a few ticks to change hands in the 1.083 area, though it does trade above the intraday lows. DXY ekes out a tiny gain to 104.82 in technically irrelevant trading. EUR/GBP dropped below 0.85-support in a kneejerk reaction to the German (regional) inflation numbers to hit the lowest level since September 2022. But the subsequent recovery in European yields prevents a bearish break for now. The combo is filling bids around 0.851.

News & Views

Polish CPI inflation slowed to 0.1% M/M from 1.1% in April. Low base effects from last year raised to Y/Y measure to from 2.4% to 2.5%, exactly matching the target of the National Bank of Poland (NBP), but well below the consensus estimate of 2.8%. Prices for electricity, gas and other fuels declined 0.3% M/M and were up 1.8% Y/Y. Food price inflation slowed to 0.3% M/M and 1.6% Y/Y (from 1.9%). On the basis of today’s data, KBC economics estimates core inflation to have slowed to 3.5% Y/Y (was 4.1% in April). Softer than expected inflation will fuel the debate whether the NBP should consider cutting its policy rate later this year. Recently, the majority of Polish MPC members including governor Glapinski indicated to see little/no room to cut interest rates this year. They refer to a high degree of uncertainty with respect to the path of inflation in H2 due to fiscal and regulatory policies. A marked wage growth also might stimulate demand growth in the economy. In a context of higher EMU yields, Polish 2-y and 10-y swap yields declined 7 bps (4.49%) and 8 bps (5.31%) respectively. The zloty eased slightly to EUR/PLN 4.2575, but is holding near the strongest level against the euro since early 2020, touched yesterday.

S&P global ratings today raised the outlook on India’s sovereign credit rate to positive from stable. The rating remains at BBB-. The country’s robust expansion is having a constructive impact on its credit metrics and sound economic fundaments is seen underpinning growth over the next two to three years. S&P also expects broad continuity in economic reforms and fiscal policy regardless of the outcome of the election. Government spending being transformed with an increasing share going to infrastructure is expected to ease bottlenecks to put the country on a higher growth trajectory. The agency also sees a political commitment to fiscal consolidation. Even as fiscal settings always have been the most vulnerable part of this rating profile, S&P projections see the country’s general government deficit at 7.9% of GDP in fiscal 2025 to decline to 6.8% in 2028. After rebounding from near record low levels last week, the Indian rupee this week came again under pressure due to broader dollar strength weighing on regional currencies. USD/INR today rises to 83.35 with the all-time low of the rupee near 83.57 reached mid-April.

Graphs

German 10-yr yield rises to new YtD high despite slowing (m/m) inflation

EUR/PLN: zloty eases slightly as softer CPI pressures hawkish NBP

USD/INR: Indian rupee not impressed with S&P’s outlook upgrade

EuroStoxx 50: climb in (real) yields this time around doesn’t go unnoticed on equity markets

German inflation confirmed an acceleration. Harmonised CPI rose to 2.8% vs 2.4% a month earlier and 2.3% in March. This is positive news for the Euro, which is lagging behind the Pound and relatively weak against the Dollar, based on expectations of a looser ECB monetary policy against rivals.

A fresh batch of data from Germany casts little doubt on the ECB members’ widely announced policy easing on 6 June. Nevertheless, the acceleration in price growth, if sustained going forward, reduces the chances of the back-to-back cuts.

A sustained acceleration in inflation could revive interest in the euro, which earlier on Wednesday fell to its lowest in nearly two years. EURUSD has been hovering around 1.0850 for the past two weeks and could accelerate gains after a pause.

Potential weakness for the euro could come from the economic front, where an economic slowdown and sluggish lending, adding 0.2% to last year, the lowest since 2015, are increasingly evident.

Daily Pivots: (S1) 1.0843; (P) 1.0866; (R1) 1.0879; More....

Intraday bias in EUR/USD stays neutral as sideway trading continues. More consolidations could still be seen. On the upside, break of 1.0894 will resume the rally from 1.0601 to 1.0980 resistance next. However, break of 1.0804 will turn bias back to the downside for 1.0752 resistance turned support.

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) 1.2743; (P) 1.2772; (R1) 1.2790; More...

Intraday bias in GBP/USD is turned neutral with current retreat. Some consolidations would be seen below 1.2799 temporary top. But further rise is expected as long as 1.2670 support holds. Current rally from 1.2298 should target 1.2892 resistance next. 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) 156.78; (P) 156.99; (R1) 157.40; More...

Intraday bias in USD/JPY stays on the upside at this point. Rise from 151.86, as the second leg of the corrective pattern from 160.20, would target 100% projection of 151.86 to 156.78 from 153.59 at 158.51. On the downside, break of 156.57 minor support will turn intraday bias neutral first. Further break of 153.59 will target 151.86 and below as the third leg of the corrective pattern.

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.