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Daily Pivots: (S1) 0.9117; (P) 0.9138; (R1) 0.9178; More....

Intraday bias in USD/CHF is turned neutral with current retreat. On the upside, above 0.9157 will resume the rebound from 0.8987 to retest 0.9223 high. On the downside, break of 0.9077 support will bring retest of 0.8987. Break there will resume the fall from 0.9223 to 38.2% retracement of 0.8332 to 0.9223 at 0.8883.

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.

Daily Pivots: (S1) 156.33; (P) 156.58; (R1) 157.07; More...

Intraday bias in USD/JPY stays neutral and outlook is unchanged. Price actions from 160.20 are seen as a corrective pattern. On the upside, break of 156.78 will resume the rise from 151.86, as the second leg, to 100% projection of 151.86 to 156.78 from 153.59 at 158.51. On the downside, below 153.59 will target 151.86 and below as the third leg.

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) 1.2691; (P) 1.2726; (R1) 1.2753; More...

Intraday bias in GBP/USD stays neutral for the moment. On the upside. decisive break of 100% projection of 1.2298 to 1.2633 from 1.2445 at 1.2780 will extend the rally from 1.2298 to 1.2892 resistance next. However, break of 1.2685 will minor support will turn bias back to the downside, for retreat to 55 4H EMA (now at 1.2661) and below.

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 1.2298 support will extend the corrective pattern instead.

As trading progresses into US session, activity in the forex markets remains relatively muted. Euro is showing signs of recovery ahead of key support levels against Dollar and crucial support against Sterling. Eurozone PMIs revealed that economic recovery is strengthening, with Germany, the region's largest economy, finally catching up. Despite this positive data, Euro's gains are still modest.

Currently, New Zealand Dollar is the strongest performer of the day, supported by strong retail sales data. Following closely is Australian Dollar while Swiss Franc is the third strongest. On the other end of the spectrum, Dollar is the weakest performer, trailed by Japanese Yen and British Pound. Canadian Dollar and Euro are positioned in the middle of the performance spectrum.

Technically, focus is now on whether EUR/USD could extend the bounce from slightly above 1.0810 resistance turned support. Further break of 1.0894 will confirm underlying bullishness momentum. Rise from 1.0601 should then target 1.0980 resistance next.

In Europe, at the time of writing, FTSE is flat. DAX is up 0.41%. CAC is up 0.50%. UK 10-year yield is down -0.021 at 4.215. Germany 10-year yield is up 0.012 at 2.551. Earlier in Asia, Nikkei rose 1.26%. Hong Kong HSI fell -1.70%. China Shanghai SSE fell -1.33%. Singapore Strait Times rose 0.44%. Japan 10-year JGB yield rose 0.002 to 1.003.

US initial jobless claims falls to 215k, vs exp 220k

US initial jobless claims fell -8k to 215k in the week ending May 18, below expectation of 220k. Four-week moving average rose 2k to 220k. Continuing claims rose 8k to 1794k in the week ending May 11. Four-week moving average of continuing claims rose 5k to 1782k.

UK PMI manufacturing rises to 22-month high, services growth slows

UK PMI Manufacturing rose from 49.1 to 51.3 in May, surpassing expectations of 49.2 and reaching a 22-month high. However, PMI Services fell from 55.0 to 52.9, below the anticipated 54.8 and marking a 6-month low. Consequently, PMI Composite dropped from 54.1 to 52.8.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that the flash PMI indicates a "further expansion" of UK business activity, aligning with GDP growth of around 0.3% in Q2. He highlighted an "encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth."

The survey also revealed positive news regarding service sector inflation, which is cooling. Companies reported the slowest price growth in over three years, with headline inflation falling close to BoE's target. Williamson noted that the PMI data support the view that BoE will start cutting interest rates in August, assuming the data continues to improve over the summer.

Eurozone PMI composite hits 12-month high at 52.3, pointing to 0.3% GDP growth in Q2

In May, Eurozone's PMI Manufacturing rose from 45.7 to 47.4, surpassing expectations of 46.6 and marking a 15-month high. PMI Services remained unchanged at 53.3, slightly below the forecast of 53.5. PMI Composite increased from 51.7 to 52.3, reaching a 12-month high.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that Eurozone's economy is "gathering further strength." He highlighted that new orders are growing at a healthy rate, and companies' confidence is reflected in a steady hiring pace.

Additionally, de la Rubia pointed out some positive developments for ECB. Rates of inflation for input and output prices in the services sector have softened. This trend supports ECB's apparent stance to cut rates at the upcoming meeting on June 6.

Incorporating PMI numbers into their GDP nowcast, de la Rubia suggested that Eurozone will likely grow at a rate of 0.3% during Q2, effectively dispelling fears of a recession. He further indicated that GDP growth rate of nearly 1% could be achievable this year, with potential for even higher growth.

Also released, French PMI Manufacturing rose from 45.3 to 46.7 in May. PMI Services fell from 51.3 to 49.4. PMI Composite fell from 50.5 to 49.1, back in contraction.

Germany PMI Manufacturing rose from 42.5 to 45.4 in May, a 4-month high. PMI Services rose from 53.2 to 53.9, an 11-month high. PMI Composite rose from 50.6 to 52.2, a 12-month high.

Japan's PMI manufacturing rises to 50.5, first expansion in a year

Japan's PMI Manufacturing rose from 49.6 to 50.5 in May, exceeding expectations of 49.7 and signaling improving business conditions for the first time in a year. Meanwhile, PMI Services declined from 54.3 to 53.6, and PMI Composite inched up from 52.3 to 52.4.

Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, noted that Japan's private sector expansion accelerated for the third consecutive month, reaching its fastest pace since August 2023. This suggests continued growth momentum midway through Q2, hinting at a better GDP reading after the disappointing Q1 results.

Pan highlighted that the expansion in business activity remained "services-led," but the "near-stabilization" of manufacturing output offers hope for broader growth later in the year.

Both input cost and output price inflation rates eased, indicating "softer inflationary pressures across official gauges." However, manufacturers continue to face rising cost pressures, partly due to "yen fluctuations," which remain an important factor to monitor.

Australia PMI composite dips to 52.6, increasing cost pressures

Australia's PMI Manufacturing remained steady at 49.6 in April, a joint 9-month high. PMI Services dropped slightly from 53.6 to 53.1, while PMI Composite decreased from 53.0 to 52.6.

Warren Hogan, Chief Economic Advisor at Judo Bank, noted that PMI remains "firmly in expansionary territory," and pointed to growth at "around the long-term trend rate, if not a touch higher".

However, Hogan warned that weak consumer spending will drag on growth in the first half of the year. Despite this, businesses are still hiring, with the employment index reaching a 6-month high.

Composite input price index hit a 6-month high, with service industry cost pressures rising slightly. Hogan remarked, "This does not suggest a material step down in domestic inflation pressures in Q2."

Additionally, manufacturing input prices hit a one-year high in May, raising doubts about further deflation in domestic goods prices. This has been crucial in bringing inflation below 4% over the past year. Any increase in goods inflation, alongside high service sector inflation, poses a significant concern for RBA, which expects inflation to decrease over the next 18 months.

NZ retail sales up 0.5% in Q1, ending two-year downturn

New Zealand's retail sales volumes rose by 0.5% qoq to NZD 25B in Q1, significantly outperforming the anticipated -0.3% qoq decline. Sales values increased by 0.7% qoq to NZD 30B.

"In the March quarter, we saw a modest increase in retail activity, with growth across most industries," said Melissa McKenzie, business financial statistics manager. "This followed two years of declines."

Of the 15 retail industries, nine experienced higher sales volumes during the quarter. The most notable contributions came from food and beverage services, which rose by 2.2%, motor vehicle and parts retailing, which increased by 1.1%, recreational goods retailing, which surged by 4.7%, and accommodation, which climbed by 4.1%.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2691; (P) 1.2726; (R1) 1.2753; More...

Intraday bias in GBP/USD stays neutral for the moment. On the upside. decisive break of 100% projection of 1.2298 to 1.2633 from 1.2445 at 1.2780 will extend the rally from 1.2298 to 1.2892 resistance next. However, break of 1.2685 will minor support will turn bias back to the downside, for retreat to 55 4H EMA (now at 1.2661) and below.

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 1.2298 support will extend the corrective pattern instead.

Economic Indicators Update

US initial jobless claims fell -8k to 215k in the week ending May 18, below expectation of 220k. Four-week moving average rose 2k to 220k.

Continuing claims rose 8k to 1794k in the week ending May 11. Four-week moving average of continuing claims rose 5k to 1782k.

Full US jobless claims release here.

The price of gold fell to $2370.00 per troy ounce by Thursday following the release of the minutes from the latest US Federal Reserve meeting. The general tone of the Fed's policymakers was notably cautious, aligning with previous calls for a restrained approach to monetary policy.

The Fed indicated that more time is needed to be confident that US inflation is declining towards the 2% target. This cautious sentiment has tempered market expectations of imminent interest rate cuts. Previously, the market anticipated two rate cuts (in September and December); now, it expects no more than one. Consequently, the US interest rate is likely to remain at 5.5% per annum for an extended period before the Fed considers revising it.

Higher interest rates reduce the attractiveness of gold, which does not yield interest. This dynamic has contributed to the recent decline in gold prices.

Technical analysis of XAU/USD

On the H4 chart, XAU/USD has formed a downward impulse to the level of 2404.40, followed by a correction to 2433.90. The limits of the consolidation range are now well-defined, and the market has recently broken out downwards. This breakout opens the potential for a further decline to 2322.00. After reaching this level, a rebound to 2385.35 is expected. This scenario is technically supported by the MACD indicator, with its signal line above zero but directed strictly downwards towards new lows.

On the H1 chart, a decline to 2385.00 has been executed, followed by the formation of a consolidation range around this level. The market has recently broken out downwards from this range, opening the potential for a further decline to 2337.35, which is the local target. Following this, a correction back to 2385.00 (testing from below) is possible. Further decline towards 2321.45 may follow. This scenario is technically confirmed by the Stochastic oscillator, with its signal line above 20 and poised to rise to 50 before another potential decline to 20.

Summary

Gold prices have declined due to the Fed's cautious stance on monetary policy and the expectation of prolonged high interest rates. Technical indicators suggest further potential declines, with possible corrective rebounds along the way. Investors should monitor these levels closely as market conditions evolve.

Last night, the FOMC meeting minutes were released. According to USNews, there were no major surprises. However, the confirmation of persistent inflation – along with hints that some officials discussed potential future rate hikes – displayed a "hawkish" stance. The dollar index initially rose following the minutes' release but returned to pre-release levels this morning, suggesting the initial reaction might have been incorrect.

Subsequently, the Purchasing Managers' Index (PMI) data for key European economies was published. According to ForexFactory:

→ Flash Manufacturing PMI (France): actual = 46.7; expected = 45.8; previous = 45.3;

→ Flash Services PMI (France): actual = 49.4; expected = 51.8; previous = 51.3;

→ Flash Manufacturing PMI (Germany): actual = 45.4; expected = 43.4; previous = 42.5;

→ Flash Services PMI (Germany): actual = 53.9; expected = 53.5; previous = 53.2.

Overall, the actual PMI figures, considered a leading indicator of economic health, exceeded expectations and gave the euro a bullish push.

The combined effect of the euro's rise and the dollar's decline since midnight resulted in a four-hour EUR/USD chart candle with a long lower tail (indicated by an arrow), suggesting demand outweighs supply. A subsequent bullish candle could confirm this.

Technical analysis of the EUR/USD chart shows:

→ The price is within an ascending channel;

→ The 1.081 level served as resistance from 1-13 May but, following a bullish breakout on 14 May, now shows signs of support. This level is reinforced by the lower boundary of the ascending channel and the fundamental news mentioned above.

Thus, euro bulls might attempt to resume the trend and lift the EUR/USD rate to the significant resistance at 1.08750, established in April. The first test of their resolve could be the former support at 1.08466.

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• EURGBP at a make-or-break point near 0.8500 after plunge
• Oversold conditions detected, but the bears not ready to give up the battle

EURGBP was knocked down near the 200-day simple moving average (SMA) at the start of the month, subsequently losing around 1.0% to reach the critical pivot zone of 0.8490-0.8500 which rescued the pair fourth times since July 2023.

Better-than-expected eurozone PMI figures generated fresh positive momentum today after a decline to 0.8498. With the price having stretched below the lower Bollinger band and the stochastic oscillator preparing its next bullish cycle in the oversold zone below 20, there is potential for some recovery. Yet, Wednesday’s crash below the short-term support trendline at 0.8535 suggests that potential increases might be short-lived and insufficient to reverse the negative trajectory in the market. Recall that April’s peak at 0.8643 formed a new bearish channel in the medium-term picture.

If the bulls cannot take charge above 0.8500, the pair could slump towards the channel’s bottom and into the 0.8415-0.8430 territory last active in 2022. An extension lower could see a test near the August 2022 low of 0.8340.

In the event the current positive momentum in the price accelerates above 0.8535, the 20- and SMAs could challenge the bulls around the 23.6% Fibonacci retracement of the November 2023-February 2024 downleg at 0.8560. If the rally continues, the spotlight will again turn to the flattening 200-day SMA at 0.8600, while any spikes above that wall could cease near the channel’s upper band at 0.8625, which is also the extension of the 2023 resistance line. A break higher could trigger a fast rally towards the 0.8685 region, unless the 61.8% Fibonacci mark of 0.8660 blocks the way up beforehand.

Summing up, EURGBP is currently looking oversold near a critical support zone, which helped the pair gain significant ground in the past. That said, worsened trend signals are reducing the odds for a meaningful rebound.

Market picture

The crypto market is quiet, hovering around a total capitalisation of $2.6 trillion for the third day. Bitcoin has so far failed to gain a foothold above $70K, and this is curbing the enthusiasm. It is losing 0.3% in 24 hours against Ethereum’s 0.6% rise.

The top altcoins have comparatively subdued and varied dynamics, with fluctuations between -2% for Dogecoin, -1.5% for Solana and a 1.5% rise for Toncoin.

Technically, Bitcoin remains near the upper boundary of the descending range. The round level of $70K is also quite important for the young crypto market. Going higher would break two barriers at once. Short-term growth momentum could quickly take the price to the highs at $73.5K. A more distant and important target could be in the $95K-$100K area, where the lower boundary is the 161.8% level of the January-March rise and the upper boundary is an important round level.

News background

US SEC staff told trading platforms that the agency is “leaning towards” approving a spot Ethereum-ETF. This is reported by Barron’s, citing anonymous sources. The SEC has requested comments on the applications, and if submitted in time, could lead to approval as early as this week, the piece said.

At least five management companies have sent updated documents to the SEC, Bloomberg notes. Spot ETH-ETFs from VanEck and Franklin Templeton under the tickers ETHV and EZET have appeared on the US National Settlement Depository (DTCC) asset list.

The resumption of the SEC’s dialogue with companies is an important step that may indicate a U-turn in the regulator’s policy, according to Bloomberg. At the same time, some experts saw political overtones in the regulator’s actions.

If the spot Ethereum-ETFs are approved, Matrixport believes cryptocurrency Solana (SOL) could be the next contender to launch exchange-traded funds.

Decentralised exchange Uniswap called on the SEC to reconsider its decision to file the lawsuit, citing the agency’s actions as unreasonable and the legal argument as weak. Uniswap said it is prepared for a legal fight with the regulator.

SEC head Gary Gensler said that the bill proposed for approval by the House of Representatives on the structure of the U.S. cryptocurrency market excludes the definition of digital assets as securities, which poses a danger to investors.

Gold price remains in red for the third straight day and fell to the lowest since May 15 during early European session on Thursday, in extension of Wednesday’s 1.75% drop.

Fed minutes, released late Wednesday, showed that the US central bank believes that inflation will cool further over the time, but left the door open for possible further tightening, if conditions worsen.

Markets saw the latest message from the US policymakers as hawkish signal, which raised demand for dollar and deflated the yellow metal’s price.

Fresh dips weakened near-term structure, but overall picture remains overall bullish on daily chart and suggesting that pullback from new record high ($2450, posted on May 20) would mark a healthy correction before bulls regain full control.

Strong supports at $2343/32 (Fibo 61.8% of $2277/$2450 upleg / top of thick daily Ichimoku cloud) should contain dips and keep near-term action biased higher, though return above pivots at $2391/$2400 (daily Tenkan-sen / psychological) will be required to confirm.

Conversely, loss of $2343/32 handles would open way for deeper correction and expose next targets at $2318/$2300 (Fibo 76.4% / psychological) guarding key near-term supports at $2277/72 (May 3 low and floor of recent consolidation range (Fibo 38.2% of $1984/$2450 uptrend).

Only firm break here would sideline larger bulls and generate initial reversal signal on completion of a double-top pattern ($2431/50).

Res: 2391; 2400; 2413; 2433.
Sup: 2343; 2332; 2300; 2277.