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Daily Pivots: (S1) 0.9889; (P) 0.9903; (R1) 0.9923; More....

EUR/CHF's rally resumed after brief consolidations and intraday bias is back on the upside. Sustained break of 61.8% projection of 0.9304 to 0.9847 from 0.9563 at 0.9899 will pave the way to 100% projection at 1.0106, which is slightly above 1.0095 key structural resistance. On the downside, below 0.9876 minor support will turn bias back to the downside for retreat, back to 0.9728/9835 support zone.

In the bigger picture, as long as 0.9563 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 as a correction to the down trend from 1.2004.

Daily Pivots: (S1) 1.3646; (P) 1.3672; (R1) 1.3720; More...

Immediate focus is now on 1.3589 resistance in USD/CAD. firm break there will argue that corrective fall from 1.3845 has completed at 1.3589 already. Further rise should be seen to 1.3761 resistance first. Break there will bring retest of 1.3845 high. On the downside, however, sustained break of 55 D EMA will argue that whole rise from 1.3176 has completed already, and turn outlook bearish.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Firm break of 1.3976 will confirm up resumption of whole up trend from 1.2005 (2021 low). Next target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149.

Daily Pivots: (S1) 0.6590; (P) 0.6637; (R1) 0.6667; More...

Intraday bias in AUD/USD remains neutral first and more consolidations could be seen below 0.6713. Further rally is expected as long as 0.6578 support holds. As noted before, fall from 0.6870 has probably completed with three waves down to 0.6361 already. Above 0.6713 will target 0.6870 resistance next. However, firm break of 0.6578 will dampen this bullish view. Sustained trading below 55 D EMA (now at 0.6571) will bring deeper decline back to 0.6361 support instead.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which could have completed at 0.6269 already. Rise from there is seen as the third leg which is now trying to resume through 0.6870 resistance.

Daily Pivots: (S1) 1.0805; (P) 1.0834; (R1) 1.0852; More...

Intraday bias in EUR/USD stays neutral for the moment. On the upside, break of 1.0894 will resume the rise from 1.0601 to 1.0980 resistance. Decisive break there will confirm that whole fall from 1.1138 has completed at 1.0601 already. However, firm break of 1.0810 will dampen this bullish case, and turn bias back to the downside for 55 D EMA (now at 1.0788) and below.

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

Intraday bias in GBP/USD is turned neutral first as it continued to lost upside momentum as seen in 4H MACD. 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 1.2658) 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.

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

Intraday bias in USD/JPY remains neutral for the moment. 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.

In focus today

In the euro area, focus turns to the May PMIs. The economy has started the year on a strong footing with composite PMI above 50 in the past two months. We expect that the service PMIs will remain around the 53 level while the manufacturing sector should rebound slightly to 46, still indicating weakness. We will look out for especially the services price and employment indexes as these remain strong, leaving upside risks to domestic inflation, and in turn may reduce the ECB's rate cut appetite in the second half of the year.

We also receive Q1 2024 negotiated wages for the euro area. Inflation expectations are well anchored, and recent indicators suggest a cooling in wage growth to around 4% in Q1. The treatment of one-offs leaves upside risks to the Q1 print together with the robust labour market. Finally, we also look out for the May consumer confidence.

We also look out for PMIs from the US and UK. In the evening, Atlanta Fed's Bostic (voter) will be on the wires.

In Turkey, we expect the central bank to hold the policy rate unchanged at 50% today, in line with consensus. Headline inflation remains close to 70% y/y and the still strong monthly momentum in underlying inflation gives all the reason for CBRT to remain vigilant. The central bank has communicated that further tightening would take place in case of a significant and persistent deterioration in inflation which we do not see at the moment.

In Japan, April inflation data is released early Friday. Inflation has been stable between 2-3% for a while and monthly price growth has also aimed nicely with the inflation target. In March, momentum did however slow and Tokyo data indicate further modest price growth in April.

Economic and market news

What happened overnight

In Japan, the manufacturing PMI came in at 50.5 in May (prior 49.6). This means that factory activity expanded for the first time in over a year. The service sector is still leading the expansion, even though it fell to 53.6 (prior 54.3).

What happened yesterday

In the US, the minutes of the FOMC meeting showed that Fed officials said that they had faith that price pressures would ease over the coming months. However, various officials said if inflation started to surge, they would be willing to hike borrowing costs again. The market's interpretation of the minutes was somewhat hawkish with a small sell-off in risk and broad USD strengthening.

Nvidia came out with stronger than expected figures after the close posting Q1 revenues of USD 26.0B versus an estimate of USD 24.69B and increased guidance for Q2 revenue sending the stock up over 5% afterhours. However, no spill-over to broader markets.

In the UK, In the UK, inflation in April surprised significantly to the top side across the board, relative to both the consensus expectation and the Bank of England's (BoE) forecast. Headline came in at 2.3% y/y and services a 5.9% y/y. The underlying momentum remains strong with the big driver being a broad range of services. Service inflation remains key for the BoE as it uses it as a measure of inflation persistence. Worryingly, alongside the big BoE forecast miss, the momentum in service inflation also picked up in April. Following the top side surprise and the May print unlikely to deliver an equally large downside surprise to sway the majority of the Monetary Policy Committee to vote for a cut, we now expect the first 25bp cut in August (prev. June). Read more in Bank of England - Revised BoE call - Hot service inflation spells trouble, 22 May.

Likewise in the UK, the Conservative UK Prime Minister Rishi Sunak announced that a snap general election will take place on 4 July 2024. While the consensus was for an autumn election, we do not expect the timing to be a game changer. At present, the Labour Party is set to win by a majority according to both polls and prediction markets, and this is well-priced in by markets. Overall, we expect the market impact of the UK general election on 4 July to be fairly muted with both parties firmly campaigning on the notion of delivering economic stability and the likelihood of another event akin to the "mini"-budget event being unlikely.

In China, the government is considering increasing import tariffs as high as 25% on large gasoline powered vehicles as trade tensions ramp up between China, and the US and euro area. At the moment, China imposes a 15% import tariff on such cars. An increase could hit German carmakers such as Mercedes and BMW, which exports such cars to China. Their shares dropped by over 2% on the news.

Further on China, British defence minister Grant Shapps accused China of providing or preparing to provide Russia with lethal aid in its war against Ukraine. The revelation follows a visit by Russian President Vladimir Putin to China last week for two days of talks with Chinese President Xi Jinping. We will monitor how China responds to the accusation.

Market movements

Equities: Global equities were lower yesterday without any significant news to direct the markets. Notably, both energy and materials dipped, with oil decreasing by 1.5% and industrial metals sharply lower. Tech and large-cap growth outperformed, even preceding Nvidia's earnings. In the US yesterday, the Dow fell by 0.5%, the S&P 500 by 0.3%, Nasdaq by 0.2%, and the Russell 2000 by 0.8%. This morning, Asian markets are mixed, with Japan leading the gains while Chinese stocks are lower in both mainland China and Hong Kong. US futures are higher, propelled by tech and reactions to Nvidia's earnings. European futures are also gaining, albeit not to the same extent as in the US.

FI: The surprisingly high UK inflation print in the morning shifted the entire yield curves 2-3bp higher across the board-– and after the initial reaction yields traded in a very tight range with 10y German yields ending at 2.53%, with very little difference to the other euro area jurisdictions. That also means that the long end supply from Austria (15y) and Portugal (30y) as well as the French linker were well absorbed in markets. US markets were largely ignoring the FOMC minutes released last night, in which it amongst others said that "Although monetary policy was seen as restrictive, many participants commented on their uncertainty about the degree of restrictivenes'’.

FX: The USD firmed yesterday with a final leg lower in EUR/USD after the FOMC minutes. Later, after Nvidia delivered another strong result and set a positive tone for equities futures, the USD rebound somewhat faded while EUR/SEK dropped back toward 11.60. NOK/SEK remains just above parity and just below resistance levels as EUR/NOK has been relatively stable. EUR/GBP moved sharply lower alongside relative rates after the UK inflation which surprise on the upside and suggests Bank of England rate cuts will be postponed.

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

Intraday bias in USD/CHF remains on the upside at this point. Rise from 0.8987 is in progress for retesting 0.9223. On the downside, below 0.9105 minor support will turn intraday bias neutral first. Further break of 0.8987 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.

Trading has been relatively quiet in Asian session today. Dollar regained some ground overnight following hawkish minutes from the latest FOMC meeting, which revealed that several members are prepared to support further rate hike if necessary. Despite this, the greenback lacks clear follow-through momentum at present. For a more sustained near-term rebound, Dollar will need additional support from upcoming economic data, including today's jobless claims and PMIs, as well as tomorrow's durable goods orders.

New Zealand Dollar stands out as the strongest performer of the day at the point, driven by unexpectedly robust retail sales data that ended a two-year contraction streak. Kiwi has also been a top performer for the week, buoyed by RBNZ's hawkish stance. Australian Dollar is the second strongest today, supported by solid PMI data showing solid growth and renewed cost pressures. Conversely, Dollar is the weakest performer, followed by Japanese Yen and then Euro. Notably, all major pairs and crosses are confined within yesterday's ranges, with the exception of AUD/NZD.

EUR/GBP is a major focus in European session with Eurozone and UK PMIs featured. Fall from 0.8943 resumed this week and is on track to retest 0.8491/7 support zone. Decisive break there will resume larger down trend from 0.9267 (2022 high). Next medium term target is 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376.

In Asia, at the time of writing, Nikkei is up 1.20%. Hong Kong HSI is down -1.64%. China Shanghai SSE is down -1.15%. Singapore Strait Times is up 0.22%. Japan 10-year JGB yield ius up 0.0011 at 1.002. Overnight, DOW fell -0.51%. S&P 500 fell -0.27%. NASDAQ fell -0.18%. 10-year yield rose 0.020 to 4.434.

FOMC minutes decidedly hawkish, DOW retreats but stays bullish

US stocks ended lower overnight as minutes from the latest FOMC meeting revealed a more hawkish stance than anticipated. The central focus of the minutes was the "lack of further progress" in reducing inflation towards the 2% target, which has raised fresh concerns about the persistence of inflation.

Additionally, the minutes highlighted recent monthly data showing "significant increases in components of both goods and services price inflation," adding to the urgency of the situation. More importantly, "various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate."

Despite the hawkish tone of the minutes, it's important to note that several influential figures, including Chair Jerome Powell and Governor Christopher Waller, have since indicated that they doubt the next move will be an interest rate hike.

Technically, as long as 39371.92 support holds, further rally is expected in DOW in the near term. Current rise is part of the larger uptrend and should target 61.8% projection of 32327.20 to 39889.05 from 37611.56 at 42284.78. However, break of 39371.92 will bring lengthier consolidations first before the up trend resumes.

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%.

Looking ahead

Eurozone and UK PMIs are the main focuses in European session. Later in the day, US will release jobless claims, retail sales, and PMIs.

USD/CHF Daily Outlook

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

Intraday bias in USD/CHF remains on the upside at this point. Rise from 0.8987 is in progress for retesting 0.9223. On the downside, below 0.9105 minor support will turn intraday bias neutral first. Further break of 0.8987 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.

Economic Indicators Update

Short Term Elliott Wave in Light Crude Oil (CL) suggests the decline from 4.12.2024 high is in progress as a 5 waves impulse. Down from 4.12.2024 high, wave 1 ended at 81.56 and wave 2 rally ended at 86.28. Wave 3 lower ended at 76.89. The 1 hour chart below shows the starting point from wave 3. Wave 4 bounce unfolded as an expanded Flat structure. Up from wave 3, wave ((a)) ended at 79.96 and wave ((b)) ended at 76.70. Wave ((c)) higher ended at 80.6 which completed wave 4 in higher degree.

Oil has turned lower in wave 5. Down from wave 4, wave (i) ended at 79.17 and wave (ii) ended at 79.85. Down from there, wave i ended at 78.08 and wave ii ended at 79.5. Expect wave iii to end soon, then it should see 2 more lows to end wave (v) of ((i)). Afterwards, it should rally in wave ((ii)) to correct cycle from 5.20.2024 high in 3, 7, or 11 swing before it resumes lower again. Near term, as far as pivot at 80.6 high stays intact, expect rally to fail in 3, 7, or 11 swing for further downside.

Oil (CL) 60 Minutes Elliott Wave Chart

CL Elliott Wave Video

https://www.youtube.com/watch?v=PQN0TbDJRUY