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Equity bulls around the globe celebrated in style the softer-than-expected US CPI data last week. The global equity rally was further juiced by the expectation that a softer inflation in the US would not only allow the Federal Reserve (Fed) to start cutting the rates this year, but also allow the other major central banks, like the European Central Bank (ECB) and the Bank of England (BoE), to carry on with their plans to cut their own rates and – maybe – cut more than people think they could. The S&P500, Nasdaq 100 and Dow Jones renewed record last week, the Big US retailers quarterly results hinted that consumer demand may be coming to a slippery ground, the latter sent Walmart shares to a fresh high last week after the announcement of its Q1 results. Macy’s, Lowe’s and Target earnings are due this week and could come to cement the ‘troubled outlook for spending’ story – that could continue to butter the bread of the Fed doves and further fuel the reflation trade that benefits grandly to the stocks at this side of the Atlantic Ocean as well. The European Stoxx 600 and the British FTSE 100 followed suit with fresh records, the treasuries had their best month this year and the US dollar fell.

But note that the US 2-year yield rebounded past the 4.80% level the greenback kicks off the week under some selling pressure, and the US dollar index held ground above a major Fibonacci support, the 38.2% retracement on the ytd rally that distinguishes the ytd positive trend from a medium term bearish reversal. The soft CPI data could’ve certainly marked the end of this year’s positive trend but people still took into consideration that the producer price data released just a bit earlier than the US CPI last week came in hotter-than-expected and as JP’s Jamie Dimon said ‘costs link to the green economy, remilitarization, infrastructure spending, trade disputes, and large fiscal deficits may mean inflation will stay sticky’. And he is probably right.

But regardless of the warnings, the equity market cleared an important barrier to the present optimism, and is looking to jump over the next big barrier – Nvidia earnings – this week. Nvidia is expected to reveal another blowout quarter where sales may have hit the $24bn mark. Remember that big AI spenders like Meta said earlier in this earning season that they will be spending more on AI. The latter hinted that demand for Nvidia’s AI chips may remain sustained for some more time. Price-wise, Nvidia gained more than 700% since the beginning of last year on AI boom, and is trading at a spitting distance from the $1000 per share level. This week’s results will either send the share above this $1000 level or trigger profit taking near it. But any misstep from Nvidia – which has been the icon of the AI rally – has potential to trigger a broader market selloff, especially across the technology stocks. Note that, the price-to-estimated earnings of the S&P500’s technology sector bounced above the 28 level, which has acted as an important resistance since 2020. Therefore, the current levels could well be appropriate for a correction. And a potential disappointment from Nvidia could pull that trigger.

Also this week

Canada and the UK are due to announce their latest CPI updates on Tuesday and Wednesday respectively, the Reserve Bank of New Zealand (RBNZ) is expected to maintain its policy rate unchanged at 5.50% and the FOMC is scheduled to release the minutes of its latest meeting. Inflation in the UK is expected to have fallen from 3.2% to 2.1% in April. If that’s the case, the BoE rate cut bets could take a lift and limit Cable’s upside potential before the 1.28 mark. Elsewhere, the EURUSD rallied and stepped into the bullish consolidation zone last week on the back of a softer-than-expected US inflation, but sees resistance into the 1.09 mark. Released last Friday, the series of inflation numbers from the Eurozone came with no surprise. Inflation in the Eurozone eased in April, keeping the prospects of a June rate cut well alive. The divergence between the ECB and the Fed outlooks narrowed slightly due to a softer-than-expected US CPI report, but it could not suffice to justify an extension of gains toward the 1.10 psychological mark.

In commodities, US crude rebounded and is testing the $80pb psychological offers this morning. The dovish central bank expectations continue to support the reflation trade, which in return is supportive of energy and commodity prices. Fresh Chinese stimulus measures aiming to address the country’s heavily bleeding property market, and the latest – and better-than-expected – rebound in Chinese industrial production also support the rally in commodity prices. The copper futures begin the week at fresh ATH and the CSI 300 index is pushing higher this Monday, as well.

Daily Pivots: (S1) 1.2660; (P) 1.2686; (R1) 1.2727; More...

Intraday bias in GBP/USD remains on the upside for the moment. Firm break of 1.2708 resistance will extend the rise from 1.2298 to 100% projection of 1.2298 to 1.2633 from 1.2445 at 1.2780. On the downside, below 1.2642 minor support will turn intraday bias neutral again. But further rise will now remain in favor as long as 1.2445 support holds, in case of retreat.

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.

Asian markets kicked off the week on a positive note, buoyed by the record-breaking rally in US markets last week. Despite escalating geopolitical tensions in the Middle East, which have spurred strong rallies in metals, stock investors appear relatively calm. Trading activity today may be muted due to bank holidays in several European countries and Canada, along with an empty US economic calendar. However, market participants will be paying close attention to comments from BoE MPC member Ben Broadbent and several Fed officials. Later in the week, volatility is expected to rise with RBNZ rate decision, RBA and Fed minutes as well as key CPI and PMI data from several countries.

In the currency markets, Australian Dollar is currently leading the pack, followed by Euro and Canadian Dollar. Conversely, New Zealand Dollar is the weakest performer, likely due to caution ahead of RBNZ rate decision. Dollar and Japanese Yen are also lagging, with Swiss Franc not far behind. This pattern aligns with the prevailing risk-on sentiment in the markets.

Technically, AUD/JPY's rally from 99.89 continues today and it's in progress for retesting 104.91 high. Resistance could be seen there to limit upside. Break of 103.60 minor support will turn intraday bias neutral first. Sustained break of 55 4H EMA (now at 103.17) will argue that the corrective pattern from 104.91 has started the third leg, and bring deeper fall back towards 99.89. However, decisive break of 104.91 will confirm larger up trend resumption instead.

In Asia, Nikkei rose 0.73%. Hong Kong HSI is up 0.61%. China Shanghai SSE is up 0.54%. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield is up 0.0256 at 0.978.

China holds rates steady amidst property sector support measures

China kept its benchmark lending rates unchanged at today's monthly fixing, aligning with market expectations. One-year Loan Prime Rate remained at 3.45%, while Five-year LPR stayed at 3.95%. This decision follows the People's Bank of China's move last week to maintain a key policy rate at 2.50% while rolling over maturing medium-term lending facilities.

Additionally, China announced on Friday a series of measures to stabilize its crisis-hit property sector, including the central bank facilitating CNY 1T in extra funding and easing mortgage rules. This strong supportive policy rollout has increased the likelihood of further monetary easing in the coming months.

Some economists now expect one or two cuts to LPR later this year, alongside a reduction in the reserve requirement ratio. These anticipated measures aim to bolster the property sector and sustain economic growth amid ongoing challenges.

Gold soars to record on geotensions, Silver rallies too

Gold reached a new record high today, fueled by escalating geopolitical tensions in the Middle East and the prospect of easing policies from major central banks this year. Investors are flocking to the safe-haven asset following a series of unsettling events. On Sunday, a helicopter carrying Iranian President Ebrahim Raisi crashed in dense fog, heightening regional instability. Additionally, a China-bound oil tanker was hit by a Houthi missile in the Red Sea on Saturday, further exacerbating tensions. The anticipated shift towards more accommodative monetary policies by global central banks is also reducing the opportunity cost of holding Gold, providing further support for its rally.

Technically, strong resistance could emerge at around 2500 to limit Gold's up trend, at least on first attempt. There lies 161.8% projection of 1614.60 to 2062.95 from 1810.26 at 2535.69, and 100% projection of 1160.17 to 2074.84 at 1614.60 at 2529.27.

However, decisive break of 2500 would set the stage for 200% projection of 1614.60 to 2062.95 from 1810.26 at 2706.96 next. In any case, near term outlook will stay bullish as long as 2370.74 support holds.

Silver is also in strong rally at this point. Near term outlook will stay bullish as long as 29.78 resistance turned support holds. Next target is cluster projection level at 35.80/94, 161.8% projection of 17.54 to 26.12 from 21.92 at 35.80 and 100% projection of 11.67 to 30.07 from 17.54 at 35.94.

RBNZ; RBA and FOMC Minutes; CPIs and PMIs

Several key central bank activities will take center stage this week, along with consumer inflation data and PMIs from several major economies.

RBNZ rate decision is widely expected to keep OCR unchanged at 5.50%. Investors and analysts will be particularly interested in the new Monetary Policy Statement for any changes in its OCR forecasts. Previously, the forecasts suggested 40% probability of a rate hike in Q3, followed by the first rate cut in Q2 2025. The upcoming statement may adjust these probabilities, with prospects of eliminating the chance of another hike, though it may stop short of advancing the timeline for the first rate cut.

Attention will also be directed towards the minutes from RBA and FOMC meetings. RBA has maintained a flexible stance, by not ruling anything in and out. Market observers will scrutinize the minutes for any indications of how inclined (or not) the board towards a rate hike. As for FOMC minutes, market will look for further evidence to rule out the chance of another rate hike. Regarding the first Fed rate cut, it's too early for the minutes to tell whether September is the timing.

Additionally, inflation data from Canada, the UK, and Japan will be closely watched. For BoE and BoC, substantial decline in inflation is necessary before considering a rate cut in June. If inflation remains elevated, BoE might look to August, and the BoC to July, for potential rate adjustments.

Other significant economic indicators to monitor include durable goods orders from the US and retail sales data from Canada, the UK, and New Zealand. PMIs from Australia, Japan, Eurozone, the UK, and the US will also provide valuable insights.

Here are some highlights for the week:

• Monday: Japan tertiary industry index.
• Tuesday: Australia Westpac consumer sentiment, RBA minutes; Eurozone current account, trade balance; Canada CPI.
• Wednesday: Japan machine orders, trade balance; RBNZ rate decision; UK CPI, PPI; US existing home sales.
• Thursday: New Zealand retail sales; Australia PMIs, inflation expectations; Japan PMIs; Eurozone PMIs; UK PMIs; US jobless claims, PMIs, new home sales.
• Friday New Zealand trade balance; Japan CPI; UK consumer confidence, retail sales; Canada retail sales; US durable goods orders.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2660; (P) 1.2686; (R1) 1.2727; More...

Intraday bias in GBP/USD remains on the upside for the moment. Firm break of 1.2708 resistance will extend the rise from 1.2298 to 100% projection of 1.2298 to 1.2633 from 1.2445 at 1.2780. On the downside, below 1.2642 minor support will turn intraday bias neutral again. But further rise will now remain in favor as long as 1.2445 support holds, in case of retreat.

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

Ahead of this week’s RBNZ policy meeting, our survey finds that offshore clients are more dovish than those onshore. Both groups are more dovish than the RBNZ.

• Market participants see an earlier start to RBNZ easing than RBNZ and Westpac forecasts.
• Survey participants are less dovish than market pricing.
• Offshore market participants are more dovish than New Zealand-based clients.
• Participants see the path of non-tradable and headline inflation as key risk factors.
• Offshore market participants see potential labour market weakness as being more important compared to New Zealand- based clients.
• There is a significant gulf between the RBNZ’s stance and the hopes of offshore market participants, which raises the stakes of the May Monetary Policy Statement and June quarter CPI.

Read full report here

Gold reached a new record high today, fueled by escalating geopolitical tensions in the Middle East and the prospect of easing policies from major central banks this year. Investors are flocking to the safe-haven asset following a series of unsettling events. On Sunday, a helicopter carrying Iranian President Ebrahim Raisi crashed in dense fog, heightening regional instability. Additionally, a China-bound oil tanker was hit by a Houthi missile in the Red Sea on Saturday, further exacerbating tensions. The anticipated shift towards more accommodative monetary policies by global central banks is also reducing the opportunity cost of holding Gold, providing further support for its rally.

Technically, strong resistance could emerge at around 2500 to limit Gold's up trend, at least on first attempt. There lies 161.8% projection of 1614.60 to 2062.95 from 1810.26 at 2535.69, and 100% projection of 1160.17 to 2074.84 at 1614.60 at 2529.27.

However, decisive break of 2500 would set the stage for 200% projection of 1614.60 to 2062.95 from 1810.26 at 2706.96 next. In any case, near term outlook will stay bullish as long as 2370.74 support holds.

Silver is also in strong rally at this point. Near term outlook will stay bullish as long as 29.78 resistance turned support holds. Next target is cluster projection level at 35.80/94, 161.8% projection of 17.54 to 26.12 from 21.92 at 35.80 and 100% projection of 11.67 to 30.07 from 17.54 at 35.94.

China kept its benchmark lending rates unchanged at today's monthly fixing, aligning with market expectations. One-year Loan Prime Rate remained at 3.45%, while Five-year LPR stayed at 3.95%. This decision follows the People's Bank of China's move last week to maintain a key policy rate at 2.50% while rolling over maturing medium-term lending facilities.

Additionally, China announced on Friday a series of measures to stabilize its crisis-hit property sector, including the central bank facilitating CNY 1T in extra funding and easing mortgage rules. This strong supportive policy rollout has increased the likelihood of further monetary easing in the coming months.

Some economists now expect one or two cuts to LPR later this year, alongside a reduction in the reserve requirement ratio. These anticipated measures aim to bolster the property sector and sustain economic growth amid ongoing challenges.

Key Highlights

• EUR/USD started a fresh increase above the 1.0820 resistance.
• A key bullish trend line is forming with support at 1.0825 on the 4-hour chart.
• Gold price rallied above the $2,400 resistance zone.
• Bitcoin climbed higher and even surpassed the $66,500 resistance zone.

EUR/USD Technical Analysis

The Euro started a decent increase from the 1.0620 support against the US Dollar. EUR/USD cleared the 1.0750 and 1.0800 resistance levels to move into a positive zone.

Looking at the 4-hour chart, the pair even settled above the 200 simple moving average (green, 4-hour) and the 100 simple moving average (red, 4-hour). There was a move above the 1.0850 resistance.

The pair traded as high as 1.0895 before there was a minor pullback. The pair dipped below the 23.6% Fib retracement level of the upward move from the 1.0723 swing low to the 1.0895 high. However, the bulls are active above 1.0820.

There is also a key bullish trend line forming with support at 1.0825 on the same chart. The next major support is at 1.0810. If there is a downside break below the 1.0810 support, the pair might test 1.0750.

On the upside, the first major resistance is near 1.0895. A clear move above the 1.0895 resistance might send it toward the 1.0920 level. Any more gains might call for a move toward the 1.0965 level in the near term.

Looking at Gold, the bulls are again in action and they managed to pump the price above the $2,400 resistance zone.

Economic Releases

• Fed's Jefferson speech.
• Fed's Waller speech.

• Silver broke multi-year resistance level 29.50
• Likely to reach resistance level 32.00

Silver recently broke the key multi-year resistance level 29.50 (which has been reversing the price from the middle of 2020, as can be seen from the weekly Silver chart below).

The breakout of the resistance level 29.50 should accelerate the active impulse waves 5 and (3).

Given the clear daily uptrend, if the price closes this week above 29.50, Silver can then be expected to rise further to the next resistance level 32.00.

• Brent crude oil reversed from key support level 81.00
• Likely to test resistance level 84.00

Brent crude oil recently reversed up from the key support level 81.00 (which has been reversing the price from the start of February) intersecting with the lower daily Bollinger Band and the 50% Fibonacci correction of the upward impulse from December.

The upward reversal from the support level 81.00 created the daily Hammer, which stopped the earlier correction ii.

Brent crude oil can then be expected to rise further to the next resistance level 84.00, which reversed the price at the start of May.