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The euro has posted slight losses on Friday. EUR/USD is down 0.28%, trading at 1.0837 in the North American session at the time of writing.

Eurozone CPI steady, core CPI falls

The April inflation report showed that headline inflation remained steady at 2.4% y/y, holding at its lowest level in almost three years. Services inflation and energy prices declined, while food, alcohol and tobacco prices were slightly higher. Monthly, headline CPI eased to 0.6%, down from 0.8% in March and matching the market estimate.

The most significant news was the decline in core CPI, which excludes energy and food, alcohol and tobacco and is a more accurate indicator of inflation trends. The core rate fell to 2.7% y/y, down from 2.9% in March and matching the market estimate. Core CPI has now decelerated nine straight times and has dropped to its lowest level since February 2022. The European Commission announced earlier in the week that eurozone inflation is expected to drop to 2.5% in 2024 and fall to the 2% target in the second half of 2025.

The European Central Bank has done a good job slashing inflation, which was running at 7% a year ago. The ECB has signaled that it is ready to shift policy and lower rates at the June meeting.
ECB President Lagarde has widely hinted at a June cut but has remained mum about what happens after that. Lagarde doesn’t want to raise expectations of a series of rate cuts and then disappoint the markets if the ECB doesn’t follow through.

There are no key economic releases out of the US today, leaving FedSpeak as the highlight of the day. Three voting members of the FOMC, Christopher Waller, Mary Daly and Adriana Kugler will deliver speeches which could provide some insights into future US rate policy. FOMC members have sounded rather hawkish, saying that restrictive policy is working and there is no rush to lower rates.

EUR/USD Technical

• EUR/USD is testing support at 1.0850 and is putting pressure on support at 1.0832
• There is resistance at 1.0872 and 1.0890

Silver climbed above $29.8, rewriting the highs from January 2021, but once again faced selling intensification from that level for the first time in four years and has pulled back to $29.40 at the time of writing.

Silver does not look overheated, as it is only now entering overbought territory on the RSI on the daily timeframes. Last month, silver was actively added for another three weeks after the RSI entered levels above 70. A two-week pullback in the second half of April later removed that overbought area. Technically, this clears the way up.

The upside potential after the pullback is also indicated by the April correction fitting into a classic Fibonacci pattern with a pullback to 61.8% of the initial rally from late February, followed by a quick recovery. A strong rise above the recent peaks will be an important confirmation of the growth extension and will make the $33 level a likely target for a new impulse.

We also note that the fresh assault on the 30 level came just a month after the previous one, and this rally started from a higher level than what we saw in March or 3-4 years ago.

Long-term trends are also on the bulls’ side. In the last two years, they have been able to quickly turn the price to the upside after dips under the 200-week moving average. This year, the price is successfully pulling away from that line, but the most furious part of the rally may be ahead.

Silver could be ready to repeat the growth spurt it showed in 2010-2011. Back then, the multi-year resistance was at the $20 level, and the acceleration came after the 50-week moving average exceeded the 200-week moving average, and the price took that important round level. We have already gotten the first signal, so we must wait for the overcoming of $30 at the end of the week to confirm the bullish sentiment.

A move above $30 will make us seriously consider levels above $50/oz as a long-term target, repeating the 2011 and 1980 peaks.

Market picture

The crypto market cooled off on Thursday afternoon, but on Friday morning, buyers stepped up again, bringing capitalisation back to levels from the day before at $2.39 trillion. Strong growth was followed by rapid profit-taking, which is a necessary part of healthy growth, suggesting a high chance of continued gains in the coming days.

Bitcoin was pulling back towards $65K on Thursday but is already trying to regain its footing above $66K on Friday morning. If cryptocurrencies get support from the global risk appetite on Friday, Bitcoin could exceed $70K over the weekend. A test of the $71K-$74K highs area, in our view, could happen as early as early next week, triggering a new episode of FOMO.

Solana has been revived, adding over 10% in less than three days. On Thursday, the coin managed to break out of the $125-155 consolidation range. The day before, it consolidated above the 50-day moving average. Potentially, this opens the way to $200, and this is a case where altcoins are moving better than Bitcoin.

News background

According to the company’s report, hedge fund Millennium Management owned $1.94bn worth of spot bitcoin-ETFs at the end of the first quarter of 2024, which corresponds to 3% of its assets under management.

In the first quarter, 937 companies invested $11bn in bitcoin-ETFs, K33 calculated based on summary reporting information to the SEC. On 15 May, net inflows into spot bitcoin-ETFs rose to $303 million. The positive trend continued for the third day in a row.

According to Bloomberg, there is almost zero probability that the US SEC will approve spot Ethereum-ETFs. Ethereum’s exchange rate against Bitcoin has fallen to a three-year low.

According to the FT, the world’s largest financial derivatives exchange, CME Group, plans to launch spot trading in Bitcoin in addition to its existing futures product. The exchange would then become another channel for Wall Street companies to trade Bitcoin in addition to ETFs.

Tether, the company that issues USDT, has partnered with The Open Network and the Oobit service to “create a seamless cross-chain payments solution.” This could expand the use of crypto assets as a means of payment for people without access to banking services.

Major cryptocurrency exchanges Binance, Bybit, and OKX all listed the NOT token of gaming Web3 project Notcoin on 16 May. The coin will also be added to Telegram’s built-in crypto wallet, Wallet. The project attracted users’ attention due to the announced coin distribution.

• WTI oil futures hold near recent lows; develop within narrow neutral structure
• Technical signals indicate improving sentiment, but downside risks could emerge near 80.80

Despite occasional drops, WTI oil futures remained squeezed within the 78.00-80.00 area and between two ascending lines for the second consecutive week.

The bulls have been held back around 79.68 by the 38.2% Fibonacci retracement of the December-April uptrend, while the 200-day exponential moving average (EMA) has been restrictive too.

Thus, in spite of the upward trend shown by the technical indicators, the price must conclusively exceed that boundary around 79.68 and, more significantly, breach the resistance line at 80.80 to enhance buying desire, aiming for the 23.6% Fibonacci mark of 82.45. Even higher, there is a possibility that the price will briefly stall around 84.00 before continuing its upward movement to 85.70.

Note that the 20-day EMA has slipped below the 50-day EMA, making a bearish trend continuation likely.

For the sellers to come into force, the price must crack the protective trendline at 78.63 and perhaps slide below the 50% Fibonacci number of 77.44 too. Should that materialize, the decline could pick up pace, bringing the 61.8% Fibonacci and the support line from April at 75.61 under the spotlight. If more losses occur, the price might initially pause near the 73.60 zone and then around the 78.6% Fibonacci of 72.00.

In a nutshell, WTI oil futures are presently trading within a compact neutral region. Depending on whether the market closes above 80.80 or below 78.73, the market may move accordingly.

The British pound is down slightly on Friday. GBP/USD is down 0.14%, trading at 1.2648 in the European session at the time of writing.

It has been a good week for the pound, which has gained 1% against the US dollar. Wednesday’s inflation release showed CPI dipping in April, reversing the trend of the past several months. The unexpected stickiness in inflation had delayed a rate cut from the Federal Reserve and the drop in April inflation raised expectations for a rate cut, sending equity markets higher and the US dollar lower, with GBP/USD jumping 0.75% on Wednesday.

The Federal Reserve has been cautious about shifting its “higher for longer” policy, which has kept rates on hold for six straight times. The unexpected rise in inflation in the first quarter and strong US economic data has delayed plans to lower rates. The Fed signaled in January that it was planning to cut rates three times this year but is now looking at one or perhaps two rate cuts before the end of the year.

There are no key economic releases out of the US today but three FOMC members, Waller, Daly and Kugler, will deliver speeches which could provide some insights into future US rate policy. FOMC members have sounded rather hawkish, saying that restrictive policy is working and there is no rush to lower rates.

The Bank of England is under pressure to lower rates as inflation has fallen to 3.2%. The path to achieving the 2% target is likely to be bumpy but the labour market is showing signs of cooling down, which supports a rate cut. The June meeting promises to be interesting, with the markets pricing in a 50/50 probability of a rate cut or a hold.

GBP/USD Technical

• GBP/USD is putting pressure on support at 1.2642. Below, there is support at 1.2615
• 1.2672 and 1.2699 are the next resistance lines

The Australian dollar is lower on Friday. AUD/USD is currently trading at 0.6658 in the European session, down 0.31% on the day.

The Aussie touched a high of 0.6714 on Thursday, its highest level since January 10th. This followed a massive 1% surge on Wednesday after the US inflation report indicated that April CPI ticked lower, raising expectations of a Federal Reserve rate cut.

Australian dollar after mixed Chinese data

Chinese data was a mix on Friday. Industrial production expanded by 6.7% y/y in April, compared to 4.5% in March and well above the market estimate of 5.5%. Manufacturing has shown stronger activity as the government has provided stimulus to the economy which has had a bumpy recovery from Covid.

Chinese consumers have cut spending due to the uncertain economic conditions and April retail sales was a major disappointment, dropping to 2.3% y/y. This was down from 3.1% in March and short of the market consensus of 3.8%. Retail sales remain in positive territory but the April release was the lowest in15 months and that is sure to get the attention of policy makers. China is Australia’s largest trading partner and a downtrend in domestic demand in China would spell trouble for the Australian export sector and could weigh on the Australian dollar.

The Reserve Bank of Australia meets next on June 18th. At last week’s meeting, there was no surprise as the RBA held the cash rate at 4.35% for a fourth straight time. The central bank discussed the possibility of a rate hike at the meeting, which was not the case at the March meeting. This indicates that that policy makers are concerned that the path to the 2% inflation target will be bumpy and are hesitant to start lowering rates until they see evidence of sustainable price stability.

AUD/USD Technical

• AUD/USD tested support at 0.6645 earlier. Below, there is support at 0.6602
• 0.6668 and 0.6731 are the next resistance lines

Eurozone CPI was finalized at 2.4% yoy in April, unchanged from March's reading. CPI core (ex-energy, food, alcohol & tobacco) was finalized at 2.7% yoy, down from prior month's (2.9% yoy). The highest contribution to the annual Eurozone inflation rate came from services (+1.64 percentage points, pp), followed by food, alcohol & tobacco (+0.55 pp), non-energy industrial goods (+0.23 pp) and energy (-0.04 pp).

EU CPI was finalized at 2.6% yoy. The lowest annual rates were registered in Lithuania (0.4%), Denmark (0.5%) and Finland (0.6%). The highest annual rates were recorded in Romania (6.2%), Belgium (4.9%) and Croatia (4.7%). Compared with March 2024, annual inflation fell in fifteen Member States, remained stable in four and rose in eight.

Full Eurozone CPI final release here.

ECB Vice President Luis de Guindos addressed inflation expectations at an event today, noting that "headline inflation is there at 2.4%, core inflation below 3%." He projected that inflation will "fluctuate around these values" in the coming months.

Looking further ahead, de Guindos expressed confidence in achieving ECB's long-term inflation goal, stating, "In the medium term, in the year 2025, we will be moving in a stable way towards our price stability objective which is 2%."

• GBPJPY in the green again, returns to pre-intervention levels
• Increasing possibility of another BoJ intervention
• Momentum indicators remain mostly bullish

GBPJPY is edging higher again today, recording its ninth green candle in the last 10 sessions. The bearish momentum after the recent BoJ interventions has faded with the pair quickly returning to pre-intervention levels. This move raises the possibility for another swift reaction from the BoJ, especially as the recent Japanese data releases continue to disappoint.

In the meantime, momentum indicators are bullish but there are some early signs of a rally exhaustion. More specifically, the Average Directional Movement Index (ADX) is edging higher, signaling the presence of a strong bullish trend in GBPJPY, but it appears unable to record a higher high.

Similarly, the RSI has climbed again above its midpoint, confirming the ongoing bullish pressure, but it is currently trading sideways. More importantly, the stochastic oscillator has broken above its moving average, and is tentatively edging higher. Should this move pick up pace, it would be seen as a strong bullish signal.

If the bulls remain confident, they could lead GBPJPY higher towards the 198.59 level and then set their eyes on a much bigger prize - the April 29, 2024 high at 200.50. However, if successful, they would be trading at levels that could provoke another intervention from the Japanese authorities.

On the other hand, the bears could try to push GBPJPY back below the June 24, 2015 high at 195.87, and towards the 192.57-192.64 area, which is populated by the July 21, 2005 and the 50-day simple moving average (SMA), as well as the January 2, 2024 trendline. They could then test the support set by the 188.21-190.33 range and potentially lead GBPJPY below the recent rectangle pattern for the first time since early March.

To sum up, the bulls are pushing GBPJPY higher, closer to pre-interventions levels, and increasing the pressure on the BoJ to intervene again. 

• USDCAD recovers some ground above 1.3600
• Oscillators suggest upside correction in short-term

USDCAD has gained little over the last couple of sessions, and it managed to hold above the medium-term ascending trend line and re-enter the 1.3600 area, with the technical oscillators feeding prospects for possible positive short-term trading; the RSI is moving sideways slightly beneath its trigger line, while the stochastic posted a bullish crossover within its %K and %D lines in the oversold area. Yet, the pair is facing strong resistance near the 50-day simple moving average (SMA).

A failure to overcome the 1.3630 barrier could send the price down to 1.3590, a challenging point over the last three months. Lower, support could be next found around 1.3570 where the 200-day SMA is currently positioned, while a decisive close below this line could stage a steeper sell-off.

Alternatively, if 1.3630 proves easy to get through, the spotlight will turn to the 20-day SMA at 1.3675. On top of that, the bulls would need to clear the 1.3785 barricade to push the rally towards the previous peak of 1.3845, the highest level reached since November 14.

In the short-term picture, USDCAD is trying to turn positive after the rebound off the uptrend line. Should the market continue the medium-term upward pattern, the outlook may turn brighter. A run above 1.3845 could switch the outlook to strongly bullish.