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Daily Pivots: (S1) 1.2610; (P) 1.2648; (R1) 1.2725; More...

Intraday bias in GBP/USD remains on the upside for the moment. Rise from 1.2298 is in progress. Firm break of 1.2780 will pave the way to 1.2892 resistance next. On the downside, below 1.2624 minor support will turn intraday bias neutral first. But further rally will 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.

Daily Pivots: (S1) 154.21; (P) 155.38; (R1) 156.08; More...

Intraday bias in USD/JPY is turned neutral with current recovery. Outlook is unchanged that fall from 156.78 is seen as the third leg of the corrective pattern from 160.20 high. Below 153.59 will target 151.86 support and possibly below. However, break of 156.78 will resume the rebound from 151.86 towards 160.20 high instead.

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) 0.9001; (P) 0.9036; (R1) 0.9057; More....

Intraday bias in USD/CHF is turned neutral again first with current recovery. But further decline is expected as long as 0.9101 resistance holds. Break of 0.8987 will resume the whole fall from 0.9223 and target 38.2% retracement of 0.8332 to 0.9223 at 0.8883 next. However, break of 0.9101 will turn bias back to the upside for stronger rebound.

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.

The strong rally in US stocks seen yesterday appears to lack follow-through momentum, with futures indicating a flat open today. The benchmark 10-year yield is fluctuating within a tight range, and Dollar is broadly recovering as selling momentum wanes. The strong increase in import prices serves as a reminder that, although disinflation in the US is making progress again, the journey will be "bumpy", as many Fed officials have emphasized.

Despite today's recovery, Dollar remains the worst performer of the week, followed by Swiss Franc and Canadian Dollar. New Zealand Dollar continues to lead the pack, followed by British Pound and Australian Dollar. Euro and Japanese Yen are in the middle, although the Yen is showing signs of weakening again today.

Technically, EUR/JPY recovers notably after drawing support from 55 4H EMA. With 166.73 minor support intact, the rebound from 164.01 could still extend higher. Above 169.38 will target 171.58 high. However, as this rebound is seen as the second leg of the corrective pattern from 171.58, strong resistance should emerge there to limit upside even in case of another rally.

In Europe, at the time of writing, FTSE is up 0.04%. DAX is down -0.35%. CAC is down -0.41%. UK 10-year yield is up 0.0003 at 4.070. Germany 10-year yield is up 0.021 at 2.446. Earlier in Asia, Nikkei rose 1.39%. Hong Kong HSI rose 1.59%. China Shanghai SSE rose 0.08%. Singapore Strait Times rose 0.47%. Japan 10-year JGB yield fell -0.0284 to 0.926.

US import price index rises 0.9% mom in Apr, highest since Mar 2022

US import price index rose 0.9% mom in April, well above expectation of 0.2% mom. That's also the highest 1-month increase since March 2022. Over the past 12 months, import prices rose 1.1% yoy, highest since December 2022.

Export price rose 0.5% mom, 1.0% yoy.

US initial jobless claims falls to 222k, slightly above expectations

US initial jobless claims fell -10k to 222k in the week ending May 11, slightly above expectation of 219k. Four-week moving average of initial claims rose 2.5k to 218k.

Continuing claims rose 13k to 1794k in the week ending May 4. Four-week moving average of continuing claims fell -750 to 1779k.

Fed's Williams: Monetary policy in a good place, no need to tighten today

In a Reuters interview, New York Fed President John Williams expressed confidence in the current state of monetary policy, stating that it is "in a good place." He highlighted the positive mix of economic data, noting strong consumer spending, business investment, and GDP growth. He emphasized that the economy is "not really at a near-term risk" and remains robust, supported by a strong labor market.

Williams indicated that he does not see any immediate need to tighten monetary policy, as current indicators do not suggest that the Fed's actions are harming the economy or interfering with its goals. "So I don't see any need to tighten monetary policy today," he added.

Looking ahead, Williams acknowledged that lower interest rates would be necessary as inflation approaches 2% target. He explained that once inflation is sustainably at this level, Fed would need to reduce its "restrictive influence" on the economy, and move to a "more neutral kind of position."

ECB's Centeno: Interest rate will come down

ECB Governing Council member Mario Centeno stated at a news conference today that Eurozone inflation rate's fall towards the 2% target is "real," and assured that the monetary policy interest rate will decrease.

"The market expects that the interest rate reduction will begin in June... I'm not going to anticipate the decision," Centeno commented. He also emphasized his preference for gradual rate cuts over sharp, sudden reductions.

Japan's Q1 GDP contracts -0.5% qoq, weak consumption and capital spending

Japan's GDP contracted by -0.5% qoq in Q1, slightly worse than the expected -0.4% qoq decline. On annualized basis, GDP fell by -2.0%, missing forecast of -1.5% drop.

Private consumption, which makes up over half of the Japanese economy, decreased by -0.7%, exceeding anticipated -0.2% decline. This marks the fourth consecutive quarter of decline, the longest streak since 2009.

Capital spending fell by -0.8%, slightly more than the expected -0.7% decrease. This was the first decline in two quarters.

Exports declined by -5.0%, despite ongoing support from inbound tourism, while imports fell by -3.4% amid reduction in energy imports. The trade figures reflect a broader slowdown in global demand, which is impacting Japan's export-driven economy.

Australia's employment grows 38.5k in Apr, unemployment rate rises to 4.1%

Australia employment grew 38.5k in April, well above expectation of 25.3k. Full-time jobs fell -6.1k while part-time jobs rose 44.6k. Unemployment rate rose from 3.9% to 4.1%, above expectation of 3.9%. participation rate rose from 66.6% to 66.7%. Monthly hours worked was unchanged. Number of unemployed rose 30.3k or 5.3% mom.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9001; (P) 0.9036; (R1) 0.9057; More....

Intraday bias in USD/CHF is turned neutral again first with current recovery. But further decline is expected as long as 0.9101 resistance holds. Break of 0.8987 will resume the whole fall from 0.9223 and target 38.2% retracement of 0.8332 to 0.9223 at 0.8883 next. However, break of 0.9101 will turn bias back to the upside for stronger rebound.

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

US import price index rose 0.9% mom in April, well above expectation of 0.2% mom. That's also the highest 1-month increase since March 2022. Over the past 12 months, import prices rose 1.1% yoy, highest since December 2022.

Export price rose 0.5% mom, 1.0% yoy.

Full US import and export price release here.

US initial jobless claims fell -10k to 222k in the week ending May 11, slightly above expectation of 219k. Four-week moving average of initial claims rose 2.5k to 218k.

Continuing claims rose 13k to 1794k in the week ending May 4. Four-week moving average of continuing claims fell -750 to 1779k.

Full US jobless claims release here.

The Australian dollar is lower on Thursday after surging 0.98% a day earlier. AUD/USD is currently trading at 0.6671, down 0.33% on the day.

Australian job growth rebounds but unemployment rate rises

Australian employment bounced back in April with an increase of 38,500 after a decline of 5,900 in March and higher than the market estimate of 23,700. However, the rebound was not all that impressive, as full-time employment declined by 6,100. The unemployment rate rose to 4.1%, up from 3.9% and its highest level since January.

The Reserve Bank of Australia needs to see weaker data before it can lower interest rates, and this employment report could point to some cracks in the labor market. If labour data continue to soften, a rate cut before the end of the year would be on the table. Wage growth eased in the first quarter, which would point to inflation heading lower.

US CPI drops to 3.4%

US CPI dipped to 3.4% y/y in April, down from 3.5% in March and matching the market estimate. Monthly, CPI ticked lower to 0.3%, down from 0.4% in March and matching the market estimate. Core CPI dropped from 3.8% y/y to 3.6% y/y and from 0.4% m/m to 0.3% m/m, matching the market estimate.

The drop in inflation, especially in the core rate, raised expectations of a Fed rate cut and sent the Australian dollar surging in the aftermath of the inflation report. The markets have priced in a September rate cut at 74% and a rate cut before the end of the year at 94%, according to the CME FedWatch tool.

Overlooked by all the attention to the inflation report, US retail sales fell sharply to 3% y/y in April, down from a revised 3.8% in March. Monthly, retail sales were flat, compared to a revised 0.6% in March. This points to consumers cutting down on spending due to high interest rates.

AUD/USD Technical

• AUD/USD has support at 0.6670 and 0.6645
• 0.6720 and 0.6745 are the next resistance lines

In a Reuters interview, New York Fed President John Williams expressed confidence in the current state of monetary policy, stating that it is "in a good place." He highlighted the positive mix of economic data, noting strong consumer spending, business investment, and GDP growth. He emphasized that the economy is "not really at a near-term risk" and remains robust, supported by a strong labor market.

Williams indicated that he does not see any immediate need to tighten monetary policy, as current indicators do not suggest that the Fed's actions are harming the economy or interfering with its goals. "So I don't see any need to tighten monetary policy today," he added.

Looking ahead, Williams acknowledged that lower interest rates would be necessary as inflation approaches 2% target. He explained that once inflation is sustainably at this level, Fed would need to reduce its "restrictive influence" on the economy, and move to a "more neutral kind of position."

ECB Governing Council member Mario Centeno stated at a news conference today that Eurozone inflation rate's fall towards the 2% target is "real," and assured that the monetary policy interest rate will decrease.

"The market expects that the interest rate reduction will begin in June... I'm not going to anticipate the decision," Centeno commented. He also emphasized his preference for gradual rate cuts over sharp, sudden reductions.

The yen’s exchange rate rose to the US dollar on Thursday in response to improving prospects for the Federal Reserve interest rate. The USDJPY pair has declined to 153.88.

After the US released up-to-date data on April inflation, the likelihood of a reduction in the cost of borrowing in the country increased markedly. Both the overall and the core consumer price index slowed in April, while retail sales stagnated. Hypothetically, an interest rate cut from the Federal Reserve means a narrower gap between the Federal Reserve and the Bank of Japan’s monetary approaches, which is a positive signal for the yen.

Japan’s GDP statistics were weaker than expected, with Japan’s economy contracting by 2.0% y/y in Q1 2024 compared to the expected decline of 1.5%. The primary driver is weak private consumption, which has been declining for four consecutive quarters.

Such a report considerably complicates the operations of the Bank of Japan. The regulator needs to take actions to keep a balance between supporting the economy and fighting the consequences of the weak yen.

USD/JPY Technical Analysis

On the H4 chart, USDJPY has completed a corrective wave, reaching 156.76. Today, another decline towards 151.40 is forming. After the price reaches this level, a correction could start, aiming for 154.80 (testing from below). Subsequently, the trend might continue to 149.00 representing the first target of the decline wave. This scenario is technically confirmed by the MACD oscillator, with its signal line below the zero level, directed strictly downwards.

On the H1 chart, USDJPY has completed an impulse structure, reaching 154.80. A narrow consolidation range has formed around this level. Today, with a downward breakout, the price has reached the local target of 153.60. Next, a rise to 154.80 (testing from below) is expected, followed by another possible decline wave, aiming for 152.90 and potentially continuing to 151.40. Technically, this scenario is confirmed by the Stochastic oscillator, with its signal line above 20, poised to rise to the 80 mark.