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Daily Pivots: (S1) 1.3651; (P) 1.3699; (R1) 1.3723; More...

Intraday bias in USD/CAD remains neutral for the moment. On the upside, break of 1.3782 resistance will argue that correction from 1.3845 has completed with three waves down to 1.3608. Intraday bias will be back to the upside to resume larger rally from 1.3176 through 1.3845. However, sustained trading below 55 D EMA (now at 1.3629) will argue that whole rise from 1.3176 has completed already, and target 1.3477 support next.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. 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) 0.9754; (P) 0.9764; (R1) 0.9778; More...

Intraday bias in EUR/CHF remains neutral and outlook is unchanged. Fall from 0.9835 is seen as the third leg of the corrective pattern from 0.9847. Risk will stay on the downside as 0.9835 resistance holds. Below 0.9278 will turn bias back to the downside for 0.9563 support.

In the bigger picture, as long as 0.9563 support holds, rise from 0.9252 medium term bottom is still in favor to continue. Break of 0.9847 resistance will target 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) 167.00; (P) 167.38; (R1) 168.01; More...

Intraday bias in EUR/JPY stays on the upside for the moment. Rebound from 164.01 is seen as the second leg of the corrective pattern from 171.58. Further rise would be seen to 168.64 resistance. On the downside, below 165.63 minor support will turn intraday bias neutral again first.

In the bigger picture, a medium top could be formed at 171.58 after brief breach of 169.96 (2008 high). As long as 55 W EMA (now at 157.82) holds, fall from there is seen as correcting the rise from 153.15 only. However, sustained break of 55 W EMA will argue that larger scale correction is underway and target 153.15 support.

Daily Pivots: (S1) 194.08; (P) 194.48; (R1) 195.11; More..

GBP/JPY's rebound from 191.34 is still in progress and intraday bias stays on the upside. This rebound is seen as the second leg of the corrective pattern. Further rise would be seen back to 197.40 resistance. On the downside, however, break of 193.82 minor support will turn intraday bias neutral again first.

In the bigger picture, a medium term top could be in place at 200.53 after breaching 199.80 long term fibonacci level. As long as 55 W EMA (now at 183.34) holds, fall from there is seen as correcting the rise from 178.32 only. However, sustained break of 55 W EMA will argue that larger scale correction is underway and target 178.32 support.

Daily Pivots: (S1) 1.6260; (P) 1.6307; (R1) 1.6335; More...

Intraday bias in EUR/AUD remains neutral for the moment. Further decline is expected as long as 1.6494 resistance holds. Fall from 1.6742 is seen as the third leg of the corrective pattern from 1.7062. Break of 1.6216 will turn bias back to the downside to 1.6127 support, or further to 100% projection of 1.7062 to 1.6127 from 1.6742 at 1.5807.

In the bigger picture, fall from 1.7062 medium term top is seen as a correction to the up trend from 1.4281 (2022 low). In case of deeper fall, strong support is expected around 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound. Break of 1.7062 is in favor as a later stage.

Short Term Elliott Wave in AUDUSD suggests the pullback to 0.636 ended wave (2). The pair has turned higher in wave (3) with internal subdivision in 5 waves in lesser degree. Up from wave (2), wave (i) ended at 0.6432 and pullback in wave (ii) ended at 0.6407. The pair then extended higher in wave (iii) towards 0.655 and dips in wave (iv) ended at 0.6516. Final leg wave (v) higher ended at 0.6586 and this completed wave ((i)). Pullback in wave ((ii)) ended at 0.6464.

Up from there, wave (i) ended at 0.654 and pullback in wave (ii) ended at 0.65. Pair resumed higher in wave (iii) towards 0.6647 and dips in wave (iv) ended at 0.662. Pair then extended higher 1 more leg in wave (v) to 0.6649 which completed wave ((iii)). Pullback in wave ((iv)) unfolded as a zigzag Elliott Wave structure. Down from wave ((iii)), wave (a) ended at 0.66 and wave (b) rally ended at 0.6644. Pair then extended lower in wave (c) towards 0.6657 which completed wave ((iv)). Near term, as far as pivot on 4.19.2024 low at 0.636 stays intact, expect dips to find support in 3, 7, or 11 swing for further upside.

AUDUSD 60 Minutes Elliott Wave Chart

AUDUSD Elliott Wave Video

https://www.youtube.com/watch?v=D8YUIcW_JwE

The title of yesterday’s report was: will the Bank of England (BoE) cut? And the answer is yes, it is planning to cut its rates soon. This – expected and concretized dovish shift – was the major takeaway from the BoE’s latest MPC meeting that took place yesterday. None of the 9 MPC members voted to hike the policy rate yesterday, 7 of them voted to maintain it, and 2 of them voted to cut – as Dave Ramsden opted for an immediate rate cut. And because the committee members has a track record of having followed his view in the past, Mr. Ramsden’s vote to cut has been taken as a very strong signal that the BoE will be cutting its rates soon.

How soon? Governor Bailey said that the June meeting ‘is neither ruled out nor a fait accompli’. We have two sets of inflation and labour data before the next decision, so the expectations will likely swing but in the wake of the BoE meeting, the market gives a 50% for a June cut, and an August cut is seen as a sure thing.

As a result, the FTSE 100 rallied to a fresh record yesterday and Cable sold off as a kneejerk reaction to the dovish shift in the BoE’s outlook, but rebounded strongly after the weekly jobless claims data from the US came in much stronger than expected. As such, a broad-based US dollar selloff that sent Cable above the 1.25 level despite a dovish BoE, the EURUSD is drilling above the top of its ytd descending channel and is preparing to test the 50 and 200-DMA to the upside, while the USDJPY remains bid against winds and tides.

If we summarize and give a structure to the FX outlook, the major currencies are operating in a three-speed environment. The Federal Reserve (Fed) can’t cut rates because inflation is stagnating – and worse, picking up momentum to the upside, the European Central Bank (ECB) and the BoE are convinced that inflation in their homes will continue to ease and the diverging inflation dynamics keep them on path to cut their rates this summer. The Bank of Japan (BoJ), on the other hand, doesn’t want to normalize policy. The Japanese have been traumatized by decades of deflation and can’t think properly anymore. So, the macro picture is supportive for a dollar appreciation, back a further depreciation in the euro and sterling against the dollar, and further yen weakness against all of them, with the risk of seeing BoJ step in time to time to slowdown the bleeding.

The S&P500 rallied yesterday and closed from a spitting distance from an ATH level because the stronger-than-expected weekly jobless claims suggested a tighter labour market and an economic slowdown that could bring the Fed to cut rates if inflation eases. And if inflation eases not, well, it is still interpreted as a good news, because then, the demand is strong enough to push prices higher. Yes, equities are winners in both cases. But there is also the stagflation scenario - where the Fed will have no option but to keep rates at higher levels for a longer period of time, praying that the inflation fever will eventually break. And that – stagflation – is the major risk to the US equity rally ahead of next week’s US inflation update.

UK GDP grew 0.4% mom in March, well above expectation of 0.1% mom. Services output rose 0.5% mom. Production output rose 0.2% mom while construction output fell -0.4% mom.

For Q1, GDP grew 0.6% qoq, above expectation of 0.4% qoq. Compared with the same quarter a year ago, GDP is estimated to have increased by 0.2% yoy. In output terms, services grew by 0.7% on the quarter with widespread growth across the sector; elsewhere the production sector grew by 0.8% while the construction sector fell by -0.9%.

Full UK monthly and quarterly GDP releases.

Daily Pivots: (S1) 0.8593; (P) 0.8607; (R1) 0.8623; More...

Intraday bias in EUR/GBP stays mildly on the upside at this point, and further rally could be seen to 0.8643 resistance. Firm break there will resume the choppy rebound from 0.8497 low. On the downside, below 0.8585 minor support will argue that rebound from 0.8529 has completed, and larger fall might finally be ready to resume. Intraday bias will be back on the downside for 0.8529 support first.

In the bigger picture, outlook remains bearish as EUR/GBP is capped below medium term falling trendline. That is, down trend from 0.9267 (2022 high) is still in progress. Firm break of 0.8491/7 will target 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376.

Sterling remains one of the weakest performers this week, despite lack of strong selling momentum. BoE Chief Economist Huw Pill reaffirmed the market's expectations that the central bank would start to consider interest rate cuts in upcoming meetings. These messages echoed the slight dovish shift noted in yesterday's BoE rate decision. Attention is now shifting towards the upcoming UK GDP data, which will provide crucial insights into the strength of the economic rebound from last year's modest recession.

In other developments, Japanese Yen continues to be the weakest overall. But Yen's decline is notably slowing, particularly against Dollar. Swiss Franc is not far behind the Pound, ranking as the third weakest. On the more positive side, New Zealand Dollar stands out as the strongest performer at this moment, finding support from slight improvements in manufacturing data. Euro follows as the second strongest, with the Canadian dollar close behind, which will likely see some volatility with the release of Canada's employment data later today. Dollar and Australian Dollar are positioned in the middle of the pack in terms of performance.

Technically, Gold's break of 2352.33 resistance now suggests that correction from 2431.27 has completed at 2277.23 as a triangle pattern. Further rally should be seen to retest 2431.27 record high. Firm break there will confirm larger up trend resumption. This will remain the favored case as long as 2306.56 support holds, in case of retreat.

In Asia, at the time of writing, Nikkei is up 0.35%. Hong Kong HSI is up 1.74%. China Shanghai SSE is down -0.22%. Singapore Strait Times is up 0.82%. Japan 10-year JGB yield is up 0.0045 at 0.918. Overnight, DOW rose 0.85%. S&P 500 rose 0.51%. NASDAQ rose 0.27%. 10-year yield fell -0.043 to 4.449.

BoE's Pill signals rate cut discussions in upcoming meetings

BoE Chief Economist Huw Pill expressed growing confidence in the possibility of lowering interest rates and stated that the committee would start discussing it "over the next few meetings".

"We're growing more and more confident that we can begin to reduce the restriction that monetary policy is putting in the economy and start to cut interest rate," Pill said at a Q&A session organized by the central bank yesterday.

Pill emphasized that the Bank is not quite ready to make these adjustments, stating, "We're not quite there yet, and we need more evidence."

Yet, he also mentioned, "In the absence of big new disturbances in the economy, we're going to be thinking about moving interest rates over the next few meetings."

This commentary came after the Bank's decision to maintain the interest rate at 5.25%, a decision supported by an 8-2 vote. Deputy Governor Dave Ramsden joined Swati Dhingra, the usual dove, in voting for a rate cut, signaling a slight shift towards a more dovish stance within policy-setting committee.

Fed's Daly discusses dual scenarios for interest rate amid inflation uncertainty

San Francisco Fed President Mary Daly articulated the challenges surrounding US inflation, describing it as likely to be a "bumpy ride" going forward. In her comments yesterday, Daly highlighted there is "uncertainly about what the next few months of inflation will look like".

Daly presented two potential scenarios that could influence Fed's interest rate decisions. In the first scenario, if inflation continues on its recent downward trend alongside a cooling job market, Daly noted that lowering interest rates would be appropriate.

Conversely, Daly outlined a second scenario where inflation does not decline as expected but instead remains stagnant, as observed in the first quarter of this year. In such a situation, Daly stated that it would not be appropriate to cut interest rates, unless there is a concurrent weakening in the job market.

NZ BNZ manufacturing rises to 48.9, signs of life despite prolonged contraction

New Zealand BusinessNZ Performance of Manufacturing Index rose from 46.8 to 48.9 in April. Despite this improvement, the sector remains in contraction for the 14th consecutive month.

Breaking down the components of the index, there were some positive developments in April. Production notably increased to 50.8 from 46.0, and employment also rose to 50.8 from 46.8, both crossing into expansion territory. However, new orders still lagged behind, albeit with a slight improvement to 45.3 from 44.6, indicating that demand continues to be tepid. Additionally, finished stocks and deliveries edged closer to a neutral stance, registering at 50.4 and 48.4, respectively.

Catherine Beard, BusinessNZ's Director of Advocacy, , noted slight improvement in April but also increase in negative sentiment among businesses. She highlighted that "the proportion of negative comments again increased to 69%, compared with 65% in March and 62% in February," with lack of sales and orders being a recurrent concern alongside the broader struggles of the economy.

BNZ Senior Economist Doug Steel provided further insights, stating that "the PMI this year to date is consistent with manufacturing GDP trailing year earlier levels." He also noted that the details for April were "a bit more mixed," and they presented a less uniformly weak picture than in recent months.

Looking ahead

UK GDP is the main focus in European while production and trade balance will also be released. Italy will publish industrial output. Later in the day, Canada employment will take center stage. US will release U of Michigan consumer sentiment too.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8593; (P) 0.8607; (R1) 0.8623; More...

Intraday bias in EUR/GBP stays mildly on the upside at this point, and further rally could be seen to 0.8643 resistance. Firm break there will resume the choppy rebound from 0.8497 low. On the downside, below 0.8585 minor support will argue that rebound from 0.8529 has completed, and larger fall might finally be ready to resume. Intraday bias will be back on the downside for 0.8529 support first.

In the bigger picture, outlook remains bearish as EUR/GBP is capped below medium term falling trendline. That is, down trend from 0.9267 (2022 high) is still in progress. Firm break of 0.8491/7 will target 100% projection of 0.8764 to 0.8497 from 0.8643 at 0.8376.

Economic Indicators Update