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Daily Pivots: (S1) 152.37; (P) 154.33; (R1) 155.60; More...

USD/JPY's fall from 160.20 short term top continues today and intraday bias remains on the downside for 61.8% retracement of 146.47 to 160.20 at 151.71. Strong support should be seen from 150.87 resistance turned support to bring rebound. On the upside, above 153.81 minor resistance will turn intraday bias neutral first. However, sustained break of 150.87 will argue that larger scale correction is underway.

In the bigger picture, current rise from 140.25 is seen as the third leg of the up trend from 127.20 (2023 low). Next target is 100% projection of 127.20 to 151.89 from 140.25 at 164.94. Outlook will remain bullish as long as 150.87 resistance turned support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.9079; (P) 0.9126; (R1) 0.9155; More....

USD/CHF's sharp fall and strong break of 0.9087 support confirms short term topping at 0.9223, after first rejection from 0.9243 key resistance. Intraday bias is back on the downside, and deeper fall would be seen to 38.2% retracement of 0.8332 to 0.9223 at 0.8883. On the upside, above 0.9087 will now turn intraday bias again first.

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 near 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.

Dollar falls steeply in early US session following a disappointing non-farm payroll report that fell short of market expectations across key metrics including job growth, unemployment rate, and wage growth. DOW futures surge over 500 pts at the same time while 10-year yield dives through 4.5% mark.

Despite the single month's data being insufficient for defining a trend, the NFP report has injected a fresh dose of optimism into the market, raising hopes that Fed might be more ready to start cutting interest rates this year. Currently, fed fund futures reflect a growing consensus among investors, with the probability of a rate cut in September rising to over 62%, up from 58% just a week earlier.

As for the week, Dollar is trading as the worst performer, and is highly likely to end the week in this position. Canadian Dollar is the second worst by a distant, followed by Sterling. Yen remains the strongest one, followed by Swiss Franc, and then Kiwi. Euro and Aussie are positioning in the middle.

In Europe, at the time of writing, FTSE is up 0.46%. DAX is up 0.44%. CAC is up 0.51%. UK 10-year yield is down -0.095 at 4.196. Germany 10-year yield is down -0.066 at 2.478. Earlier in Asia, Nikkei fell -0.10%. Hong Kong HSI rose 1.48%. China was on holiday. Singapore Strait Times fell -0.12%. Japan 10-year JGB yield rose 0.0101 to 0.906.

US NFP grows only 175k, unemployment rate rises to 3.9%

US Non-Farm Payroll employment grew 175k in April, well below expectation of 243k. It's also way lower than the average gain of 242k in the prior 12 months.

Unemployment rate rose from 3.8% to 3.9%, above expectation of 3.8%. Labor force participation rate was unchanged at 62.7%.

Average hourly earnings rose 0.2% mom, 3.9% yoy, below expectation of 0.3% mom, 4.0% yoy.

Eurozone unemployment rate unchanged at 6.5%, EU dips to 6.0%

Eurozone unemployment rate was unchanged at 6.5% in March, matched expectations. EU unemployment rate fell from 6.1% to 6.0%.

Eurostat estimates that 13.258m persons in the EU, of whom 11.087m in the euro area, were unemployed in March 2024.

UK PMI services finalized at 55, indicating 0.4% quarterly GDP growth

UK PMI Services was finalized at 55.0 in April, marking a significant improvement from March's 53.1 and representing the highest level since May 2023. This level of activity, the highest since May 2023, signals robust growth in the sector, with activity and new work rising at the fastest rates in 11 months. Despite these positive developments, input cost inflation remains high, reaching its peak since August 2023, though the rate of staff hiring continues to be subdued.

Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted that the latest survey results suggest the UK economy is growing at a quarterly rate of 0.4%. He noted, "Prices charged inflation across the service sector eased to a three-year low in April, suggesting that the pass-through of higher costs has started to wane." This slowdown in price increases comes despite a sharp rise in business expenses driven by strong wage inflation, which continues to push up operating costs.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9079; (P) 0.9126; (R1) 0.9155; More....

USD/CHF's sharp fall and strong break of 0.9087 support confirms short term topping at 0.9223, after first rejection from 0.9243 key resistance. Intraday bias is back on the downside, and deeper fall would be seen to 38.2% retracement of 0.8332 to 0.9223 at 0.8883. On the upside, above 0.9087 will now turn intraday bias again first.

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 near 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 Non-Farm Payroll employment grew 175k in April, well below expectation of 243k. It's also way lower than the average gain of 242k in the prior 12 months.

Unemployment rate rose from 3.8% to 3.9%, above expectation of 3.8%. Labor force participation rate was unchanged at 62.7%.

Average hourly earnings rose 0.2% mom, 3.9% yoy, below expectation of 0.3% mom, 4.0% yoy.

Full US NFP release here.

• Nasdaq 100 has exhibited short-term intraday wild gyrations of 3% to 4% in opposite directions since last week.
• Today’s data focus will be on US non-farm payrolls and ISM Services PMI for April to offer clues on whether the stagflation risk narrative is still alive.
• Macro factors such as the movement of the US 10-year Treasury yield are likely to take over the driver’s seat over micro factors (earnings results) in the next two weeks.
• Key levels on the US 10-year Treasury yield to watch are 4.70% (above, likely to be bearish for Nasdaq 100) and 4.58% (below, bullish bias for Nasdaq 100).

Since our last publication, the Nasdaq 100 has continued to inch lower from its current all-time high level of 18,465 printed on 21 March 2024.  It has just ended April with a monthly loss of -4.46%, its worst monthly performance since September 2023 after its prior five consecutive months of positive returns.

So far it has recorded a maximum drawdown of -8% from its current all-time high to the recent 19 April 2024 low of 16,974, and current episodes of minor rebounds in price actions have been rejected by the downward slopping 20 and 50-day moving averages; the hallmark of a potential on-going medium-term corrective decline sequence within its longer-term major uptrend phase.

On a shorter-term intraday basis, wild gyrations between a range of 3% to 4% in opposite directions have been seen on the Nasdaq 100 due to several significant risk events, and data releases that unfolded this week, two of the “Magnificent 7 group of mega-cap US stocks earnings results (Amazon and Apple), US ISM Manufacturing PMI, US Treasury refunding requirements, and the FOMC monetary policy meeting.

These events and data sets offered conflicting signals on the state of the US economy; stagflation risk is still alive but negated by the Fed’s upcoming Quantitative Tightening (QT) taper initiative to kickstart in June where the monthly amount of US Treasuries roll-off in the Fed’s balance sheet will be reduced to US$25 billion from US$60 billion.

Hence, the QT taper initiative has offered a relief to potentially cap any adverse liquidity squeeze in the US financial system that can trigger a spike in short-term and overnight interest rates as a lesser amount of banks’ reverses may be needed to fund the US Treasury general account (TGA) as the amount in the Fed’s overnight reverse repos facility (the primary source of funding for TGA replenishment since September 2023) has dwindled to almost zero (US$428.68 billion as of 2 May 2024) from a peak of US$2.55 trillion in December 2022.

Watch US NFP & ISM Services PMI for more clarity on the state of the US economy

There will be two more key pieces of economic data to digest before we end this hectic and volatile week, US non-farm payrolls for April where there may be a risk of upside surprise as consensus expectations have been lowballed to +181K jobs added after a surprise rosy print of +232K jobs in March. April’s ISM Services PMI on the health of the US services sector will be out later; still in an expansionary mode (above 50 reading) but the pace of expansion has slowed since the start of the year with last month’s March print of 51.1 versus 53.4 seen in January. If April’s number comes in below expectations of 52 and March’s 51.1, the stagflation risk narrative is likely to gain traction again.

US 10-year Treasury yield may dictate Nasdaq 100’s next intermediate moves

Fig 1: Nasdaq 100 & US 10-YR Treasury yield (inverted) medium-term trends as of 2 May 2024 (Source: TradingView, click to enlarge chart)

Considering macro intermarket analysis, the movement on the US 10-year Treasury yield does have a significant spill-over impact on the major US stock indices on the short to medium-term time horizon via the long-term cost of funding conduit. A persistent uptrend in the US 10-year Treasury yield (considered as a long-term risk-free rate) will lead to a step-up increase in interest rates charged on corporate loans which may put downside pressure on net profit margins (lowering earnings growth potential), and vice versa for a downtrend US 10-year Treasury yield.

Interestingly, yesterday’s rally on the US stock indices; S&P 500 (+0.91%), Nasdaq 100 (+1.29%), Dow Jones Industrial Average (+0.85%), and Russell 2000 (+1.81%) has been accompanied by a dip of 5 basis points in the US 10-year Treasury yield to 4.58%, its lowest level seen in almost two weeks.

The kick-start of the prior medium-term uptrend of the Nasdaq 100 from its 28 October 2023 swing low has been supported by a breakdown of the US 10-year Treasury yield (inverted) parallel support of 4.62% on 3 November 2023.

The recent -8% corrective decline sequence of the Nasdaq 100 from its 21 March 2024 current all-time to 19 April 2024 low has been reinforced by a breakout of the 4.32% resistance on the US 10-year Treasury yield (inverted) on 2 April 2024 (see Fig 1).

Hence, amid the choppy movements of the Nasdaq 100 seen this week, do take a closer look at the movement of the US 10-year Treasury yield as a key macro factor that might influence the movement of the Nasdaq 100 in the next two weeks while key micro factors (earnings results) have taken a backseat for now until the earnings release of Nvidia on 22 May.

A clearance above 4.70% resistance on the US 10-year Treasury yield (inverted) may trigger another potential downleg in the Nasdaq 100 with its key medium-term support zone coming in at 16,560/290 (also the 200-day moving average).

On the flip side, a break below 4.58% near-term support on the US 10-year Treasury yield (inverted) is likely to see a continuation of the rebound on the Nasdaq 100 from the19 April 2024 low to expose the next intermediate resistance at 17,900 (also the 50-day moving average).

The Euro keeps firm tone and extends gains into third consecutive day, pressuring key resistances at 1.0750 zone (50% retracement of 1.0885/1.0601 / daily Kijun-sen).

Firm break here to generate fresh bullish signal for extension of the bull-leg from 1.0601 (Apr 16) where larger downtrend was contained by a double-Fibo support (38.2% of 0.9535/1.1275 / 76.4% of 1.0448/1.1139).

Technical picture on daily chart is improving, as positive momentum is strengthening and 10/20DMA’s are about to form a bull-cross, however, repeated failure at 1.0750 zone would risk another recovery stall and keep the downside vulnerable.

Near-term bias is expected to remain with bulls while the price holds above 1.0700 (psychological / converged 10/20DMA’s, while break here would weaken near-term structure.

All eyes are on release of US jobs data, with US labor sector expected to remain in good condition, according to forecasts, which would add to Fed’s current stance of keeping interest rates unchanged and offer more support to dollar.

Res: 1.0753; 1.0776; 1.0796; 1.0838.
Sup: 1.0721; 1.0700; 1.0649; 1.0601.

AUD/USD is eyeing a steady increase above the 0.6555 resistance. NZD/USD is also rising and could extend its increase above the 0.6000 resistance zone.

Important Takeaways for AUD/USD and NZD/USD Analysis Today

• The Aussie Dollar is moving higher from the 0.6465 zone against the US Dollar.
• There is a connecting bullish trend line forming with support at 0.6555 on the hourly chart of AUD/USD at FXOpen.
• NZD/USD is showing positive signs above the 0.5925 support.
• There is a key bullish trend line forming with support at 0.5940 on the hourly chart of NZD/USD at FXOpen.

AUD/USD Technical Analysis

On the hourly chart of AUD/USD at FXOpen, the pair formed a base above 0.6465. The Aussie Dollar started another recovery wave above the 0.6510 resistance against the US Dollar

The bulls pushed the pair above the 0.6525 resistance zone. There was a close above the 0.6555 resistance and the 50-hour simple moving average. Finally, the pair tested the 0.6585 zone. A high is formed at 0.6585 and the pair is now consolidating above 23.6% Fib retracement level of the upward move from the 0.6465 swing low to the 0.6585 high.

On the upside, the AUD/USD chart indicates that the pair is now facing resistance near 0.6585. The first major resistance might be 0.6620. An upside break above the 0.6620 resistance might send the pair further higher.

The next major resistance is near the 0.6665 level. Any more gains could clear the path for a move toward the 0.6720 resistance zone.

If not, the pair might correct lower. Immediate support is near a connecting bullish trend line at 0.6555. The next support could be 0.6525 or the 50% Fib retracement level of the upward move from the 0.6465 swing low to the 0.6585 high.

If there is a downside break below the 0.6525 support, the pair could extend its decline toward the 0.6510 zone. Any more losses might signal a move toward 0.6465.

NZD/USD Technical Analysis

On the hourly chart of NZD/USD on FXOpen, the pair also followed AUD/USD. The New Zealand Dollar formed a base above the 0.5875 level and started a decent increase against the US Dollar.

The pair climbed above the 0.5925 resistance and the 50-hour simple moving average. The pair even spiked above 0.5940. A high was formed near 0.5978 and the pair is now consolidating gains. The NZD/USD chart suggests that the RSI is correcting lower toward 60.

On the upside, the pair is facing resistance near the 0.5980 zone. The next major resistance is near the 0.6000 level. A clear move above the 0.6000 level might even push the pair toward the 0.6070 level.

Any more gains might clear the path for a move toward the 0.6120 resistance zone in the coming days. On the downside, there is a support forming near 0.5955 or the 23.6% Fib retracement level of the upward move from the 0.5873 swing low to the 0.5978 high.

There is also a bullish trend line forming with support at 0.5940. The next major support is 0.5925 or the 50% Fib retracement level of the upward move from the 0.5873 swing low to the 0.5978 high.

If there is a downside break below the 0.5925 support, the pair might slide toward 0.5875. Any more losses could lead NZD/USD in a bearish zone to 0.5820.

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The Japanese yen has extended its gains on Friday. USD/JPY is trading at 153.26, down 0.27% at the time of writing.

It has been a week to remember as the yen has soared 3.2% against the dollar. The yen fell below the 160 level earlier in the week, setting another 34-year record. However, the Japan’s Ministry of Finance finally stepped in and intervened on Monday and Wednesday, based on Bank of Japan data. These moves have shored up the ailing yen, although previous interventions were unable to stop the yen’s descent.

The yen had been on a sharp descent before this week’s wild swings and was down over 10% since the start of the year. Last week’s BoJ meeting didn’t provide any support to the yen as the central bank maintained interest rates around zero.

Did traders miss hawkish signals from the meeting? The BoJ issued its quarterly report at the meeting and projected that inflation would be at a “level generally consistent” with its target of 2% sustainable inflation by late 2025. As well, the report said the BoJ would “adjust the degree of monetary accommodation”, which could be code for rate hikes, if the economic data and inflation meet forecasts.

The BoJ tends not to be transparent with its plans and the lack of communication may have come back to bite at the meeting, as the Bank failed to make clear that further rate hikes were on the table. Instead, the yen kept dropping, triggering this week’s dramatic interventions.

Will nonfarm payrolls remain strong?

US nonfarm payrolls are unlikely to match last month’s blowout of 303,000, but the markets are expecting strong job growth to continue. The April market estimate stands at 243,000. Wage growth, which is carefully monitored as it contributes to inflation, is expected to remain unchanged at 0.3% m/m in April. The employment report often has a significant impact on the US dollar and should be treated as a market-mover.

USD/JPY Technical

• USD/JPY faces resistance at 154.33 and 155.60
• There is support at 152.37 and 151.10

Eurozone unemployment rate was unchanged at 6.5% in March, matched expectations. EU unemployment rate fell from 6.1% to 6.0%.

Eurostat estimates that 13.258m persons in the EU, of whom 11.087m in the euro area, were unemployed in March 2024.

Full Eurozone unemployment release here.

UK PMI Services was finalized at 55.0 in April, marking a significant improvement from March's 53.1 and representing the highest level since May 2023. This level of activity, the highest since May 2023, signals robust growth in the sector, with activity and new work rising at the fastest rates in 11 months. Despite these positive developments, input cost inflation remains high, reaching its peak since August 2023, though the rate of staff hiring continues to be subdued.

Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted that the latest survey results suggest the UK economy is growing at a quarterly rate of 0.4%. He noted, "Prices charged inflation across the service sector eased to a three-year low in April, suggesting that the pass-through of higher costs has started to wane." This slowdown in price increases comes despite a sharp rise in business expenses driven by strong wage inflation, which continues to push up operating costs.

Full UK PMI services final release here.