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• GBPJPY is in the green again today, a tad below its 9-year high
• The BoJ meeting failed to stop the yen’s underperformance; intervention threat lingers
• Momentum indicators are clearly on the GBPJPY bulls’ side

GBPJPY is trading higher again today, recording its fourth consecutive green candle and preparing to test the June 24, 2015 high at 195.87. The market is digesting the BoJ meeting’s outcome, with the lack of hawkish rhetoric maintaining the underperformance of the ailing yen and increasing the pressure on the Japanese finance ministry to intervene.

Momentum indicators have taken notice of the recent upside sentiment in GBPJPY. More specifically, the Average Directional Movement Index (ADX) edged above its 25-threshold, pointing to a tentatively bullish trend. Similarly, the RSI has climbed to a 2-month high, confirming the ongoing bullish pressure in GBPJPY. More importantly, the stochastic oscillator has returned inside its overbought territory (OB) but maintains a good gap from its moving average. It can stay in the OB area for a while before signalling the possibility of a correction.

Should the bulls remain hungry, they could try to overcome the June 24, 2015 high at 195.87 and record a new 9-year high. They could then set their eyes on a much bigger prize - the February 6, 2003 high at 198.59.

On the other hand, the bears are desperate to regain market control and gradually push GBPJPY towards the July 21, 2005 low at 192.57. They could then test the support set by the January 2, 2024 trendline and the busy 189.61-191.07 range, which is defined by the 50-day simple moving average (SMA).

To sum up, GBPJPY continues its journey north as the dovish BoJ meeting increases the pressure on the Japanese authorities to react in order to control the ongoing yen devaluation.

Daily Pivots: (S1) 193.67; (P) 194.31; (R1) 195.39; More..

GBP/JPY's up trend continues today and intraday bias stays on the upside for 195.86 long term resistance. Firm break there will target 198.89 projection level. On the downside, below 194.33 minor support will turn intraday bias neutral first. But outlook will remain bullish as long as 189.97 support holds, in case of retreat.

In the bigger picture, current rally is part of the up trend from 123.94 (2020 low), and is in progress for 195.86 long term resistance (2015 high). Break there will target 61.8% projection of 155.33 to 188.63 from 178.32 at 198.89 next. Break of 189.97 support is needed to be the first sign of medium term topping. Otherwise, outlook will remain bullish in case of retreat.

Daily Pivots: (S1) 166.28; (P) 166.68; (R1) 167.42; More...

Intraday bias in EUR/JPY remains on the upside as recent up trend continues. Next target is 168.72 projection level. On the downside, below 166.66 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, current rally is part of the up trend from 114.42 (2020 low), which is still in progress. Next target is 61.8% projection of 139.05 to 164.29 from 153.15 at 168.72, or even further to 169.96 (2008 high). Break of 162.26 support is needed to be the first sign of medium term topping. Otherwise, outlook will stay bullish in case of retreat.

Daily Pivots: (S1) 0.8563; (P) 0.8577; (R1) 0.8590; More...

Break of 55 4H EMA suggests that EUR/GBP's rise from 0.8519 has completed at 0.8643, ahead of medium term trend line resistance. near term bearishness is retained. Intraday bias is back on the downside for retesting 0.8491/7 support zone. On the upside, above 0.8599 minor resistance will turn intraday bias neutral again.

In the bigger picture, outlook is mixed up by current strong rebound. On the upside, sustained break of the trend medium term trend resistance will argue that the down trend from 0.9267 (2022 high) has completed as a triangle pattern. Further rise should then be seen through 0.8764 resistance next. However, rejection by the trend line will retain medium term bearishness for another fall through 0.8491 at a later stage.

Daily Pivots: (S1) 1.6419; (P) 1.6453; (R1) 1.6495; More...

Intraday bias in EUR/AUD remains neutral first. On the downside, firm break of 1.6368 support will revive that case that rebound from 1.6127 has completed at 1.6742. Fall from there is seen as the third leg of the pattern from 1.7062. Deeper decline would then be seen to 1.6127 support and below.

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 another 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.

Daily Pivots: (S1) 0.9773; (P) 0.9786; (R1) 0.9801; More...

Intraday bias in EUR/CHF stays mildly on the upside at this point. Rise from 0.9563 would target a retest on 0.9847. Decisive break there will resume larger rally from 0.9252 high. On the downside, below 0.9708 minor support will turn intraday bias to the downside for another leg of the corrective pattern from 0.9847.

In the bigger picture, while 55 D EMA (now at 0.9655) was breached, EUR/CHF rebounded strongly since then. Rise from 0.9252 medium term bottom should still be in progress. Break of 0.9847 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. however, sustained trading below 55 D EMA will argue that the rebound has completed.

• USDCAD is in bearish correction mode
• MACD and RSI suggest weak momentum

USDCAD is heading south erasing the rally towards the 1.3845 peak, slipping beneath the 20-day simple moving average (SMA). However, the broader outlook remains positive as the price is posting higher highs and higher lows above the 200-day SMA.

Technically, the MACD oscillator is holding beneath its trigger line in the positive area, while the RSI is moving horizontally near the neutral threshold of 50.

If the market continues to dive further, immediate support could come from the 1.3610-1.3630 restrictive region before plunging to the 50-day SMA currently at 1.3585. Even lower, the 200-day SMA at 1.3550 may act as a turning point for traders.

Alternatively, an earlier rebound around the 1.3630 support may send the pair higher towards the 1.3730 resistance. If the bullish efforts are successful, the price may advance towards the previous top of 1.3845 with the 1.3900 round number being the next destination.

In brief, USDCAD has been in a downside correction over the last ten days and any declines below the 200-day SMA may switch the longer-term picture to neutral.

Markets

US yields reached new YTD highs across the curve following Q1 US GDP data. The 1.6% Q/Qa headline print missed consensus by quite a margin (2.5% Q/Qa), but details showed underlying strength in consumption and investments. The biggest drag came from net exports with imports rising faster than exports, which we consider a sign of resilient demand. Inventories also weighed on growth in another hint of firm domestic demand. Final sales to domestic purchasers grew at a much stronger 2.8% pace. Higher spending on services was partly offset by a decrease in goods. Quarterly PCE price gauges flanked the GDP number with the core PCE accelerating more than expected, from 2% Q/Qa to 3.7% Q/Qa and matching the fastest pace since Q1 of last year. The PCE figures strengthen the view coming from CPI reports that inflation is reaccelerating away from the (never-reached) 2% inflation target. They warrant the current higher for longer market positioning which we expect to be cemented at next week’s FOMC meeting. Another very low weekly jobless claims figure and stronger pending home sales offered US Treasuries no way back. Daily changes on the US yield curve ranged between +4.1 bps (30-yr) and +7.1 bps (2-yr) yesterday. The 2-yr yield closed at 4.9975%. We stick to the view that it will take anticipation on rate hikes instead of cuts to push this tenor above this psychologic mark. Therefore we think that the long end of the curve remains most vulnerable. German Bunds followed US Treasuries south in the aftermath of the GDP/PCE. German yields rose by 2.8 bps (30-yr) to 5.2 bps (3-yr). The German 2-yr yield closed above 3% for the first time since November of last year. The 10-yr yield broke through 2.6% resistance (62% retracement on Q4 decline) giving the technical thumbs up for a full return to last year’s 3.02% high. Market correlation between Fed delaying rate cuts and the ECB holding rates after a flagged 25 bps cut in June is high. Especially since latest European confidence indicators hint at green shoots following last year’s standstill. The dollar clawed back immediately after the data (EUR/USD 1.0720 to 1.0680) but failed to hold on to these gains with the pair eventually closing at 1.0725. Stock markets offer part of the explanation with Nasdaq for example able to limit an opening loss of 2.25% (!) to only 0.5% in the close. Today’s eco calendar contains US income and spending data and March PCE deflators. Those shouldn’t come as a surprise after yesterday. We expect bonds to remain under pressure going into a data-heavy week with EMU CPI’s, US ISM’s, ADP, payrolls and FOMC meeting.

News & Views

The Bank of Japan kept its target policy rate unchanged at 0-0.1% and will continue to buy bonds in line with the guidance it gave in March. In its quarterly economic update, the BoJ projects inflation (CPI ex. fresh food) in the range of 2.5-3% for fiscal 2024 and at around 2% for fiscal 2025 and 2026. Underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and as medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify. This will keep inflation at a level consistent with the inflation target also in the later part of the projection period. The BoJ didn’t give any concrete guidance on the time for further rate hikes but governor Ueda still gives a press conference later today. The lack of policy engagements this morning results in a further decline of the yen with USD/JPY touching a new 34-year top north of USD/JPY 156. Markets are now again looking at the Ministry of Finance for potential interventions to stop a too fast decline of the currency. Aside from the BoJ meeting, Tokyo April CPI data decelerated sharply (ex fresh food from 2.4% from 1.6%). However, the data were distorted due to the start of education subsidies, which also makes the link less tight with the national data that will be published later.

UK consumer confidence (GfK) improved further in April from -21 to -19, matching the best level since early 2022.. Consumers are turning more confident on their personal finances, on the economic situation (last and next 12 months) and climate for major purchases. The improvement was supported by “the impact on household budgets of lower inflation and the anticipation of further tax cuts”. It is in line with other recent survey evidence, also from the corporate sector, that the UK is likely moving toward better growth going forward.

Graphs

GE 10y yield

ECB President Lagarde clearly hinted at a summer (June?) rate cut and seems to have broad backing. EMU disinflation will continue in April and bring headline CPI (temporary) at/below the 2% target. Together with weak growth momentum, this gives backing to deliver a first 25 bps rate cut. A more bumpy inflation path in H2 2024 and the Fed’s higher for longer strategy make follow-up moves difficult. Markets come to terms with that, pushing yields up.

US 10y yield

The March dot plot contained several hawkish elements including a symbolically higher neutral rate. In our view they set the stage for a later (September at the earliest, likely December) start of a possibly shallower cutting cycle. Upcoming CPI readings (through base effects) and resilient eco data should confirm this. US yields continue their uptrend across the maturity spectrum, setting fresh YTD highs.

EUR/USD

Economic divergence (US > EMU) and a likely desynchronized rate cut cycle with the ECB exceptionally taking the lead pulled EUR/USD towards the YTD low at 1.0695. Stronger-than-expected US March inflation figures forced a technical break, opening the path to last year’s low at 1.0494.

EUR/GBP

Debate at the Bank of England is focused at the timing of rate cuts. Most BoE members align with the ECB rather than with Fed view, suggesting that the disinflation process provides a window of opportunity to make policy less restrictive (in the near term). Sterling’s downside turned more vulnerable with the topside of the sideways EUR/GBP 0.8493 - 0.8768 trading range serving as the first real technical reference.

Short Term Elliott Wave View on DAX suggests rally from 10.23.2023 low is unfolding as a 5 waves impulse. Up from 10.23.2023 low, wave (1) ended at 17003.28 and dips in wave (2) ended at 16345.02. The Index extended higher in wave (3) towards 18567.16 as the 1 hour chart below shows. Down from there, wave (4) unfolded as a double three Elliott Wave structure. Down from wave (3), wave ((w)) ended at 18088.03 and wave ((x)) ended at 18326.37. Wave ((y)) lower ended at 17864.69 which completed wave W in higher degree. Wave X rally ended at 18191.95 with internal subdivision as expanded flat.

The Index then extended lower in wave Y towards 17621.66 which completed wave (4). The Index has turned higher in wave (5). Up from wave (4), wave (i) ended at 17873.58 and wave (ii) pullback ended at 17738.04. the Index extended higher in wave (iii) towards 18078.1 and pullback in wave (iv) ended at 18011. Last leg wave (v) ended at 18226.32 which completed wave ((i)). Pullback in wave ((ii)) ended at 17795.96 as a zigzag. Near term, as far as pivot at 17621.6 low stays intact, expect the Index to extend higher.

DAX 60 Minutes Elliott Wave Chart

DAX Elliott Wave Video

https://www.youtube.com/watch?v=EDM9-T1sr3U

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USDJPY breaks higher as inflation came at 1.8% down from 2.5% expectations, and 2.6% prev reading. Thats very interesting reading. Who would think of this data considering how expensive are commodities for them, including oil, with recent drop of JPY. But it puts less pressure on BoJ to hike. Maybe more time is needed for inflation to show up and that's when they will hike, in coming months.

In Elliott wave cycles, we see big third leg up with room for 160, potential resistance for this year.