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US PPI for final demand fell -0.3% mom in May, below expectation of -0.1% mom rise. PPI goods fell -1.6% mom while PPI services rose 0.2% mom. PPI less foods, energy, and trade services was flat mom.

For the 12 months ended in May, PPI slowed from 3.1% yoy to 2.8% yoy, below expectation of 2.9% yoy. PPI for less foods, energy, and trade services slowed from 3.3% yoy to 2.8% yoy.

Full US PPI release here.

NIESR projects that UK monthly GDP will "remain flat" in May compared to April. The institute added "Higher-frequency data suggest that continued growth in services in May be partially offset by a further decline in manufacturing activity."

For the second quarter, NIESR anticipates a rather lukewarm GDP growth of merely 0.1%, a pace that "broadly consistent with the longer-term trend of low economic growth".

Paula Bejarano Carbo, Associate Economist, NIESR, noted, "With the Bank Rate set to rise further over the coming months, curbing demand, it is likely that UK growth will continue to be anaemic at best."

Full NIESR release here.

• US inflation dips
• Federal Reserve expected to pause rates
• BoE feels pressure after sizzling UK jobs report

The British pound is in positive territory on Wednesday. In the European session, GBP/USD is trading at 1.2645, up 0.27%. The pound surged close to 1% on Tuesday, after a red-hot UK employment report and the drop in US inflation.

Federal Reserve likely to pause

The US inflation report made headlines as inflation fell from 4.9% to 4.0%. That was of course good news, but not the whole story. The drop in headline inflation was primarily due to lower food and energy prices, as the core rate decline was modest – from 5.5% to 5.3%. Core CPI levels remain incompatible with a 2% inflation target, which means that more rate hikes could be on the way after today’s expected pause.

The markets have priced in a pause at close to 100%, meaning it would be a stunner if the Fed raised rates. Still, with Fed members split on whether to pause or continue hiking, Jerome Powell could choose the middle path and deliver a ‘hawkish skip’, whereby the Fed takes a breather but sends out the message that the current tightening cycle is not over. The Fed decision is likely a foregone conclusion, but the rate statement and Powell’s follow-up remarks will be a must-watch.

UK jobs report puts pressure on BoE

Tuesday’s UK employment report was solid, as unemployment fell, employment numbers hit a record and wage growth climbed higher. Once upon a time, such data would have been cheered, but that’s not the case at a time when inflation remains frustratingly high and strong job numbers likely mean more rate hikes.

The Bank of England has tried to do its part by raising interest rates at twelve consecutive meetings. The aggressive tightening was supposed to cool the economy and dampen the labour market, which would then push inflation lower. To put it mildly, the plan hasn’t quite worked out as planned. The economy has not slowed as much as expected and the employment market remains robust, as seen in Tuesday’s employment report.

BoE policy makers appear to have little choice other than to raise rates, but that will make a soft landing a difficult task. The BoE meets on June 22^nd and may deliver an oversize 50-basis point hike, which we haven’t seen since December 2022.

GBP/USD Technical

• 1.2657 is under pressure in resistance. Next, there is resistance at 1.2734
• There is support at 1.2513 and 1.2436

Market picture

The crypto market cap fell 0.5% over the past 24 hours to $1.055 trillion. The recovery momentum was broken with the release of US inflation data, although other markets quickly recovered from the initial move. Bitcoin lost 1% to $25.8K, and Ethereum lost 0.5% to $1740. BNB was going up against the market, adding 5.8%, while XRP is losing 3.5%, having stumbled on profit-taking after rising.

The dynamics of Bitcoin are pulling the crypto market down faster than other assets, which could manifest as reduced demand in the most risk-sensitive part of the market spectre before the FOMC decision results.

An uptrend was built through the local lows of the last four days in BTCUSD. But Bitcoin’s attempts to accelerate gains the night before were met with a sell-off on the approach to $26.4K, the area of the previous consolidation. The Bears may have the upper hand right now. If so, the declines might accelerate to $25.7K, directly leading to $24.8K.

According to Glassnode, bitcoin’s hash rate (smoothed by the seven-day moving average) has reached 393.9 EH/s. As a result of the expected overnight recalculation, BTC’s mining complexity is expected to update to a high of 52.84T. The increase in complexity on the back of lower Bitcoin prices is putting pressure on miners’ yields.

News background

Fortune journalists found a video from 2018 in which future SEC chairman Gary Gansler reveals that BTC, ETH, LTC and BCH are not securities.

XRP renewed its 2.5-month high around $0.56 after the court formally disclosed documents related to former SEC official William Hinman’s 2018 speech. At the time, he claimed that, for some reason, bitcoin and Ethereum were not securities. Ripple Labs believes Hinman’s statements refute all of the SEC’s allegations, so the company has a good chance of succeeding in this case.

Circle CEO Jeremy Allaire said it’s time for US authorities to develop global crypto regulations that will significantly impact the crypto industry and the dollar’s competitiveness for decades to come. The first step could be the adoption of the Stablecoin Act.

Crypto exchanges in the US would likely be required to register with the SEC as brokers, and all cryptocurrencies on the platforms would be classified as securities, JPMorgan believes. Such a situation would put pressure on the crypto industry.

On the hourly chart of GBP/USD at FXOpen, the pair started a fresh increase from the 1.2500 zone. The British Pound was able to clear the 1.2540 resistance against the US Dollar.

It settled above the 1.2590 level and the 50-hour simple moving average. It is now consolidating gains below the 1.2625 resistance. Immediate support is near a connecting bullish trend at 1.2590.

The first major support is near the 1.2540 level. The main support is forming near the 1.2500 level, below which GBP/USD might move lower toward the 1.2440 support.

On the upside, the first major resistance is near the 1.2625 level. If there is a clear upside break above the 1.2625 resistance, the pair could rise toward the 1.2680 level in the near term. The next major resistance sits near the 1.2750 level.

The dollar index is standing at the back foot and consolidating above three-week low in early Wednesday, following Tuesday’s post-US CPI drop and subsequent bounce which kept the price action above key supports at 103.15/01 (top of thick daily cloud/Fibo 38.2% of 100.45/104.59).

Near-term picture remains bearishly aligned, weighed by rising negative momentum and 10/20DMA bear-cross, but the action needs to see clear break of 103.15/01 pivots to signal bearish continuation and open way for deeper drop.

The demand for dollar dropped on softer than expected inflation in May which added to strong expectations that Fed will pause rate hikes this time, though the consumer prices are still twice the Fed target and core inflation at 5.3%, providing a little relief.

Markets see a pause in policy tightening as likely scenario, but even in case of no more hikes in coming months, the borrowing cost is expected to remain high for some time, which would underpin the dollar in the longer run.

Res: 103.67; 104.00; 104.33; 104.58.
Sup: 103.01; 102.83; 102.57; 102.03.

Eurozone industrial production rose 1.0% mom in April, below expectation of 1.2% mom. Production of capital goods grew by 14.7% mom and energy by 1.0% mom, while production of intermediate goods fell by -1.0% mom, durable consumer goods by -2.6% mom and non-durable consumer goods by -3.0% mom.

EU industrial production rose 0.7% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+21.5%), Lithuania (+2.8%) and Sweden (+1.4%). The largest decreases were observed in Slovenia (-7.9%), Portugal (-5.5%) and the Netherlands (-3.5%).

Full Eurozone industrial production release here.

NZDUSD has returned inside the rectangle that has been dictating the price action since February 2023 as the recent bearish breakout proved to be false. This move has clearly dented the NZD bears’ confidence, but they have to react quickly in order to contain the bullish pressure.

NZDUSD is currently hovering around the 200-day simple moving average (SMA) as the momentum indicators are tentatively supporting the current upleg. The Average Directional Movement Index (ADX) is edging higher, signaling a decent bullish trend, and the RSI is hovering just above its 50-midpoint. More interestingly, the stochastic oscillator is edging higher, opening a sizeable gap from its moving average, and hence pointing to the continuation of the current rally.

If the NZD bulls try to further capitalize on the failed bearish breakout, they have to break the busy 0.6147-0.6216 area that is defined by the 50-, 100- and 200-day SMAs. Higher, the 50% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6272 could prove tougher to crack than anticipated.

On the other hand, if the NZD bears decide to negate the current bullish move, they have to push the pair below the 200-day SMA. They would then have to recapture the 0.6060-0.6092 range populated by the 38.2% Fibonacci retracement and the July 14, 2022 low respectively. Another bearish breakout looks premature but if the NZD bears appear confident, they would set their eyes on the May 15, 2022 low at 0.5920.

To sum up, NZDUSD bulls have the chance for a strong rally following the false bearish breakout, as the bears look for the appropriate area to set up their defence.

USDJPY was trading muted within a short-term range and marginally above the 140.00 level prior to the FOMC policy announcement.

The pair bounced on the 20-day exponential moving average (EMA) once again on Tuesday, increasing optimism that the bulls could take charge in the short-term. The RSI is still hovering above its 50 neutral mark, reflecting a positive bias. Though, its falling trend is witnessing persisting caution in the market. In other warning signals, the MACD remains below its red signal line, while the stochastic oscillator is not far below its 80 overbought level. The descending triangle in the short-term picture is feeding some skepticism as well, although the price is currently trading slightly above it.

Buyers may wait for a close above May’s peak of 140.90 to drive the price up to the 142.15 resistance taken from November 21. A dynamic bullish correction could reach the resistance line from March at 143.00. Breaking higher, the pair may next visit the 144.50-145.00 region.

On the downside, a forceful move below the 20-day EMA and the 138.75 floor could squeeze the price towards the 50-day EMA and the support trendline at 136.95. Should the bears push lower, the next pivot could take place around the 200-day EMA at 135.00, while the 2023 ascending trendline may also attract special attention at 133.80.

In summary, USDJPY is in a neutral mode in the short-term picture. A step above 140.90 or below 138.75 could provide the next direction in the market.

EUR/USD started a fresh increase above the 1.0740 resistance. USD/JPY is consolidating and facing hurdles near the 140.45 level.

Important Takeaways for EUR/USD and USD/JPY Analysis Today

• The Euro is rising and trading well above the 1.0740 resistance zone.
• There is a key bullish trend line forming with support near 1.0785 on the hourly chart of EUR/USD at FXOpen.
• USD/JPY is trading in a positive zone above the 139.65 and 139.15 levels.
• There was a break above a bearish trend line with resistance near 139.65 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair started a fresh increase from the 1.0670 zone. The Euro climbed above the 1.0710 resistance zone against the US Dollar.

The pair even settled above the 1.0740 resistance and the 50-hour simple moving average. Finally, the bears appeared near the 1.0820 zone. A high is formed near 1.0818 and the pair is now consolidating gains.

It traded below the 23.6% Fib retracement level of the upward move from the 1.0743 low to the 1.0818 high. The first major support is near a key bullish trend line at 1.0785 and the 50-hour simple moving average.

The trend line is close to the 50% Fib retracement level of the upward move from the 1.0743 low to the 1.0818 high. If there is a downside break below 1.0785, the pair could drop toward the 1.0740 support. The next major support on the EUR/USD chart is near 1.0710, below which the pair could start a major decline.

On the upside, the pair is now facing resistance near 1.0820. The next major resistance is near the 1.0850 level. An upside break above 1.0850 could set the pace for another increase. In the stated case, the pair might visit 1.0920.

USD/JPY Technical Analysis

On the hourly chart of USD/JPY at FXOpen, the pair started a fresh increase from the 139.00 zone. It gained bullish momentum and was able to clear the 139.50 resistance.

There was also a break above a bearish trend line with resistance near 139.65 and the 50-hour simple moving average. However, the bears are active near the 140.25 resistance zone. A high was formed near 140.30 before the pair corrected lower.

The pair is now trading near the 23.6% Fib retracement level of the upward move from the 139.01 swing low to the 140.30 high.

The first major support on the USD/JPY chart is near the 50-hour simple moving average at 139.65. It is close to the 50% Fib retracement level of the upward move from the 139.01 swing low to the 140.30 high. The next major support is near the 139.15 level, below which the pair could decline steadily. In the stated case, the pair might dive toward the 138.8 support.

On the upside, the pair is facing resistance near the 140.25 level. The first major resistance is near the 140.45 level. If there is a close above the 140.45 level and RSI moves above 65, the pair could rise toward 141.20. The next major resistance is near 141.50, above which the pair could test 142.00.