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WTI oil futures (July delivery) have been moving without a clear direction in the last month. Even though the commodity managed to spike above the upper end of its downward sloping channel after OPEC’s decision to cut output, the price quickly retraced lower and re-entered its long-term bearish pattern.

The momentum indicators are reflecting a cautiously positive tone. Specifically, the RSI jumped above its 50-neutral mark, while the MACD is strengthening above its red signal line but remains in the negative zone.

Should the price manage to close above its restrictive trendline, immediate resistance could be met at the 50-day simple moving average (SMA), currently at 74.80. Jumping above that zone, WTI futures may ascend towards 75.70 or higher to test the March peak of 81.00. A break above the latter could pave the way for the 2023 high of 83.40.

On the flipside, if the bulls fail to conquer the crucial technical region, the price could reverse towards the May support of 69.40. Should that barricade get violated, the spotlight could turn to the recent bottom of 67.00. A dive below that floor could open the door for the double-bottom of 64.20, which is also an 18-month low.

In brief, WTI oil futures are trading very close to the upper boundary of their long-term descending channel, attempting to post a bullish breakout. However, a failure to do so could trigger a significant retreat towards the recent lows.

EURUSD strengthened its positive momentum on Thursday, rising as high as 1.0758 despite disappointing GDP data out of the eurozone.

The market structure has improved in the four-hour chart, with the pair marking a higher high at 1.0778 and a higher low at 1.0666, flagging a potential bullish trend reversal.

Cable accelerates higher on Thursday, lifted by weaker dollar as markets are still not sure what the Fed will decide in the next week’s policy meeting.

The latest surprises from RBA and BOC raise hopes that the US central bank would opt for another 25 basis points hike, against signals of pause in hiking cycle, although it is still unclear what the US policymakers will decide.

Fresh strength emerges again above the top of rising daily cloud following false breaks higher in past two days but needs to sustain gains above the cloud and close above 1.2493 pivot (50% retracement of 1.2679/1.2307 / daily Kijun-sen) to generate fresh direction signal after two consecutive long-legged daily Doji candles signaled strong indecision.

Improving daily studies (14-d momentum is back to positive territory / MA’s turning to bullish configuration) support the action, however, another failure to clearly break out from rising and thickening daily cloud would weaken near-term structure and keep the downside vulnerable.

Res: 1.2431; 1.2472; 1.2493; 1.2544.
Sup: 1.2450; 1.2435; 1.2397; 1.2368.

Markets

Question today was whether markets would build on yesterday’s post-BoC repositioning. Team Tiff Macklem concluded they had no other option but to restart the tightening cycle. The demand/supply balance remained too stretched. It simply wasn’t justifiable anymore to reasonably hope that the 4.5% policy rate in place since January would be restrictive enough to bring inflation back to 2% in a sustainable manner. A similar analysis applies to multiple developed economies, reinforcing the case for a widespread ‘higher for longer’ scenario. At the start in Europe, EMU yields tentatively tried some follow-through action on yesterday’s rise, but the move immediately stalled. There was too little ‘news’. The revision of EMU Q1 GDP growth (-0.1% from 0.1%) officially put the EMU economy in a (mild) recession at the turn of the year (-0.1% in Q4 2022 as well). This doesn’t change the picture going forward, but also didn’t help. German yields gradually nearing key resistance at 2.96/3% (2-y) and 2.55% (10-y) probably also put a lid on a further rise (for now). US jobless claims jumped sharply from 233k to 261k. Continuing claims declined further (157k from 1794k). It evidently won’t change the Fed’s assessment at next week’s policy meeting. Still, US yields after the release dropped in the negative territory (except for the very long end). The 2-y yield eases 4 bps. The 30-y trades more or less unchanged. German yields shed less than 2 bps across the curve. Equities (both in the Europe and in the US) are keeping up well (Eurostoxx 50 +0.15%, S&P opens little changed). In this respect, we keep an eye at real yields. For now, the recent rise doesn’t hurt sentiment too much. Still, the US (10-y) real yield is on the verge of breaking out of a consolidation/bull flag pattern (cf graph infra).

On FX markets, the dollar gives tentative signs of a topping off pattern, but first relevant technical support hasn’t been broken yet. DXY dropped to 103.65 (ST neckline at 103.38). EUR/USD rebounds to 1.0745, but last week’s ‘minor’ top (1.0779) survives. EUR/GBP held a tight range near 0.86. The Swiss franc this afternoon jumped sharply from EUR/CHF 0.976 to fill bids just below the 0.7 big figure. SNB’s Jordan warned on second and third round effects. As Swiss yields are relatively low, Jordan advocated that it’s not a good idea to wait with raising rates. An additional hike at the June 22 SNB meeting can be taken for granted.

News & Views

The IMF concluded its regular country review of Norway, releasing the statement of this year’s so-called Article lV mission. Output grew strongly in 2022 and it is projected to expand this year, albeit at a slower pace. While high inflation and interest rates weigh on activity, the labor market has been resilient, and Norway has enjoyed very favorable terms of trade. Risks to growth remain balanced, but there are upside risks to inflation. The IMF added that supervisory authorities should remain vigilant to potential pressures in the real estate markets and global turbulence. Fiscal policy should be more supportive of the Norges Bank’s disinflationary efforts. Last month, the government did the opposite by announcing plans to raise spending of its sovereign wealth fund, widening the structural non-oil deficit for 2023 from NOK 317bn to NOK 373bn. Monetary policy has been responding in a timely manner, but to bring inflation durably towards the medium-term target of 2%, further tightening is needed.

Hungarian inflation decreased by 0.4% M/M in April (vs +0.5% expected) with the Y/Y figure dropping more than forecast, from 24% to 21.5%. Prices were mainly dragged lower by electricity, gas and other fuels (-3% M/M; 37.2% Y/Y). Food prices rose by 0.1% M/M (33.5% Y/Y) while services became 0.9% more expensive in April (14.3% Y/Y). Earlier this month, Hungarian Q1 GDP growth was downwardly revised to -0.3% Q/Q. Both April retail sales (-12.6% Y/Y) and industrial production (-2.5% M/M & -5.8% Y/Y) also fell more sharply than anticipated. The recessionary environment and accelerating disinflationary tendencies allow the Hungarian central bank to continue efforts to reduce emergency deposit rate towards the 13% base rate. The forint stomachs the data well, holding near strongest levels against the euro since April of last year (EUR/HUF 368).

Daily Pivots: (S1) 0.9062; (P) 0.9084; (R1) 0.9125; More...

Immediate focus is now on 0.9013 minor support in USD/CHF with today's fall. Sustained break there will argue that corrective recovery from 0.8818 has completed at 0.9146 already. Intraday bias will turn back to the downside for retesting 0.8818 low. On the upside, though, above 0.9146 will resume the rebound towards 38.2% retracement of 1.0146 to 0.8818 at 0.9325.

In the bigger picture, fall from 1.1046 (2022 high) is seen as a leg in the long term range pattern from 1.0342 (2016 high), which might have completed at 0.8818 already, just ahead of 0.8756 long term support. Sustained trading above 0.9058 support turned resistance should confirm medium term bottoming. Further break of 0.9439 resistance will confirm bullish trend reversal.

Daily Pivots: (S1) 139.39; (P) 139.82; (R1) 140.61; More...

No change in USD/JPY's outlook and intraday bias remains neutral. With 138.22 minor support intact, further rally is expected. On the upside, break of 140.90 will resume larger rise from 127.20 to 142.48 fibonacci level. However, considering bearish divergence condition in 4 hour MACD, break of 138.22 will confirm short term topping, and turn bias back to the downside for 55 D EMA (now at 136.62).

In the bigger picture, rise from 127.20 is seen as the second leg of the corrective pattern from 151.93 high. Stronger rally would be seen to 61.8% retracement of 151.93 to 127.20 at 136.34. Sustained break there will pave the way back to retest 151.93. On the downside, however, break of 133.73 support will argue that the pattern could have started the third leg through 127.20 low.

Daily Pivots: (S1) 1.2389; (P) 1.2444; (R1) 1.2494; More...

Intraday bias in GBP/USD stays neutral at this point. On the upside, break of 1.2543 will resume the rebound from 1.2306. Further rally should then be seen to retest 1.2678 high. On the downside, break of 1.2306 will resume the correction from 1.2678. Deeper decline would then be seen to 1.1801 cluster support (38.2% retracement of 1.0351 to 1.2678 at 1.1789).

In the bigger picture, as long as 1.1801 support holds, rise from 1.0351 medium term bottom (2022 low) is expected to extend further. Sustained break of 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759 will add to the case of long term bullish trend reversal. However, firm break of 1.1801 will indicate rejection by 1.2759, and bring deeper decline, even as a correction.

Daily Pivots: (S1) 1.0665; (P) 1.0703; (R1) 1.0736; More...

Intraday bias in EUR/USD stays neutral for the moment. On the upside, break of 1.0778 resistance will resume the rebound from 1.0634 short term bottom to 55 D EMA (now at 1.0813). Sustained break there could pave the way back to retest 1.1094 high. On the downside, however, break of 1.0634 will resume the corrective decline from 1.1094. Deeper fall should then be seen to 1.0515 cluster support, 38.2% retracement of 0.9534 to 1.1094 at 1.0498.

In the bigger picture, as long as 1.0515 support holds, rise from 0.9534 (2022 low) would still extend higher. Sustained break of 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high).

Dollar falls broadly in early US session after much worse than expected jobless claims data. But it's so far still holding largely in range. Market pricing on whether Fed would hike on June 14 continues to flip-flop (at around 30% for a 25bps hike). For the week, Kiwi is the second worst, after Dollar, followed by Sterling. Aussie remains the strongest one, but Swiss Franc jumped to the second place, followed by Canadian. Euro and Yen are mixed, a bit of the soft side.

Technically, with today's selloff in Dollar, focuses is back on near term support levels, including 0.9013 minor support in USD/CHF, 138.22 support in USD/JPY, 1.0778 resistance in EUR/USD and 1.2543 resistance in GBP/USD. Break of any of these levels could be a signal of more weakness in the greenback. Let's see how it goes.

In Europe, at the time of writing, FTSE is down -0.02%. DAX is up 0.06%. CAC is up 0.28%. Germany 10-year yield is down -0.0316 at 2.427. Earlier in Asia, Nikkei is down -0.85%. Hong Kong HSI rose 0.25%. China Shanghai SSE rose 0.25%. Singapore Strait Times rose 0.22%. Japan 10-year JGB yield rose notably by 0.0234 to 0.442.

US initial jobless claims rose to 261k, highest since Oct 2021

US initial jobless claims rose 28k to 261k in the week ending June 3, well above expectation of 235k. That's also the highest level since October 30, 2021, when it was 264k. Four-week moving average of initial claims rose 7.5k to 237k.

Continuing claims dropped -37k to 1757k in the week ending May 27. Four-week moving average of continuing claims dropped -12.5k to 1785k.

Gold recovering after poor US job data, but bounded in range

Gold recovered notably in early US session, following the selloff in Dollar on much worse than expected US jobless claims data.

But after all, Gold is just seen as extending the consolidation pattern from 1931.84 short term bottom. That is, another fall remains in favor. Break of 1931.84 support will firstly confirm resumption of whole fall from 2062.95. Secondly, that should also have medium term channel support firmly taken out. In this case, Gold should target 38.2% retracement of 1614.60 to 2062.95 at 1891.68.

However, break of 1985.08 resistance will argue that the channel support is defended, and maintains medium term bullishness. Stronger rise should then be seen to retest 2062.95, even further to 2074.48 high.

SNB Jordan: It's really important to bring inflation down to price stability level

Swiss National Bank Chairman Thomas Jordan said today "It's really important to bring Swiss inflation to a level of price stability."

He added that inflation is more persistent that the bank thought, adding that there are signs of second and third round effects.

Jordan also emphasized that it would not be a good idea to wait for inflation to rise and then have to raise interest rates.

"When inflation remains under 2% for a long time, we don't have a problem," Jordan noted.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0665; (P) 1.0703; (R1) 1.0736; More...

Intraday bias in EUR/USD stays neutral for the moment. On the upside, break of 1.0778 resistance will resume the rebound from 1.0634 short term bottom to 55 D EMA (now at 1.0813). Sustained break there could pave the way back to retest 1.1094 high. On the downside, however, break of 1.0634 will resume the corrective decline from 1.1094. Deeper fall should then be seen to 1.0515 cluster support, 38.2% retracement of 0.9534 to 1.1094 at 1.0498.

In the bigger picture, as long as 1.0515 support holds, rise from 0.9534 (2022 low) would still extend higher. Sustained break of 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high).

Economic Indicators Update

Gold recovered notably in early US session, following the selloff in Dollar on much worse than expected US jobless claims data.

But after all, Gold is just seen as extending the consolidation pattern from 1931.84 short term bottom. That is, another fall remains in favor. Break of 1931.84 support will firstly confirm resumption of whole fall from 2062.95. Secondly, that should also have medium term channel support firmly taken out. In this case, Gold should target 38.2% retracement of 1614.60 to 2062.95 at 1891.68.

However, break of 1985.08 resistance will argue that the channel support is defended, and maintains medium term bullishness. Stronger rise should then be seen to retest 2062.95, even further to 2074.48 high.