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The Euro is consolidating above new multi-week low in early Friday’s trading, as bears take a breather after acceleration on Thursday which resulted in 0.64% daily drop and break of key supports.

Thursday’s close below 1.0805/1.0791 pivots (50% retracement of 1.0516/1.1095/daily cloud base) generated strong bearish signal and added to negative near-term outlook, opening prospects for further weakness.

The pair is on track for the second consecutive weekly drop, with Friday’s close below daily cloud to confirm signal and keep bears firmly in play for extension towards 1.0737/00 (Fibo 61.8% of 1.0516/1.1095/psychological).

Negative momentum remains strong on daily chart and moving averages are in bearish setup, though oversold conditions may slow bears for consolidation/limited correction.

Broken cloud base and Fibo 50% reverted to solid resistances which should ideally cap.

Only bounce and close above daily cloud would sideline bears and shift near-term focus to the upside.

Firm dollar on growing optimism about debt ceiling deal and signals that US interest rates will stay higher for some time, add pressure on the single currency.

Res: 1.0791; 1.0805; 1.0874; 1.0884.
Sup: 1.0760; 1.0737; 1.0700; 1.0652.

USD/JPY breaks major resistance

The Japanese yen recouped some losses after a jump in April’s CPI. A close above the double top (137.60) on the daily chart signals a comeback of the dollar and could pave the way for an extension towards 142.00. The psychological level of 140.00 would be the first hurdle. The RSI’s repeatedly overbought situation may briefly temper the bullish drive to let the bulls catch their breath with the base of the latest breakout at 137.40 as a fresh support. Further down, 136.30 would be the bulls’ second level of defence.

XAG/USD struggles for bids

Silver slides as traders stay optimistic about the US avoiding a potential default. After hitting a roadblock at a 13-month high of 26.00, a bearish MA cross on the daily chart suggests that sentiment has soured. A fall below the lower end of the consolidation range at 24.60 led to more exits from buyers, turning the area into a supply one in the process. The psychological level of 23.00 sits at the 50% retracement of the March rally and is a key level to expect renewed buying interests. 24.20 is the first resistance to lift should this happen.

SP 500 bounces higher

The S&P 500 rallied after Washington signalled a possible deal to raise the federal debt ceiling. A pop above 4150 and the consolidation range has put the index back on track, prompting the short side to cover. A close above the recent peak and daily resistance of 4185 would reinforce the bullish mood and resume the recovery in the medium-term, with 4250 then the August 2022 high of 4310 as potential targets. On the downside, 4150 at the start of the breakout is important in keeping the current momentum intact.

BoJ Governor Kazuo Ueda, in a speech today, reinforced the necessity "to continue with monetary easing" in Japan, citing the country's vulnerability to a decelerating global economy and doubts surrounding the sustainability of wage increases.

Ueda cautioned against hasty modifications to the prevailing policy, emphasizing the high stakes involved. "The cost of prematurely shifting policy, and nipping the bud towards achieving 2% inflation, is extremely large," he stated.

Earlier, Ueda warned the parliament about the potential fallout from a US. debt default, which he believes could trigger turbulence in markets and have a significant impact on the global economy. He assured that BoJ is committed to maintaining market stability, pledging to respond flexibly with a keen eye on economic, price, and financial developments.

On the hourly chart of EUR/USD at FXOpen, the pair started a fresh decline below the 1.0845 support. The Euro declined below the 1.0810 support against the US Dollar.

The pair retested the 1.0765 support and is currently consolidating losses. On the upside, immediate resistance is near a connecting bearish trend line on the same chart at 1.0790.

The next major resistance is near the 50-hour simple moving average at 1.0810. A break above the 1.0810 resistance zone could start a decent increase toward the 1.0845 zone. A close above the 1.0845 level might start a strong increase toward the 1.0940 resistance.

Conversely, the pair might resume its decline from the 1.0765 level. Initial support is near the 1.0750 zone. The next major support is near 1.0700, below which EUR/USD could test the 1.0680 support.

• Japan Core CPI rises
• USD/JPY in negative territory

The Japanese yen is in positive territory today, in what could be the end of a 6-day rally by the US dollar. During that time, the yen has plunged 440 points and hit a six-month low on Thursday. In the European session, USD/JPY is trading at 138.13, down 0.41%.

Japan’s Core CPI rises to 3.4%

Inflation continues to rise in Japan. Core consumer inflation climbed to 3.4% y/y in April, up from 3.1% in March and matching the estimate. This indicator excludes fresh food but includes energy items. The index which excludes both food and energy, which is closely watched by the Bank of Japan, jumped 4.1% y/y in April, its highest level since September 1981.

The rise in inflation, coupled with a first-quarter GDP which surprised on the upside, has raised speculation that the BoJ could begin to phase out the Bank’s ultra-loose policy, which has been in place for decades. The new Governor, Kazuo Ueda, has said that he would not change policy until inflation was sustainably around 2 per cent and wage growth strengthened. Inflation has been above the Bank’s 2% target for over a year, and the markets are monitoring every comment coming out of the BoJ, looking for any hints of a shift in policy.

The BoJ has long played a game of cat-and-mouse with speculators, who are betting that Ueda will make a move to tighten policy, which would push the yen higher. With the yen below the 138 line and 140 looming closer, the possibility increases that the government will intervene in the currency markets to stabilize the yen and fire a salvo at speculators.

It’s an unusually quiet economic calendar in the US today, with no data releases. The markets will have a chance to focus on Fedspeak, with Jerome Powell and two FOMC members delivering public remarks. Just a few weeks ago, the markets had priced in a pause at the June meeting at over 90%. That has changed to a 66% chance of a pause and a 33% chance of a hike of 25 basis points, according to CME’s FedWatch. That downward revision is due to a consistently hawkish message from the Fed and a surprisingly robust US economy.

USD/JPY Technical

• USD/JPY faces resistance at 138.42 and 140.43
• There is support at 137.08 and 136.42

Daily Pivots: (S1) 0.8667; (P) 0.8684; (R1) 0.8698; More...

Intraday bias in EUR/GBP remains neutral as consolidation from 0.8660 is extending. Further decline is expected as long as 0.8758 resistance holds. On the downside, break of 0.8660 will resume recent decline to 100% projection of 0.8977 to 0.8717 from 0.8874 at 0.8614. Nevertheless, break of 0.8758 minor resistance will turn bias back to the upside for stronger rebound.

In the bigger picture, current development argues that whole decline from 0.9267 (2022 high) is still in progress. This is part of the long term range pattern from 0.9499 (2020 high). Deeper fall would be seen through 0.8545 support. his will now remain the favored case as long as 0.8874 resistance holds.

Daily Pivots: (S1) 1.6232; (P) 1.6290; (R1) 1.6324; More...

Intraday bias in EUR/AUD stays neutral for the moment. Further decline is expected with 1.6354 minor resistance intact. Considering bearish divergence condition in D MACD, fall from 1.6785 might be a correction to whole up trend from 1.4281. Break of 1.6134 will target 38.2 retracement of 1.4281 to 1.6785 at 1.5828, which is inside 1.5254/5976 support zone. Nevertheless, sustained break of 1.6354 minor resistance will turn bias back to the upside for retesting 1.6785 high instead.

In the bigger picture, whole down trend from 1.9799 (2020 high) should have completed at 1.4281 (2022 low). Further rise should be seen to 61.8% retracement of 1.9799 to 1.4281 at 1.7691 next. For now, outlook will stay bullish as long as 1.5976 resistance turned support holds, even in case of deep pull back.

Daily Pivots: (S1) 148.96; (P) 149.21; (R1) 149.63; More....

EUR/JPY breached 149.25 resistance briefly but quickly retreated. Intraday bias remains neutral. On the upside, firm break of 149.25 resistance will argue that pull back from 151.60 has completed at 146.12 already. Stronger rally should be seen back to retest 151.60. On the downside, however, break of 146.12 will resume the fall to 61.8% retracement of 139.05 to 151.60 at 143.84.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 61.8% projection of 124.37 to 148.38 from 138.81 at 153.64. Sustained break there will pave the way to 100% projection at 162.82. For now, medium term outlook will remain bullish as long as 139.05 support holds, even in case of deep pull back.

Daily Pivots: (S1) 171.49; (P) 171.83; (R1) 172.45; More...

Intraday bias in GBP/JPY stays neutral as it's staying in range below 172.30. On the upside, break of 172.30 will resume larger up trend to 100% projection of 148.93 to 172.11 from 155.33 at 178.51. Nevertheless, firm break of 167.82 support should confirm short term topping, and turn bias back to the downside for deeper pull back to 165.40 support and possible below instead.

In the bigger picture, focus stays on 172.11 resistance (2022 high). Decisive break there will resume whole up trend from 123.94 (2020 low). Next target will be 161.8% projection of 122.75 (2016 low) to 156.59 (2018 high) from 123.94 at 178.69. Nevertheless, firm break of 165.40 support will indicate rejection by 172.11 and extend the corrective pattern from there with another falling leg.

Daily Pivots: (S1) 0.9729; (P) 0.9745; (R1) 0.9763; More...

EUR/CHF continues to lose downside momentum as seen in 4H MACD, but there is no sign of bottoming yet. But while deeper fall cannot be ruled out, strong support should be seen from 0.9704 to bring rebound. Break of 0.9847 will argue that choppy fall from 0.9995 has completed and turn bias back to the downside. However, firm break of 0.9704 will resume the whole decline from 1.0095 to 61.8% retracement of 0.9407 to 1.0095 at 0.9670.

In the bigger picture, prior rejection by 38.2% retracement of 1.1149 to 0.9407 at 1.0072 suggests that medium term outlook is staying bearish. The pair is also capped below 55 W EMA (now at 0.9963). Down trend from 1.2004 is not completed yet and is in favor to resume through 0.9407 at a later stage. However, decisive break of 1.0095 resistance will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484).