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Daily Pivots: (S1) 0.8701; (P) 0.8735; (R1) 0.8756; More...

Intraday bias in EUR/GBP remains on the downside at this point. Choppy decline form 0.8977 is resuming and would target 100% projection of 0.8977 to 0.8717 from 0.8874 at 0.8614. On the upside, above 0.8766 minor resistance will turn intraday bias neutral first.

In the bigger picture, outlook remains rather mixed for now, except that price actions from 0.9267 (2022 high) are part of the long term range pattern from 0.9499 (2020 high). With 0.8720 support intact, rise from 0.8545 is in favor to continue through 0.8977. However, firm break of 0.8720 will argue that such rebound has completed, and open up deeper fall through this support level.

Daily Pivots: (S1) 1.6266; (P) 1.6365; (R1) 1.6416; More...

Intraday bias in EUR/AUD stays neutral as it's holding above 1.5219 support. Further rally could be seen and 1.6785 will resume larger up trend to 100% projection of 1.4281 to 1.5976 from 1.5254 at 1.6949. However, considering bearish divergence condition in D MACD, decisive break of 1.6219 will argue that it's already in correction to whole up trend from 1.4281. Deeper decline would then be seen towards 1.5254/5976 support zone instead.

In the bigger picture, the solid break of 1.6434 resistance argues that whole down trend from 1.9799 (2020 high) has 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) 0.9760; (P) 0.9805; (R1) 0.9858; More...

Intraday bias in EUR/CHF remains neutral for the moment. Outlook is unchanged that fall from 0.9995 is a correction to rise from 0.9704 only. Break of 0.9878 resistance will indicate that such correction has completed and target 0.9995. Firm break there should confirm that larger corrective decline from 1.0095 has completed at 0.9704 too.

In the bigger picture, prior rejection by 55 W EMA (now at 0.9971) and 38.2% retracement of 1.1149 to 0.9407 at 1.0072 suggests that medium term outlook is staying bearish. That is, 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).

The USDCNH currency chart shows the formation of a double zigzag w-x-y of the cycle degree.

In the last section of the chart, the initial part of the actionary wave y can be constructed. It seems that it will take the form of a standard zigzag Ⓐ-Ⓑ-Ⓒ.

The first wave Ⓐ, which has the form of a leading diagonal, is under development.

The price in the last intermediate wave (5) may rise to 7.045. At that level, wave (5) will be at 100% of impulse (3).

Alternatively, the construction of the cycle intervening wave x is still in progress. It can take the form of a triple zigzag Ⓦ-Ⓧ-Ⓨ-Ⓧ-Ⓩ.

The primary intervening wave Ⓧ, which has the form of an intermediate triple zigzag (W)-(X)-(Y)-(X)-(Z), could have ended, and now the price is in the actionary wave Ⓩ.

Probably Ⓩ will take the form of a standard zigzag, as shown in the chart. Its end is expected near 6.652, where it will be at 61.8% of wave Ⓨ.

USD/JPY bounces off key floor

The US dollar recovered after surprisingly robust jobs data in April. Coming off this year’s high of 137.80, the pair is looking to preserve its gains without losing more ground. 133.50 at the base of the previous rally is an important level to keep the directional bias upward, as its breach would dent the optimism and force buyers to bail out. The RSI’s oversold condition has attracted some bargain hunters and 135.50 is the first obstacle to lift. A close above 137.80 would resume the uptrend in the medium-term.

EUR/CAD to test daily support

The Canadian dollar soared after April’s jobs number smashed expectations. A break below the confluence of the recent swing low of 1.4840 and the 20-day SMA triggered a new round of liquidation of leveraged short-term positions. The daily support of 1.4620 is a key level to prevent a deeper correction. An oversold RSI might trigger a ‘buy-the-dips’ behaviour. 1.4900 is a fresh resistance and the double top at 1.5100 which coincides with the September 2021 high is a major ceiling should the bulls manage to make their way back.

Dow Jones 30 jumps back

The Dow Jones 30 rallies as Apple's solid results eased worries about a recession. A combination of fresh selling and profit-taking have made this year’s highs around 34300 a solid supply zone. A fall below the recent low of 33300 and the 30-day SMA has put the bulls under pressure, but with layers of support underneath, this is likely to be a consolidation rather than a bearish reversal. 32900 from the late March breakout rally saw strong support and 33800 is the resistance to lift before the rebound could gain traction.

Markets

The Fed last week suggested a pause in its anti-inflation campaign while the ECB shifted to a slower pace of tightening. Both central banks want time to assess the impact of previous policy action and of recent tightening of financial conditions. Still, especially the ECB clearly indicated that there is further work to do. Friday’s US payrolls were a first economic reality check on how the Fed policy is affecting demand for and the price of labour. Admittedly, the labor data are a lagging indicator. Still the report show ongoing strong demand. The US economy in April added an above-consensus 253k jobs. The unemployment rate dropped from 3.5% to 3.4% while average hourly earnings accelerated to 0.5% M/M and 4.4% Y/Y (4.2% expected). At the same time, pressure on regional US banks stocks also eased Friday, triggering a relief rally in US equities (Nasdaq +2.25%). This combination caused US yields to rebound between 12.4 bps (2-y) and 2.4 bps (30-y). It allowed them to take some distance from key support levels (3.60% area for the 2-y, 3.25% are for the 10-y). Yields are evolving in the lower part of recent consolidation pattern. Expectations for a first Fed rate cut are pushed back in time, but markets still see a first 25 bps step in September. German yields also rebounded 9.0/11.0 bps across the curve as first ECB speakers post Thursday’s policy decision echoed chair Lagarde’s guidance that the ECB still as further to go. On FX markets, post-payrolls USD gains were very short-lived. DXY even closed marginally lower near 101.20. EUR/USD finished well north of 1.10 (1.102). With little hard eco news, sterling for the second consecutive day outperformed. EUR/GBP closed at 0.8725, nearing the 0.8719/0.8691 support area.

Asian markets mostly join Friday’s risk-rally on WS. The dollar again losing a few ticks. US Treasuries are trading little changed. Today (and tomorrow) there are few important eco data in the US or Europe. On Wednesday, US April CPI will be one of the key data for this week. Whatever the outcome, it will take a long series of relatively strong data for markets to backtrack on the idea of Fed rate cuts after summer. In the meantime, market sentiment depends on headlines on financial stability or the debate on the US debt ceiling. In this respect, we keep an eye at the Fed Senior Loan Officer Opinion Survey and the May Financial stability report today. We expect US yields to hold a sideways trading pattern slightly above the above-mentioned key support levels. The technical picture for the dollar remains fragile with the DXY 100.8 support and EUR/USD 1.1095 resistance still within reach.

News and views

Slovak caretaker prime minister Heger offered his resignation on Sunday. The trigger for his decision were a series of other resignations recently. The agriculture minister left for being involved in a subsidy scandal. The foreign minister stepped down a day later without explanation. President Caputová said she’ll appoint a non-partisan cabinet next week with central bank deputy governor Odor leading the technocratic government going into snap elections September 30. Heger assumed the role of a caretaker PM on the president’s request after his government lost its parliamentary majority in September 2022, followed by Heger losing a vote of no confidence in December. The deepening political crisis could set the stage for an early comeback of Fico. The former PM and his Smer party saw their downfall in 2018 amid nationwide anti-corruption protests. But widespread resentment about high inflation, which Smer blames mostly on sanctions against Russia, lifted them back in the saddle. They now lead in the polls.

Rating agency Fitch maintained Switzerland’s top AAA rating with a stable outlook. According to Fitch, the country has strong credit fundamentals with income and governance indicators above the median level of its rated peers, adding that “A record of prudent economic and fiscal policymaking lends support to macroeconomic stability and low government debt levels” (27.6% end 2022). Fitch said that the large banking sector (assets 5x GDP) is a long-standing contingent liability and challenges to the sector have increased. Yet, the stable outlook reflects the view of a limited risk of sector-wide spillovers from the UBS-CS takeover with no material deterioration in the sovereign’s balance sheet. Fitch expects the Swiss economy to expand 0.8% this year with tighter monetary policy (peak seen at 1.75%) and weaker external demand to keep the outlook subdued. Inflation would average 3% in 2023 and 2.2% in 2024 with risks tilted to the upside.

Daily Pivots: (S1) 1.0974; (P) 1.1011; (R1) 1.1055; More...

Intraday bias in EUR/USD remains neutral as sideway trading continues. But further rally remains in favor too. On the upside, firm break of 1.1094 will resume larger up trend to 1.1273 fibonacci level. Break there will target 61.8% projection of 0.9534 to 1.1032 from 1.0515 at 1.1441 However, considering bearish divergence condition in 4H MACD, break of 1.0908 support will indicate short term topping and turn bias back to the downside.

In the bigger picture, rise from 0.9534 (2022 low) is in progress for 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. Sustained break there will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high). This will now remain the favored case as long as 1.0515 support holds, even in case of deeper pull back.

Daily Pivots: (S1) 1.2578; (P) 1.2615; (R1) 1.2669; More...

Intraday bias in GBP/USD remains on the upside for the moment. Current up trend should target 1.2759 fibonacci level first. Firm break there will target 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095. Meanwhile, break of 1.2434 support is needed to confirm short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, the rise from 1.0351 medium term term bottom (2022 low) is in progress for 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. Sustained break there will add to the case of long term bullish trend reversal. Further break of 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095 could prompt upside acceleration to 100% projection at 1.3895. For now, this will remain the favored case as long as 1.1801 support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.8836; (P) 0.8905; (R1) 0.8974; More...

Intraday bias in USD/CHF remains neutral for the moment. While down trend from 1.0146 could still extend lower, strong support should be seen from 61.8% projection of 1.0146 to 0.9058 from 0.9439 at 0.8767, which is close to 0.8756 long term support, to bring rebound, at least on first attempt. On the upside, break of 0.8993 resistance will indicate short term bottoming, on bullish convergence condition in 4H MACD, and turn bias back to the upside for stronger rebound.

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). So, downside should be contained by 0.8756 to bring reversal. Sustained break of 0.9058 support turned resistance will be the first sign of medium term bottoming. However, decisive break of 0.8756 will carry larger bearish implications.

Daily Pivots: (S1) 134.11; (P) 134.62; (R1) 135.34; More...

Intraday bias in USD/JPY remains neutral at this point, and further decline is still in favor with 135.68 minor resistance intact. Fall from 137.76 is seen as the third leg of the pattern from 137.90. Below 133.48 will target 133.00 first, break will target 129.62 support. Still, as long as 129.62 holds, larger rebound from 127.20 is still in favor to resume at a later stage. On the upside, above 135.68 minor resistance will turn bias back to the upside for 137.76/90 instead.

In the bigger picture, price actions from 151.93 high are currently seen as a corrective pattern to the long term up trend. The first leg should have completed at 127.20. Rebound from there is seen as the second leg. Sustained break of 38.2% retracement of 151.93 to 127.20 at 136.34 will bring stronger rebound to 61.8% retracement at 142.48. Meanwhile, break of 129.62 will argue that the third leg is starting through 127.20 low.