Sample Category Title

AUD/USD edged higher to 0.7282 last week but retreated sharply since then. Initial bias stays neutral this week first. On the downside, break of 0.7034 minor support will argue that rebound form 0.6828 has completed. Intraday bias will be back to the downside for retesting 0.6828 low. On the upside, above 0.7282 will resume the rise from 0.6828 towards 0.7660 resistance.

In the bigger picture, price actions from 0.8006 are seen as a corrective pattern to rise from 0.5506 (2020 low). Deeper fall could still be seen to 50% retracement of 0.5506 to 0.8006 at 0.6756. This coincides with 100% projection of 0.8006 to 0.7105 from 0.7660 at 0.6760. Strong support is expected from 0.6756/60 cluster to contain downside to complete the correction. Meanwhile, firm break of 0.7660 resistance will confirm that such corrective pattern has completed, and larger up trend is ready to resume.

In the longer term picture, focus remains on 0.8135 structural resistance. Decisive break there will argue that rise from 0.5506 is developing into a long term up trend that reverses whole down trend from 1.1079 (2011 high). However, rejection by 0.8135 will keep long term outlook neutral at best.

USD/CAD edged lower to 1.2516 last week but rebounded strongly since then. Initial bias remains mildly on the upside this week. Further rally would be seen back to 1.3075 resistance next. On the downside, below 1.2680 will turn bias back to the downside for 1.2516 support first. Break will resume the fall from 1.3075 to 1.2401 support next.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern only. That is, up trend from 0.9506 (2007 low) is still expected to resume at a later stage. This will remain the favored case as long as 1.2061 support holds, which is close to 50% retracement of 0.9406 to 1.4689 at 1.2048. However, firm break of 1.2061 support will argue that USD/CAD has already started a long term down trend. Next target is 61.8% retracement of 0.9406 to 1.4689 at 1.1424.

GBP/JPY rose further to as high as 168.67 last week but retreated since then. Initial bias remains neutral this week first. Downside of retreat should be contained by 162.88 minor support to bring rebound. Break of 168.67 will resume larger up trend and target 100% projection of 150.95 to 168.40 from 155.57 at 173.02. However, break of 162.88 will bring deeper fall back towards 155.57 support.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Sustained break of 61.8% retracement of 195.86 (2015 high) to 122.75 (2016 low) at 167.93 will be a long term bullish signal, and could pave the way back to 195.86 high. This will now remain the favored case as long as 155.57 support holds, even in case of deep pull back.

In the longer term picture, rise from 122.75 could be the third leg the the pattern from 116.83 (2011 low). Further rise will remain in favor as long as 55 month EMA (now at 149.27) holds. Sustained break of 61.8% retracement of 195.86 to 122.75 at 167.93. will pave the way to 195.86 (2015 high).

EUR/JPY rose to as high as 144.23 last week but retreated since then. Initial bias remains neutral this week first. Downside should be contained by 139.99 resistance turned support to bring rebound. Break of 144.23 will resume larger up trend. Next target is 100% projection of 124.37 to 139.99 from 132.63 at 148.25. However, break of 139.99 will bring deeper pull back towards 132.63 support instead.

In the bigger picture, up trend from 114.42 (2020 low) is in progress. Such rise is seen as the third leg of the pattern from 109.30 (2016 low). Sustained trading above 100% projection of 114.42 to 134.11 from 124.37 at 144.06 will indicate upside acceleration and target 149.76 long term resistance (2014 high). In any case, outlook will now remain bullish as long as 132.63 support holds, in case of deep pull back.

In the long term picture, current rally could be resuming whole rise from 94.11 (2012 low). Further rally would be seen to 149.76 resistance (2014 high) and above. This will remain the favored case as long as 132.63 support holds.

EUR/GBP stayed in consolidation from 0.8617 last week. Initial bias remains neutral this week first. With 0.8365 support intact, further rise is in favor. On the upside, break of 0.8617 will resume rise from 0.8201 medium term bottom to 0.8697 medium term fibonacci level. However, break of 0.8365 will dampen this bullish view, and turn bias back to the downside instead.

In the bigger picture, a medium term bottom could be in place at 0.8201, on bullish convergence condition in daily and weekly MACD. Rise from there could either be a correction to the down trend from 0.9499 (2020 high), or a medium term up trend itself. In either case, further rise should be seen to 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Sustained break there will target 61.8% retracement at 0.9003.

In the long term picture, current development argues that fall from 0.9499 is probably the third leg of the pattern from 0.9799 (2008 high). Sustained break of 61.8% retracement of 0.6935 to 0.9499 at 0.7917 will pave the way back to 0.6935 (2015 low) and probably below. However, sustained trading above 55 month EMA (now at 0.8604) will dampen this bearish view and bring stronger rebound.

EUR/AUD recovered after dipping to 1.4759 last week. Initial bias stays neutral this week first. Pullback from 1.5277 might have completed at 1.4759. Above 1.5039 will turn bias to the upside for retesting 1.5277 resistance first. On the downside, though, break of 1.4759 will resume the fall from 1.5277 instead.

In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend from 1.9799 (2020 high) is still expected to continue. On resumption, next target is 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). However, firm break of 1.5354 will indicate medium term bottoming and bring stronger rally back to 1.6434 key resistance.

In the longer term picture, fall from 1.9799 (2020 high) is seen as the third leg of the pattern from 2.1127 (2008 high). Deeper fall should be seen to 1.3624 support. Decisive break there would pave the way back to 1.1602 (2012 low).

EUR/CHF rose to as high as 1.0512 last week but failed to break through 1.0513 resistance and retreated. Initial bias remains neutral this week first. On the upside, decisive break of 1.0513 will resume the whole rebound from 0.9970, for 1.0610 structural resistance. On the downside, break of 1.0216 will turn near term outlook bearish for 1.0086 support next.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.

In the long term picture, capped below 55 month EMA, EUR/CHF is seen as extending the multi-decade down trend. There is no prospect of a bullish reversal until some sustained trading above the 55 month EMA (now at 1.0851).

Worries of stagflation intensified a whole lot last week. In particular, even the habitually cautious ECB pre-committed to rate hikes in July and September, while delivering new economic forecasts with sharply higher inflation and lower growth projections. Selloff in risk markets accelerated further after US CPI re-accelerated to new 40-year high. The hope of inflation having peaked was dashed. Fed is more likely than not to continue with its plan of 50bps hike per meeting through September. Higher prices and rates will suppress consumer spending and eventually bite back the economy.

Dollar ended as the strongest one, as both supported by risk aversion and rising treasury yields. Yen was originally the run away loser, but it did come back to live on risk aversion on Friday. Swiss Franc was the second worst. Euro's performance was disappointing given the more hawkish than expected ECB. Other mostly traded currencies were mixed against each other.

S&P 500, FTSE and DAX tumbled on stagflation fear

In the US, S&P 500's fall started in Thursday, followed by a gap down on Friday and accelerated selloff. The development suggests that oversold bounce from 3810.32 has completed at 4177.41. Rejection by 55 day EMA keeps near term outlook bearish.

Whole corrective pattern from 4818.62 is still in progress and it's likely started another falling leg through 3810.32 low. Strong support could be seen around 3666.44/3672.97 cluster projection level to finish the correction (61.8% projection of 4637.30 to 3810.32 from 4177.51 at 3666.44, 161.8% projection of 4818.62 to 4222.62 from 4637.30 at 3672.97).

However, firm break of 3666.44/3672.97 will bring even deeper correction into support zone between 3195.28 and 3505.24 (61.8% and 50% retracement of 2191.86 to 4818.62).

Over the Atlantic in the UK, FTSE's price actions from 7687.27 are seen as a correction pattern to rise from 4898.79. It's likely starting another falling leg. Break of 7158.52 support should send FTSE lower towards 38.2% retracement of 4898.79 to 7687.27 at 6622.07.

In Germany, DAX's sharp decline suggests that it's probably starting another falling leg in the correction from 16290.19. Rejection by 55 week EMA affirms this bearish case. Near term focus is on 13380.67 support. Firm break there will affirm this bearish case and target 12438.85 support, and probably further to 61.8% retracement of 8255.65 to 16290.19 at 11324.84.

US 10-year yield to taken on 2018 high as up trend resumes

German 10-year bund yield jumped to close at 1.52%, highest level since 2014. UK 10-year gilt yield also rose to 2.4475, highest since 2014 too. In the US, 10-year yield's breach of 3.167 suggests that the medium term up trend is resuming. But it should be noted again that TNX is facing a key long term resistance level at 3.248 (2018 high), which could cap its upside. However, Sustained break of 3.248 would finally mark the end of the multi-decade down trend from 15.84 (1981 high). That would be a significant, era-defining development if happens.

Dollar index might be ready to resume long term up trend

Dollar index's rebound from 101.29 extended higher last week. The strong support seen from 55 day EMA is a bullish sign. Current upside acceleration raising the chance of up trend resumption. Near term focus is back on 105.00 high. Rejection by 105.00 will extend the corrective pattern from there with another falling leg, probably with one more take on 55 day EMA.

However, sustained break of 105.00 will resume the long term up trend. Next target will be 61.8% projection of 72.69 (2011 low) to 103.82 (2017 high) from 89.20 (2021 low) at 108.43.

USD/JPY heading to 150? Or Japan will intervene?

Yen dropped to the lowest level against Dollar since 2001 last week. The selloff in Yen was originally broad based, but it managed to recover against most others on risk aversion on Friday. Widening yield gap will keep the Japanese currency pressured. But the question is whether current development is enough to trigger intervention by the government, or any action by BoJ.

In rare occasion, the Ministry of Finance, the Financial Services Agency, and BoJ issued a statement, expressing concerns. The statement noted that "we are worried about the rapid depreciation of the yen". The government and BoJ will work to "closely monitor the trends" and their impact on the economy. Most importantly, it noted that based on G7 agreement, "excessive fluctuations and chaotic movements" can lead to "appropriate action if necessary.

Barring any special actions, including direct intervention by the MoF, or BoJ's allowance for a wider band for 10-year JGB yield, USD/JPY's rally is there to continue. As long as 126.35 support holds, current up trend should target 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high).

Gold's main hurdle at 1900 despite impressive rebound

Gold's reversal on Friday is impressive and worth a mention. It initially dived to 1824.93 after US CPI release, but then rebounded to close at 1871.47, after breaching 1873.88 resistance. An environment where global interest rates are on the way up should be unfavorable to Gold. Yet, it's attracting some safe-haven flows (much less than Dollar), when funds are rushing out of treasuries and stocks.

Technically, there is upside potential for the near term. But key hurdle lies 1900 handle, which is close to 1894.77 support turned resistance and the near term falling channel resistance. Strong resistance could be seen from this handle to complete the corrective recovery from 1786.65.

Fall from 2070.06 is seen as the third leg of the whole corrective pattern from 2074.74 (2020 high), and there should be one more fall to go, towards 1682 60 support. Nevertheless, sustained break of 1900 will dampen this bearish case and could trigger some fierce buying back towards 2000.

EUR/USD Weekly Outlook

EUR/USD's late decline last week suggests that corrective recovery from 1.0348 has completed at 1.0786, after rejection by 55 day EMA. Initial bias stays on the downside this week for retesting 1.0348 and 1.0339 long term support. Decisive break there will resume larger down trend. On the upside, above 1.0641 minor resistance will turn intraday bias neutral first.

In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case. Rise from 1.0348 is at least a correction to the down trend from 1.2348. Stronger rebound would be seen to 38.2% retracement of 1.2348 to 1.0348 at 1.1112.

In the long term picture, current development suggests that long term down trend from 1.6039 (2008 high) is ready to resume. Break of 1.0339 will target 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. Decisive break there could bring downside acceleration towards 100% projection at 0.8694.

Monday, Jun 13, 2022

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Tuesday, Jun 14, 2022

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Wednesday, Jun 15, 2022

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Thursday, Jun 16, 2022

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Friday, Jun 17, 2022

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Summary

United States: Prices Push Higher in May, Signaling Little Immediate Relief for Consumers

• Consumer price inflation continued to push higher in May, with the consumer price index rising more than expected and lifting the annual rate of inflation to a fresh 40-year high. Consumers continue to feel the pinch of higher prices, evident in the persistent deterioration in consumer sentiment. To date, households have demonstrated uncanny staying power in the face of inflation, but with little signs of immediate relief from prices, this will only become more challenging.
• Next week: Retail Sales (Tue), FOMC Rate Decision (Tue), Housing Starts (Wed)

International: European Central Bank Readies Rate Hike as Reserve Bank of Australia Delivers

• The European Central Bank (ECB) took another step this week on its path of policy normalization at its latest monetary policy announcement. The ECB said it intends to raise rates by 25 bps in July, perhaps by an even larger amount in September, and deliver a steady series of rate hikes over time. The Reserve Bank of Australia surprised markets with a larger-than-expected 50 bps rate increase, which we expect it will follow up with another 50 bps hike at its July announcement.
• Next week: U.K. GDP (Mon), China Retail & Industrial Activity (Wed), Australia Employment (Thu)

Interest Rate Watch: SNB and BoE Hold Policy Meetings Next Week

• We expect the Swiss National Bank to remain on hold next week, but we look for it to commence a tightening cycle later this year. We expect the Bank of England to hike rates by 25 bps on Thursday.

Credit Market Insights: Consumer Credit Is Up, Household Net Worth Is Down

• Consumer credit had yet another strong month in April rising $38.1 billion, a near-record increase bested only by the prior month's unprecedented surge. Meanwhile, household balance sheets slipped in the first quarter as household net worth declined for the first time since Q1-2020, when COVID initially struck.

Topic of the Week: Budget Deficit Shrinks...For Now

• Fiscal year 2022 is now nearly three-quarters complete, and the federal budget deficit has narrowed significantly. Our current forecast is for the federal government to incur a budget deficit of $900 billion in FY 2022. If realized, this would be a smaller deficit than the one that prevailed before the pandemic.

Full report here.