Sample Category Title

Daily Pivots: (S1) 1.4891; (P) 1.4966; (R1) 1.5039; More...

Intraday bias in EUR/AUD is back on the upside with break of 1.4965 minor resistance. Pull back from 1.5277 could have completed at 1.4759 already. Further rally would be seen back to retest this resistance. On the downside, through, 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.

Daily Pivots: (S1) 0.8459; (P) 0.8525; (R1) 0.8565; More...

EUR/GBP is still extending the consolidation from 0.8617 and intraday bias remains neutral. 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.

Daily Pivots: (S1) 1.0351; (P) 1.0432; (R1) 1.0492; More....

EUR/CHF retreated sharply after failing to break through 1.0513 resistance. Intraday bias is turned neutral 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.

Daily Pivots: (S1) 1.2597; (P) 1.2651; (R1) 1.2753; More...

USD/CAD's break of 1.2685 minor resistance suggest that a short term bottom is formed at 1.2516, well ahead of 1.2401 support. Intraday bias is back on the upside for rebound. Sustained trading above 55 day EMA (now at 1.2714) will bring further rally to retest 1.3075 high. On the downside, break of 1.2516 will target 1.2401 support instead.

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.

Daily Pivots: (S1) 0.7059; (P) 0.7132; (R1) 0.7169; More...

Intraday bias in AUD/USD stays neutral for the moment. Outlook is unchanged that further rise will remain in favor as long as 0.7034 support holds. Current development raised the chance that whole fall corrective fall from 0.8005 has completed at 0.6828. Above 0.7282 will extend the rebound to 0.7660 resistance for confirmation. However, break of 0.7034 will dampen this bullish view and bring retest of 0.6828 low instead.

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 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.

Daily Pivots: (S1) 133.53; (P) 134.04; (R1) 134.90; More...

Intraday bias in USD/JPY remains neutral as consolidation from 134.55 temporary top would extend. But downside should be contained above 131.34 resistance turned support. Break of 134.55 will resume larger up trend to 61.8% projection of 114.40 to 131.34 from 126.35 at 136.81. Firm break there will target 100% projection at 143.29.

In the bigger picture, current rally is seen as part of the long term up trend form 75.56 (2011 low). Next target is 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). This will remain the favored case as long as 126.35 support holds.

Daily Pivots: (S1) 0.9745; (P) 0.9781; (R1) 0.9839; More...

USD/CHF's rebound form 0.9543 resumes after brief consolidation and intraday bias back on the upside. Further rally would be seen to retest 1.0063 high. Firm break there will resume larger up trend. However, break of 0.9714 minor support will extend the correction from 1.0063 with another leg, and turn bias to the downside for 61.8% retracement of 0.9193 to 1.0063 at 0.9525.

In the bigger picture, down trend from 1.0342 (2016 high) should have completed with three waves down to 0.8756 (2021 low) already. Rise from 0.8756 is likely a medium term up trend of its own. Next target is 1.0237/0342 resistance zone. This will remain the favored case as long as 0.9471 resistance turned support holds. However, sustained break of 0.9471 will extend long term range trading with another falling leg.

Daily Pivots: (S1) 1.2469; (P) 1.2514; (R1) 1.2540; More...

Intraday bias in GBP/USD remains neutral and outlook is unchanged. On the downside, break of 1.2429 support suggest that rebound from 1.2154 has completed. Intraday bias will be back on the downside for resting this low. On the upside, above 1.2666 will target 55 day EMA (now at 1.2698) and above.

In the bigger picture, fall from 1.4248 (2018 high) could be a leg inside the pattern from 1.1409 (2020 low), or resuming the longer term down trend. Deeper decline is expected as long as 1.2999 support turned resistance holds. On resumption, next target is 1.1409 low.

Markets

Yesterday, the ECB turned a page. With new staff projections forecasting both core and headline inflation to stay above the 2.0% target over the bank’s policy horizon, the ECB couldn’t but formally give the highest priority to address the inflation challenge, even as growth was downwardly revised for this and next year. APP asset purchases will end in July, opening the door for a 25 bps lift-off rate hike in July. However, the ECB’s anti-inflation commitment goes further. If the inflation outlook persists or deteriorates, a bigger hike will be appropriate at the September meeting. After September, the ECB expects that a further gradual but sustained path of rate hikes will be needed. Even as decisions will be data dependent, this looks like quite a strong ‘precommitment’. EMU yields recently already anticipated the start of ECB policy normalization. Still, the prospect of one (and potentially more) 50 bps hikes forced a new break higher. The German curve bear flattened with yields rising between 13.4 bps (2-y) and 3.4 bps (30-y). European swap rates set new cycle highs across the curve. US yields rises were more modest. The belly of the curve underperformed (5-y +6.3 bps). Even so, the 2-y (2.83%) and 5-y (3.05%) are also testing cycle top levels. The change in the ECB inflation narrative didn’t help the euro, on the contrary. A new sharp risk-off correction favored the dollar. The DXY index regained the 102.73 resistance (close 103.22). EUR/USD (close 1.0617) is at risk of falling back below the 1.0627/42 support. US equities lost between 1.94% (Dow) and 2.75% (Nasdaq). The EuroStoxx 50 ceded 1.70%. Intra-EMU spreads versus Germany widened (10-y Italy + 15 bps) even as the ECB signaled to adjust PEPP reinvestments in a flexible manner to avoid market fragmentation.

This morning, losses on Asian equity markets (about 1.0% on average) are more modest compared the US and Europa yesterday. Even so sentiment remains fragile. Later today, the focus turns to US May inflation. Headline CPI is expected at 0.7% M/M and 8.3% Y/Y (was 8.3 in April). Core is seen at 0.5% M/M and 5.9% Y/Y (was 6.2%). Yesterday’s price action suggests that markets want hard evidence of a slowdown in the (monthly) inflation dynamics. If not, expectations for the Fed to keep a pace of 50 bps rate hikes in September (or even beyond) might be reinforced. This might push 2 & 5-yields to new cycle highs. The top in the 10-y yield (3.20%) is further away but also comes on the radar. Inflation moderating too slowly also might support further dollar gains both via higher yields and a further risk-off. EUR/USD falling below the 1.06 area, suggests further losses in the 1.0341/1.0806 trading range. This morning, the yen regains modest ground (USD/JPY 133.74) on headlines of a meeting between the Japanese Ministry of Finance and the BOJ. However, in case of higher US yields, a test of the 135.15 multi-year top might still occur, unless there comes decisive action from Japanese authorities.

News Headlines

Chinese inflation fell 0.2% m/m in May to stabilize at 2.1% y/y, the National Bureau of Statistics revealed. A slight rise to 2.2% was expected. The first monthly decline of 2022 came as Chinese consumers’ spending and sentiment was dampened by Covid restrictions. Food and energy remain two key price drivers in the yearly figure. Excluding both, inflation only rose by 0.9% y/y. Factory gate inflation eased further from 8% y/y to 6.4% y/y, the slowest pace since March 2021. Prices of mining and raw materials maintained double digit y/y gains though. Unchanged (core) CPI and the ongoing slowdown in PPI may ease policymaker’s concerns about inflation and could allow them to focus more on how to support growth. The Chinese yuan trades unchanged just south of USD/CNY 6.70.

European and US stocks declined yesterday and the futures hint at a bearish start in Europe.

Inflation and recession fears take the upper hand, after the European Central Bank (ECB) raised its inflation significantly from 5.1% to 6.8% for this year, and cut the growth forecast, significantly as well, for this year and the next.

The ECB confirmed it will end the bond purchases as of July 1st, and intends to raise the interest rates by 25 bps in July. Christine Lagarde also said that the bank will consider another rate hike in September, and the size of the September hike will depend on inflation.

Yesterday’s ECB decision first sent the EURUSD toward the May highs of around 1.0775. But the single currency gave back gains, and the EURUSD returned below the 1.07 mark before the end of Lagarde’s press conference.

This morning, the EURUSD trades around 1.0630, meaning that yesterday’s ECB meeting sparked nothing but a quick optimism. Slashing the expectation of a 50bp hike in July gave cold feet to euro bulls. As a result, the EURUSD strength will likely remain limited for now.

In the medium run, the ECB will likely take further hawkish measures to pave the way for a stronger euro, toward 1.10 against the US dollar.

On the index level, the ECB decision triggered a fresh selloff in European equities, as the ugly growth projections came as a slap to investors. The DAX which was consolidating gains above the 100-DMA slipped below this level. The soft euro could limit the selloff, but whether it could reverse the negative trend is hard to tell. With a slowing world economy, the DAX could get back to its bearish trend building since the beginning of this year, which would imply a fall below the 14000 mark deep into this summer.

Inflation may not look good

The US stocks have been battered yesterday, with the S&P500 losing up to 2.40%, as the US 10-year yield consolidated above the 3.05 mark. The US dollar index rose above the 103 level, again.

Investors are holding their breath into today’s CPI reading. Analysts expect the US inflation to stabilize around last month’s 8.3% level, but we could see a bad surprise today, as the positive pressure on food and energy prices and the unexpected uptick in secondhand car prices in May could prevent the index to ease for a second consecutive month.

A stronger-than-expected inflation figure would revive the Federal Reserve (Fed) hawks, and eventually push the S&P500 below the 4000 mark before the weekly closing bell. A softer inflation read on the other hand, would resuscitate hope that inflation has peaked two months ago, and the worst is behind.

Don’t get your expectations too high, though

For inflation to ease persistently, we need to see energy prices soften. US crude topped above the $123pb this week. The recession fear certainly limited the upside potential. But the United Arab Emirates’ energy minister said that ‘if we continue consuming with the pace of consumption we have, we are nowhere near the peak, because Chine is not back just yet’, and that ‘China will come with more consumption’. Hopefully, they will tap into the Russian oil…

But the US LNG chaos, triggered by a fire at a Texas facility will halt 20% of US oil exports, and could push LNG prices higher in the short run.