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Daily Pivots: (S1) 126.78; (P) 127.01; (R1) 127.35; More...

USD/JPY's correction from 131.34 could still extend lower. But downside should be contained by 125.09 cluster support (38.2% retracement of 114.40 to 131.34 at 124.86) to bring rebound. On the upside, break of 129.77 minor resistance will suggest that the correction is finished and bring retest of 131.34.

In the bigger picture, current rally is seen as part of the long term up trend form 75.56 (2011 low). Sustained trading above 61.8% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 130.04 will pave the way to 100% projection at 149.26, which is close to 147.68 (1998 high). For now, this will remain the favored case as long as 121.27 support holds.

Daily Pivots: (S1) 0.9546; (P) 0.9575; (R1) 0.9605; More...

No change in USD/CHF's outlook and fall from 1.0063 could extend lower. But should be contained by 61.8% retracement of 0.9193 to 1.0063 at 0.9525 to bring rebound. On the upside, above 0.9763 minor resistance will turn bias back to the upside for recovery. However, sustained break of 0.9525 will bring deeper decline to 0.9193 support.

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) 1.2567; (P) 1.2594; (R1) 1.2636; More...

GBP/USD's rise from 1.2154 is still in progress and intraday bias remains on the upside for 55 day EMA (now at 1.2756). Sustained break there will target 1.2999 support turned resistance. On the downside, though, break of 1.2480 minor support will turn bias back to the downside for retesting 1.2154 low instead.

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.

Daily Pivots: (S1) 1.0699; (P) 1.0732 (R1) 1.0767; More...

Intraday bias in EUR/USD remains on the upside at this point. Sustained trading above 55 day EMA (now at 1.0757) will target 1.0935 resistance next. On the downside, however, break of 1.641 minor support will turn bias back to the downside for retesting 1.0348 low instead.

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 and bring medium term corrective rebound first.

Commodity currencies are trading broadly higher today, with help from risk-on sentiment, with Aussie and Loonie competing for the first place. Selloff are mainly centered Yen and Swiss Franc, and to a lesser extent Dollar. Euro and Sterling are mixed for the moment. The moves could intensify further on relatively lower liquidity with US on bank holiday.

Technically, the rally in Yen crosses (including AUD/JPY below) is picking up momentum. There are some levels to pay attention to, including 129.77 resistance in USD/JPY, 138.33 resistance in EUR/JPY and 101.34 resistance in CAD/JPY. Break of these levels will argue that medium term up trends in Yen crosses are ready to resume in general. If happens, that would likely come with extended rebound in global stock indexes.

In Europe, at the time of writing, FTSE is down -0.02%. DAX is up 0.45%. CAC is up 0.56%. Germany 10-year yield is up 0.099 at 1.063. Earlier in Asia, Nikkei rose 2.19%. Hong Kong HSI rose 2.06%. China Shanghai SSE rose 0.60%. Singapore Strait Times rose 0.26%. Japan 10-year JGB yield rose 0.0038 to 0.234.

AUD/JPY rises on risk-on sentiment, ready for up trend resumption?

On the back of risk-on sentiment, AUD/JPY rally resumed the rally from 87.28 today, and hit as high as 91.67 so far. The development affirms the case that correction from 95.73 has completed with three waves down to 87.28. Further rally should be seen as long as 89.63 support holds. Next target is 94.00 resistance.

Also, while the pull back from 95.73 was deep, it was held above 85.78 resistance turned support, as well as 55 week EMA. Medium term bullishness is maintained. Firm break of 94.00 will argue that whole up trend from 59.85 (2020 low) is ready to resume through 95.73. In that case, next medium term target will be 100% projection of 59.85 to 85.78 from 78.77 at 104.70.

Eurozone economic sentiment ticked up to 105 in May, EU down to 104.1

Eurozone Economic Sentiment Indicator ticked up from 104.9 to 105.0 in May. Employment Expectations Indicator rose from 112.6 to 112.9. Industrial confidence dropped from 7.7 to 6.3. Services confidence rose from 13.6 to 14.0. Consumer confidence rose from -22.0 to -21.1. Retail trade confidence dropped from -3.9 to -4.0. Construction confidence rose from 7.0 to 7.2.

EU Economic Sentiment dropped from 104.6 to 104.1. Amongst the largest EU economies, the ESI rose markedly in Spain (+4.1) and, to a lesser extent, in France (+1.5) and Italy (+0.8), while it remained

Swiss KOF dropped to 96.8, below long-term average

Swiss KOF Economic Barometer dropped from 103.0 to 96.8 in May, below expectation of 102.3. The indicator is now below its long-term average. KOF said, "the Swiss economy is thus likely to develop moderately over the next few months."

The decline was "driven by indicator bundles of almost all branches of the economy", except financial and insurance services sector, and foreign demand.

RBNZ Conway: Probably some more 50 points hikes coming

RBNZ chief economist Paul Conway said today that 50bps rate hikes are the way forward, and he's confident of soft landing as the labor market is strong.

"75 wasn't seriously on the table because we are pretty convinced that we can get to where we need to get with 50-point increments," he said. Also, the central bank was "signaling there's probably some more 50 points coming over the next little while."

On the economy, Conway said "it's difficult to engineer a soft landing -- typically a significant reduction in inflation is accompanied by negative economic growth -- but there's reasons to believe New Zealand is well placed to pull it off this time around."

"The labor market is strong and that's the underlying reason why the New Zealand economy is well placed to weather the storm," he added.

BoJ Kuroda: Yen's rapid weakening not because of monetary policy

BoJ Governor Haruhiko Kuroda told the parliament today, "I don't think the BoJ's monetary policy was the factor behind a rapid yen weakening. The recent yen weakening may have been driven by an abnormal situation where oil prices topped $130 per barrel."

He also said that the rapid depreciation of Yen was "undesirable". But the situation was improving with Dollar easing back to around 127 Yen.

Meanwhile, Kuroda also repeated the pledge to maintain powerful monetary easing to help the economy from recovering.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0699; (P) 1.0732 (R1) 1.0767; More...

Intraday bias in EUR/USD remains on the upside at this point. Sustained trading above 55 day EMA (now at 1.0757) will target 1.0935 resistance next. On the downside, however, break of 1.641 minor support will turn bias back to the downside for retesting 1.0348 low instead.

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 and bring medium term corrective rebound first.

Economic Indicators Update

On the back of risk-on sentiment, AUD/JPY rally resumed the rally from 87.28 today, and hit as high as 91.67 so far. The development affirms the case that correction from 95.73 has completed with three waves down to 87.28. Further rally should be seen as long as 89.63 support holds. Next target is 94.00 resistance.

Also, while the pull back from 95.73 was deep, it was held above 85.78 resistance turned support, as well as 55 week EMA. Medium term bullishness is maintained. Firm break of 94.00 will argue that whole up trend from 59.85 (2020 low) is ready to resume through 95.73. In that case, next medium term target will be 100% projection of 59.85 to 85.78 from 78.77 at 104.70.

The German 40 cash index is continuing last week’s rebound but with slower momentum, reaching a five-week high near 14,600. The short-term bias looks positive as the MACD keeps gaining ground above its trigger line, while the RSI seems to be making its way up above its 50-neutral mark, though more progress is needed from the latter.

The 15,000 could be a trigger point for steeper bullish action if the index manages to break the 14,600 line. Even higher, the 200-day simple moving average (SMA) at 15,100 should attract some attention ahead of the 15,740 barrier.

However, if the price reverses back to the downside, investors could meet first at the 50- and then at the 20-day SMAs at 14,138 and 13,980 respectively. If the index continues to drop, support could next come somewhere between the latest lows at 13,270.

In the medium-term picture, the bounce off 13,270 turned the outlook from negative to neutral again. Chances for another bullish move are still rising as the short-term SMAs are pointing upwards.

The New Zealand dollar continues to take advantage of US dollar weakness. NZD/USD posted sharp gains last week, climbing 2.01%.

Will Business Confidence improve?

The week kicks off with ANZ Business Confidence, which has been in deep-freeze for months. The indicator was almost unchanged at -42.0 in April, which means that close to half of New Zealand businesses expect economic conditions to worsen during the next 12 months.

The government has eased Covid restrictions, which is good news for the business sector, in particular for services such as hospitality and recreation. The upcoming survey is likely to show that businesses continue to struggle with two main issues – surging inflation and shortages of materials and workers.

Businesses have seen their operating costs, including wages, accelerate rapidly and this is forcing them to pass on higher costs. Inflation has hit 30-year highs and no ‘inflation peak’ appears in sight, despite aggressive rate hikes from the RBNZ. Perhaps as important, business expect CPI to remain high. Two-year expectations have risen to 3.29% and five-year expectations have risen to 2.42%, well above the RBNZ’s inflation target of 1%-3%.

The RBNZ has repeatedly said that its hawkish policy is aimed at curbing both inflation and inflation expectations. Governor Orr said last week that it was crucial that inflation expectations remain “anchored” and that a situation where higher inflation expectations become persistent had to be avoided “at all costs”.

Orr added that he expects the cash rate, which is currently at 2%, to rise to 4% in mid-2023. This means that the RBNZ will continue be aggressive and we can expect further 50-bps rate hikes, if the central bank feels that the economy is strong enough for aggressive rate therapy.

NZD/USD Technical

• NZD/USD is testing resistance at 0.6475. Above, there is resistance at 0.6540
• There is support at 0.6352 and 0.6287

This week is starting with new highs in Brent – the asset has reached the highs of 9 March 2022 and updated $120.

There are several factors that support oil bulls – they are pretty clear but market players are still building on them. Increasing car traffic in the US due to the start of a travel season make the demand for fuel go up even when retail prices for energy are high. At the same time, the supply shortage in the domestic market didn’t go anywhere and it’s another thing that keeps prices “in suspense”.

In addition, investors aren’t forgetting about a possible oil embargo against Russian oil by the European Union. The suspense is getting more intense, and investors will remain nervous as long as it’s here.

The latest report from Baker Hughes confirmed that the shale industry remained rather inactive, although the volumes were slowly increasing. Over the past week, the Oil Rig Count in the US decreased by 2 units, down to 574. In Canada, the indicator increased by 15 units, up to 55.

Technical analysis – Brent oil

In the H4 chart, after forming a new consolidation range around 117.00 and breaking to the upside, Brent is expected to expand it up to 119.30 and may later fall to test 117.30 from above. After that, the instrument may resume moving within the uptrend with the target at 123.00 or even extend this structure up to 128.88. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is growing above 0 within the histogram area, which means that the uptrend in the price chart may continue.

As we can see in the H1 chart, having rebounded from 117.10, Brent is growing to break 119.30. and may later continue trading upwards with the target at 123.00. From the technical point of view, this idea is confirmed by the Stochastic Oscillator: its signal line is moving below 80 and may later continue moving downwards to rebound from 50. After that, the line is expected to resume growing and reach 80.

EURUSD opened with low volatility on Monday, remaining muted marginally below the 50-day simple moving average (SMA) and the 1.0768 key resistance level for the fifth consecutive session after securing two bullish weeks.

Despite the ongoing restrictions on the upside, the latest bounce on the former boundary of 1.0640 keeps buying interest alive. The momentum indicators are sending positive vibes as well; the MACD is trying to expand in the positive area for the first time since February, while the RSI is printing new highs above its 50 neutral mark.

Of course, some caution is still required as the Stochastics fluctuate in the overbought territory, though given the progressing positive intersection between the %D and %K lines, any negative correction could come with some delay, helping the pair to gain further ground before the next bearish round.

A decisive close above the 50-day SMA, which triggered the sell-off at the end of March, could initially pause somewhere between 1.0850 and 1.0900. Should the rally pick up steam above 1.1000 too, all eyes will shift to the tentative descending trendline currently seen around the March peak of 1.1180. Notably, the 200-day SMA at 1.1240 is converging towards the same area.

Should the bulls lose the battle at 1.0768, the pair may again seek shelter near the 1.0640 support zone. If that fails to hold, the 20-day SMA at 1.0567 may immediately come to the rescue. Otherwise, the focus will turn to the 1.0459 floor, where any break lower is expected to bring the 5½-year low of 1.0348, and therefore the long-term downtrend off 1.2348 under examination.

Summarizing, EURUSD is maintaining some optimism despite the latest congestion. A successful step above the 50-day SMA may confirm additional upside moves.