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The British pound is drifting on Friday, after showing unusually strong volatility this week. The pound rebounded on Thursday, racking up gains of 1.06% and briefly breaking above the symbolic 1.25 line.

UK retail sales showed a strong gain in April, with a gain of 1.4% MoM. This followed a decline of 1.2% in March. However, on a yearly basis, sales volumes were 4.9% lower, as the broader picture looks grim. The monthly gain for March may have been a blip, as consumers were hit with higher household energy costs as well as an increase in taxes. Add into the mix inflation at 9.0% and possibly heading into double-digits, and it’s difficult to envision retail sales moving higher.

Consumer confidence hits record low

The GfK consumer confidence index remains deep in negative territory. The index dropped to -40 in May, down from -38 in April. How pessimistic are consumers about the economy? The previous record of -39 was set in July 2008, at the height of the global financial crisis.  Consumer confidence is considered an early, reliable signal of economic activity, and these massively poor numbers could well indicate that the UK economy is falling into recession. A GfK note summed up the grim situation, saying that the BoE is pessimistic about inflation, consumer confidence is gloomy, and there aren’t any reasons for optimism anytime soon. This certainly does not bode well for the British pound, which has plunged over 7% since the start of the year.

The BoE finds itself playing catch-up with the inflation curve. There have been voices calling for more aggressive rate hikes than the 25-bps increments we’ve seen over the past three meetings, especially with inflation hitting 9%. The central bank has a daunting challenge, as it must raise rates to curb inflation but also needs to be mindful that the economy is still recovering from Covid and could tip into a recession due to high interest rates.

GBP/USD Technical

• 1.2393 has switched back to support. Below, there is support at 1.2275
• There is resistance at 1.2525 and 1.2643

GBPJPY is confronting the 159.69 barrier, which is the 50.0% Fibonacci retracement level of the uptrend from 150.96 until the multi-year high of 168.42, which failed to close north of the 166.07-168.55 resistance zone that extends back to February 2016. The climbing simple moving averages (SMAs) are endorsing the broader bullish structure but it’s worth mentioning that the positive rebounds in the price over the latest one-month decline continue to be capped by the Fibonacci levels.

The short-term oscillators are transmitting conflicting messages in directional momentum. The MACD, which is creeping higher in the negative region, is nearing the red trigger line, suggesting downside momentum is softening, while the rising RSI is flirting with the 50 level. Meanwhile, the negatively charged stochastic oscillator is promoting bearish price action in the pair.

Currently, buyers are battling the 50.0% Fibo of 159.69 to boost positive developments. Successfully moving higher, resistance could then commence around the mid-Bollinger band at 160.63 and the 50-day SMA at 161.20. If positive forces endure, the next upside limitations may emanate from the resistance band between the 38.2% Fibo of 161.76 and the 162.26 barrier. Recapturing the area north of this barricade could reinforce upside pressures where buyers face the 163.57 high and the 23.6% Fibo of 164.29, where the upper Bollinger band presently resides.

Otherwise, if the price fades back beneath the 50.0% Fibo of 159.69, congested support may transpire from the 100-day SMA at 158.15 and the adjacent lows of 157.86 and 157.42 respectively. A deeper dive in the price below the lower Bollinger band at 156.98 could encourage sellers to target the fortified 154.91-155.45 support border. If selling interest persists, the next support obstacle may arise around 152.83-153.39.

Summarizing, GBPJPY is sustaining a one-month bearish bearing beneath the 161.76-162.26 resistance boundary. Yet, the bulls are making efforts to shift the outlook to the upside.

BoE Chief Economist Huw Pill said in a speech,the balance of risk around inflation is "tilted towards inflation proving stronger and more persistent than anticipated in that baseline.". Underlying developments that point in this direction include reduced contestability of UK labour markets by EU immigrants and workers due to Brexit. Broader globalization process looks to have stalled and maybe in retreat. Impact of aging and longer-term health consequences of the pandemic may have led to a decline in UK labour force participation.

Pill added that in this context, "avoiding any drift towards the embedding of such 'inflationary psychology' into the price setting process is crucial". Thus, the time has now come to withdraw monetary policy accommodation.

"It is the need for a continuation of this transition in monetary policy that led me to support the 25bp hike in Bank Rate at the May MPC meeting," he said. "And, even after this hike, I still view that necessary transition as incomplete. Further work needs to be done."

Full speech here.

Daily Pivots: (S1) 158.29; (P) 159.10; (R1) 160.32; More...

Intraday bias in GBP/JPY stays neutral and outlook is unchanged. Risk will stay on the downside as long as 162.16 minor resistance holds, as correction from 168.40 could extend. On the downside, below 155.57 will target 150.95 key structural support next. Nevertheless, firm break of 162.16 will indicate that the correction has completed, and bring retest of 168.40 high next.

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 150.95 support holds, even in case of deep pull back. However, firm break of 150.95 will indicate rejection by 167.93, and bearish trend reversal.

Daily Pivots: (S1) 134.33; (P) 134.89; (R1) 135.86; More....

Intraday bias in EUR/JPY remains neutral and outlook is unchanged. Corrective fall from 139.99 could still extend lower. Below 132.63 will target 61.8% retracement of 124.37 to 139.99 at 130.33. Nevertheless, break of 138.33 will indicate that the correction has completed, and bring retest of 139.99 high next.

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). Next target will be 100% projection of 114.42 to 134.11 from 124.37 at 144.06. In any case, outlook will now remain bullish as long as 124.37 support holds, in case of deep pull back.

Daily Pivots: (S1) 0.8455; (P) 0.8475; (R1) 0.8502; More...

Intraday bias in EUR/USD remains neutral at this point and outlook is unchanged. With 0.8365 support intact, further rise is still 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) 1.4997; (P) 1.5027; (R1) 1.5081; More...

Intraday bias in EUR/AUD remains neutral and risk stays on the downside with 1.5227 resistance intact. Corrective rebound from 1.4318 could have completed with three waves up to 1.5277 already. Below 1.4885 will target 1.4597 support first. Break there will bring retest of 1.4318 low next.

In the bigger picture, as long as 1.5354 support turned resistance holds, larger down trend form 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) 1.0230; (P) 1.0296; (R1) 1.0361; More....

Intraday bias in EUR/CHF remains on the downside at this point. Corrective rebound from 0.9970 could have complete at 1.0513, after rejection by 1.0505 resistance. Deeper fall would be seen to 1.0186 support first. Break will target 1.0086 and below. On the upside, above 1.0359 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.0513 resistance holds.

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.

Bitcoin fluctuates around $30K and has crossed that line daily in one way or another over the past 12 days. A 3.5% increase in the day’s results on Thursday turned into another pullback on Friday morning.

Ethereum has strengthened by 3.5% in the past 24 hours, finding itself pegged at $2000. Other altcoins in the top 10 gained between 0.4% (Solana) and 5.5% (XRP).

Total cryptocurrency market capitalisation, according to CoinGecko, rose 3.1% overnight to $1.28 trillion. The Bitcoin Dominance Index rose 0.1% to 44.8%.

By Friday, the cryptocurrency fear and greed index is unchanged at 13 points (“extreme fear”).

Bitcoin and the entire cryptocurrency market’s protracted tug-of-war promises to resolve with a strong move in one direction. However, there is hope for both bulls and bears. The latter has a minor advantage, as we saw this area touch down from above in January and June-July 2021. But now, all the fighting is concentrated below.

Among the crypto news that caught our eye:

MicroStrategy CEO Michael Saylor said his company would buy bitcoin at any price until it reached a million dollars.

Bitcoin’s drop below $30,000 last week came after a large volume of the cryptocurrency entered exchanges. According to IntoTheBlock, traders have sent around 40,000 BTC to exchanges since May 11.

According to an audit report by accounting firm MHA Cayman, USDT stable coin issuer Tether Holdings Limited reduced its reserves in the commercial papers by 17%, improving the quality of its funds.

The Ethereum development team said it would migrate the Ropsten test network to the Proof-of-Stake (PoS) consensus algorithm on June 8 2022.

According to the legislation, SEC chief Gary Gensler has warned that the regulator is ready to take new measures against unregistered cryptocurrency companies.

The US Commodity Futures Trading Commission (CFTC) believes that amid a rise in cryptocurrency crime, the watchdog must strengthen regulation of digital assets to crack down on fraud and manipulation.

EUR/USD

During today's trading session, the single European currency rose against the dollar by almost a figure. At the time of writing, the rate of the euro against the dollar is consolidating around the support at 1.0567 as the strength of the bulls proved insufficient to reach the key resistance at 1.0641. If the bears manage to fuel the sell-off, then the next hurdle for them would be the support at 1.0482. The remainder of the day holds no news or statements that are expected to strongly influence the currency pair.

USD/JPY

The dollar began to lose ground against the Japanese yen during today's trading session and managed to breach the first support at 127.48, heading towards the second one at 127.07. The bulls, on the other hand, managed to increase their purchases and dashed the bears’ hopes of breaching two supports in less than a day. At the time of writing, the dollar bulls are aiming at the first resistance of 128.70.

GBP/USD

In a relatively volatile session, the bulls managed to breach two resistances in a matter of hours. A breach of the third one seemed like it was only a matter of time, but the bears managed to limit the rally and keep the bulls at the resistance of 1.2464. Those of the market participants who share positive sentiment will likely try another attack on the next resistance at 1.259. If the bears manage to stand their ground, then they in turn would try to breach the support at 1.2390.

EUGERMANY40

At the beginning of the trading session, it looked as if the bears were going to gain enough momentum to continue the sell-off as they managed to breach the first support at 13716, but failed to confirm their breach. The bulls sensed their opportunity to attack and did not hesitate, overcoming the resistance at 13870. At the time of writing, the next goal of the bulls would be to breach the resistance at 14109.

US30

The day for the U.S. blue chips was relatively calm as neither the bears nor the bulls were able to take control over the market. Throughout the day, the index traded around the level of support at 31326. The first important target for the bulls, however, would be the resistance at 31855. If the bears want to become the dominant party, then they would first have to deal with the support at 31326 in order to reach the next one at 30508.