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Australia employment rose just 4k in April, missing expectation of 30k growth. Full time jobs rose 92.4k while part-time jobs dropped -88.4k.

Unemployment rate was unchanged at 3.9%, matched expectations. Participation rate dropped -0.1% to 66.3%. Monthly hours worked rose 23m hours, or 1.3% mom.

Bjorn Jarvis, head of labour statistics at the ABS, said, "3.9 per cent is the lowest the unemployment rate has been in the monthly survey. The last time the unemployment rate was lower than this was in August 1974, when the survey was quarterly."

Full release here.

Japan exports rose 12.5% yoy to JPY 8076B in April. Imports rose 28.2% yoy to JPY 8915B, a new record. Trade deficit came in at JPY 839B.

Trade with China shrank notably. China-bound shipments fell -5.9% yoy, the biggest drop since March 2020.  Imports from China also fell -5.5% yoy, the most since September 2020. On the other hand, exports to the US jumped 17.8% yoy while imports rose 15.3% yoy.

In seasonally adjusted terms, exports rose 1.0% mom to JPY 7629B. Imports rose 7.9% mom to JPY 9248B. Trade deficit came in at JPY -1619B, larger than expectation of JPY -1520T.

Full release here.

Philadelphia Fed President Patrick Harker said yesterday, "I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee's inflation target."

"I still am in the camp that we can have, if not a soft landing, a safe landing," he said. He expected the economy to grow between 2% and 3% this year, adding that "this economy can withstand a measured, methodical approach to tightening financial conditions."

DXY:

On the H4, with prices bouncing off the ichimoku support , we have a bullish bias that price will rise to our 1st resistance at 104.171 where the horizontal pullback resistance, 61.8% Fibonacci projection and 50% Fibonacci retracement is from our 1st support at 103.290 in line with the horizontal swing low support. Alternatively, price may break 1st support structure and head for 2nd support at 102.477 where the horizontal swing low support is.

Areas of consideration:

• H4 time frame, 1st resistance at 104.171
• H4 time frame, 1st support at 103.290

XAU/USD (GOLD):

On the H4, with price moving below the ichimoku, we have a bearish bias that price will drop from our 1st resistance at 1821.740 where the horizontal swing high resistance is to our 1st support at 1798.623 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance at 1832.948 where the horizontal swing high resistance and 61.8% Fibonacci projection is.

Areas of consideration:

• H4 time frame, 1st Resistance at 1821.740
• H4 time frame, 1st Support at 1798.623

GBP/USD:

On the H4, with price reversing off the ichimoku indicator, we have a bearish bias that price will drop from our 1st resistance at 1.23923 where the horizontal overlap support is to our 1st support at 1.22667 in line with the horizontal pullback support, 100% Fibonacci projection and 61.8% Fibonacci retracement. Alternatively, price may break 1st resistance structure and head for 2nd resistance at 1.24961 where the horizontal swing high resistance is.

Areas of consideration:

• H4 1st resistance at 1.23923
• H4 1st support at 1.22667

USD/CHF:

On the H4, with price expected to bounce off the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 1.00497 where the 61.8% Fibonacci projection and swing high resistance is from our 1st support at 0.98710 in line with the horizontal swing low support and 50% fibonacci retracement. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal pullback resistance is.

Areas of consideration

• 1st support level at 0.98710
• 1st resistance level at 1.00497

EUR/USD :

On the H4, with price expected to reverse off the ichimoku cloud resistance, we have a bearish bias that price will drop from our 1st resistance at 1.04826 where the 23.6% Fibonacci retracement is to our 1st support at 1.03586 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the horizontal swing high resistance is.

Areas of consideration :

• H4 1st resistance at 1.04826
• H4 1st support at 1.03586

USD/JPY:

On the H4, with prices moving below the ichimoku indicator, we have a bearish bias that price will drop from our 1st resistance at 128.992 where the 61.8% Fibonacci retracement and horizontal overlap resistance is to our 1st support at 128.188 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance at 129.604 where the horizontal swing high resistance and 78.6% Fibonacci projection is.

Areas of consideration:

• H4 time frame, 1st resistance at 128.992
• H4 time frame, 1st support at 128.188

AUD/USD:

On the H4, with price expected to reverse off the ichimoku cloud resistance, we have a bearish bias that price will drop from our 1st resistance at 0.70378 where the overlap resistance and 50% Fibonacci retracement is to our 1st support at 0.68870 in line with the swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the 61.8% Fibonacci retracement is.

Areas of consideration

• H4 1st resistance at 0.70378
• H4 1st support at 0.68870

NZD/USD:

On the H4, with price moving below the ichimoku cloud, we have a bearish bias that price will drop from our 1st resistance at 0.63769 where the 50% Fibonacci retracement and horizontal pullback resistance is to our 1st support at 0.62276 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance at 0.64352 in line with 61.8% Fibonacci retracement.

Areas of consideration:

• H4 time frame, 1st support at 0.62276
• H4 time frame, 1st resistance at 0.63779

USD/CAD:

On the H4, with price moving below the ichimoku, we have a bearish bias that price will drop from our 1st resistance at 1.29039 where the horizontal pullback resistance is to our 1st support at 1.28034 in line with the swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the horizontal swing high resistance is.

Areas of consideration:

• H4 time frame, 1st resistance at 1.29039
• H4 time frame, 1st support at 1.28034

OIL:

On the H4, with price expected to bounce off the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 111.36 where the 23.6% Fibonacci retracement from our 1st support at 106.51 in line with the horizontal overlap support and 50% fibonacci retracement. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal pullback resistance is.

Areas of consideration:

• H4 time frame, 1st resistance of 111.36
• H4 time frame, 1st support of 106.51

Dow Jones Industrial Average:

On the H4, with price moving below the ichimoku cloud, we have a bearish bias that price will drop from our 1st resistance at 32553 where the 50% Fibonacci retracement is to our 1st support at 31294 in line with the swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the 78.6% Fibonacci retracement.

Areas of consideration :

• H4 time frame, 1st resistance at 32553
• H4 time frame, 1st support at 31294

• WTI reversed from resistance area
• Likely to fall to support level 105.00

WTI crude oil recently reversed down from the resistance area located between the key resistance level 110.00 (which has been reversing the price from April) and the upper daily Bollinger Band.

This resistance zone near was further strengthened by 50% Fibonacci correction of the downward ABC correction (2) from the start of March.

WTI crude oil can be expected to fall further toward the next support level 105.00.

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EURGBP's positive impetus, which evolved from the vicinity of the 200-period simple moving average (SMA) at 0.8406, is trading around the 100-period SMA at 0.8473 after fading from the lower surface of the Ichimoku cloud. The cloud has revived the more than one-week decline from the seven-and-a-half-month peak of 0.8618, something which the rolled over 50-period SMA is also endorsing.

The Ichimoku lines are suggesting that downside risks remain active, while the positive message from the short-term oscillators appears somewhat shaky. The MACD, in the negative region, is climbing above its red trigger line, while the RSI is flirting with the 50 neutral threshold. The positive charge of the stochastic oscillator is also in question as the stochastic lines are residing at the 80 overbought mark.

If positive forces continue to evaporate and the pair retreats beneath the 100-period SMA at 0.8473, sellers may then encounter downside friction around the red Tenkan-sen line at 0.8443 and the 0.8433 level, which is the 50.0% Fibonacci retracement of the up leg from 0.8249 until 0.8618. Remaining skewed to the downside, the bears could then challenge the tough support section from the 200-period SMA at 0.8406 until the 61.8% Fibo of 0.8390, an area that also includes the valid trough of May. Sinking beneath the 61.8% Fibo mark would boost the descent in the pair, with the price weighing on the 0.8360-0.8371 support border that stretches back to mid- April.

In the positive scenario, initial heavy resistance exists between the cloud’s lower surface at 0.8492 and the 0.8505 level. Should the bulls push even higher, they may then tackle a resistance zone linking the 50-period SMA at 0.8519 with the 0.8533 barrier. From here, if positive developments in the pair endure and pilot beyond the 0.8555 mark, traders’ attention could then shift to the resistance band, moulded by the 0.8611 inside swing low in September 2021 and the October 2021 high of 0.8623.

As things stand, EURGBP gains are being curbed by the Ichimoku cloud, while downside risks linger in the background. For another deep retracement to be avoided, the bulls would need to thrust the price north of the 0.8533 high.

Pound slides after CPI report

The British pound has taken a tumble after April CPI jumped to 9.0% YoY, up sharply from 7.0% in March. GBP/USD has fallen 100 points today and is trading at 1.2390 in North American trade.

UK inflation continues to run at a 40- year high, and the cost of living crisis is undoubtedly keeping Finance Minister Sunak and BoE Governor Bailey awake at night. Core CPI didn’t provide any relief, as it rose to 6.2%, up from 5.7% prior. This indicates that inflationary pressures are broad-based and aren’t about to ease anytime soon. The only positive in the CPI release was that it was a bit lower than the forecast of 9.1%, but I’m sure few in the City of London are taking any solace from that tidbit.

The BoE has essentially raised the white flag on the inflation front, saying that many of the factors at play, such as the Ukraine war and soaring energy costs are beyond the Bank’s control. The BoE has warned that things could get worse, projecting that inflation will top 10% later this year and warning of a likely recession. Bailey & Co. are doing their best to catch up with the inflation curve as they aggressively hike rates while trying not to choke off economic growth.

With the spectre of 10% inflation looming, confidence in the BoE may be ebbing. Like the Fed, the BoE has come under heavy criticism for not reacting to spiralling inflation quickly enough, and the 25-bps incremental hikes may not prove to be sufficient. The Fed has gone full throttle with a 50-bps hike and more to follow, and pressure is mounting on the BoE to follow suit.

The US is also facing spiralling inflation, and Fed Chair Powell has signalled that the Fed will deliver 0.50% hikes in June and July. Former Fed Chair Bernard Bernanke weighed in on Fed policy, saying that it was a mistake for the Fed not to react earlier to rising inflation. Bernanke also warned that the US economy could face stagflation in the next year or two.

GBP/USD Technical

• GBP/USD has broken below support at 1.2436. Below, 1.2374 is under pressure
• There is resistance at 1.2557 and 1.2619

Markets

ECB policy makers keep up the July rate hike rhetoric. ECB Muller, de Cos and Rehn were today’s chosen ones. Interestingly, more governors start talking about what could come next after an inaugural July move. ECB Rehn was most outspoken, suggesting broad agreement amongst ECB members that negative interest rates should end “relatively quickly”. Tomorrow’s Minutes could give us some more flavour on how fast the mindset amongst governors is changing these days. This week’s comments in any case point to the fact that Frankfurt’s reaction function will likely be in line of the one of other normalizing central banks: hiking rates at any possible opportunity and showing preparedness to step it up (eg ECB Knot yesterday or Holzmann earlier) in magnitude if necessary. European money markets picked up the signal again with 3m Euribor futures rising around 5 bps in yield terms in the end 2022/end 2023 segment. European yield curves bear flatten. German yields add around 6 bps at the front end while trading more or less stable at the very long end. As we effectively approach the start of the tightening, we’ll probably see more of those flatteners in Europe. Up until now, the rising yield environment mostly came with (bear) steepeners. The US yield curve flattens as well today, but moves are less outspoken than in Europe. Daily changes vary between +2.2 bps (2-yr) and -0.5 bps (30-yr). The relative interest rate support couldn’t establish a further comeback of the single currency against a generally better dollar today. The pair changes hands in the low 1.05-area for most of the day. Key support is still located at 1.0341 while first, minor, intermediate resistance at 1.0642 remains untested. Stock markets lacked yesterday vigor and help explain the relatively better USD performance. Today’s only datapoints were US housing numbers. They gradually start to show an over-the-top market, but alarm bells aren’t really ringing yet. April housing starts stabilized on a monthly basis (-0.2% M/M) while building permits declined by 3.2% M/M. Sterling grabbed quite some headlines as well over the past couple of sessions. This morning’s highest inflation print since 1982 (6.2% Y/Y for core and 9% Y/Y for headline) didn’t really came as a surprise. Yesterday’s heavy UK Gilt sell-off initially didn’t continue, capping sterling’s comeback as well. It was only later in the session when UK Gilts start following especially European bonds south, capping EUR/GBP’s intraday march from 0.8440 towards 0.85.
 
News Headlines

Headline inflation in Canada accelerated by 0.6% m/m to 6.8% in April, up from 6.7% last month. Expectations were for a stabilization. The three core measures watched by the Bank of Canada crushed consensus, coming in at an average 4.23% compared to 3.83% expected and faster than an upwardly revised March (from 3.76% to 3.93%). Shelter (1.1% m/m) and food (0.9%) were among the biggest contributors. Transportation (0.5%) eased considerably after a 3.5% surge in March with gasoline prices (a subcategory) even printing a 0.7% decline. Today’s outcome further solidifies market expectations for more 50 bps rate hikes (at least three through the September policy meeting) by the Bank of Canada after delivering such a large increase in April. The Canadian swap yield curve bear flattens with yields up by more than 4 bps. Moves occurred already before the CPI publication though. The Canadian dollar trades almost unchanged in the 1.282 area.

The Norwegian government updated its outlook for gas deliveries in 2022. They are now expected to hit 122 billion cubic meters, up 8% (or 9 billion cubic meters) compared to last year. If realized, the gas sales would rival the record sales seen in 2017. “The companies are producing at full, or near full capacity. High prices give the company’s strong incentives to utilize the production capacity on the fields”, Minister of Petroleum and Energy Terje Aasland said in a statement. Demand is higher than ever as Europe seeks to cut Russian imports this year by two-thirds. Gas flows from Russia to the bloc exceeded 155 billion cubic meters, or 40% of total consumption, last year.

The Euro eases on Wednesday after three-day recovery leg from five-year low at 1.0349 showed signs of stall and was capped by falling 20DMA.

Rebound was fueled by profit-taking on improved sentiment and expectations for more ECB rate hikes, in attempts to catch up with Fed, however, initial optimism was deflated on concerns that the eurozone will not be able follow Fed in fighting soaring inflation and avoid recession scenario.

Technical studies have improved on daily chart and remain partially supportive for further recovery, as 14-d momentum rose into positive territory, while broken 10DMA (1.0497) reverted to support and underpins the action.

Near-term bias is expected to remain bullish while 10DMA holds, but bulls see break of 20DMA as minimum requirement, with rise above 1.0649 (May 5 lower top / daily Kijun-sen) to confirm recovery extension.

Caution on break and close below 10DMA that would weaken near-term structure and further weakness.

Res: 1.0560; 1.0598; 1.0641; 1.0668
Sup: 1.0497; 1.0458; 1.0428; 1.0388