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Daily Pivots: (S1) 1.0474; (P) 1.0558 (R1) 1.0623; More...

Intraday bias in EUR/USD remains neutral and outlook stays bearish with 1.0756 support turned resistance intact. On the downside, break of 1.0470 will resume larger down trend. Next target will be 161.8% projection of 1.1494 to 1.0805 from 1.1184 at 1.0069.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1185 support turned resistance holds. The break of 1.0635 (2020 low) now raises the chance that it's resuming long term down trend from 1.6039 (2008 high). Retest of 1.0339 (2017 low) low should be seen next. Decisive break there will confirm this bearish case.

Daily Pivots: (S1) 1.2242; (P) 1.2439; (R1) 1.2552; More...

Intraday bias in GBP/USD remains on the downside for 161.8% projection of 1.3641 to 1.2999 from 1.3297 at 1.2258. Break will target 200% projection at 1.2013 next. On the upside, break of 1.2637 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rise from 1.1409 (2020 low) has completed at 1.4248, ahead of 1.4376 long term resistance (2018 high). Based on current momentum, fall from 1.4248 is probably the start of a long term down trend. The break of 61.8% retracement of 2.1161 to 1.1409 at 1.2493 is affirming this bearish case too. For now, deeper decline would be seen as long as 1.3158 support turned resistance holds. Next target is 1.1409 low.

Daily Pivots: (S1) 0.9743; (P) 0.9817; (R1) 0.9923; More....

USD/CHF's rally resumed after brief retreat and intraday bias is back on the upside. Sustained trading above 0.9864 will pave the way to next target at 1.0342 high. For now, outlook will remain bullish as long as 0.9708 support holds, in case of retreat.

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 100% projection of 0.8756 to 0.9471 from 0.9149 at 0.9864. Sustained break there will pave the way back to 1.0342 high. This will now remain the favored case as long as 0.9459 resistance turned support holds.

EURUSD saw some recovery on Wednesday after FOMC meeting when Powell was not as hawkish as many expected. But pair, however, is coming down again, away from 38.2% Fib retracement level that was a perfect fourth wave resistance, so the euro remains in a downtrend for now, ideally, until we see five waves down. Notice that the price is pointing even deeper now into the fifth wave, possibly to the 1.0350 Fib target area in the near term. If we are correct, then the pair may stabilize later this month but we will need a hawkish ECB for that to happen. Also, let's not forget on NFP today, data that will be tracked closely as this one should be important for further FOMC decisions regarding the interest rates.

The Federal Reserve (Fed) ‘magic’ didn’t last long, and the US stocks recorded the worst day of the year yesterday, after posting the biggest gains of the year the day before, under the pretext that the Fed wouldn’t raise the rates by 75bp points.

Investors realized that the Fed announced the biggest rate hike in more than 20 years, and said that there will be more 50bp hikes in the coming meetings. As such, the Fed is expected to hike rates by 50bps at least in the next two meetings.

The S&P 500 dived more than 3.5% yesterday as 95% of the companies fell, and Nasdaq fell more than 5% to close below the 13000 mark, as technology stocks were heavily hit. Apple plunged more than 5.50% yesterday, Meta lost 6.7%, while Amazon which has been shattered last week on disappointing Q1 results dived more than 7.5%. Other e-commerce giants including Etsy, eBay and Shopify added an additional layer of stress to the market warning investors that growth would be slowing due to high inflation and fading pandemic demand. And Etsy has been one of the biggest losers of the session with a 16.8% plunge, as, although the company managed to post better-than-expected revenue last quarter, the weaker than expected guidance, along with the overall moodiness in the market hit the stock price and sent it to the lowest level since June 2020.

Bitcoin didn’t resist to the risk selloff, and dived near $35500 mark for the first time since February. Even Gucci’s announcement that it would accept payments in cryptocurrencies couldn’t improve the mood.

Energy did better

Energy stocks did better than their peers yesterday, as the barrel of US crude extended gains past the $110 on the back of timid production target increase from the OPEC, and the European plans to ban the Russian oil and gas gradually to the end of the year.

Occidental Petroleum, for example, advanced 1.17%, Shell rallied 3% after posting the highest quarterly profit since 2008 thanks to the rally in oil prices, and despite an almost $4 billion charge on its planned exit from Russia, while BP and Exxon gave back some gains, but the losses were nothing compared to the index averages.

All eyes are on the US jobs data

Even though the Fed will turn a blind eye on softening jobs data in the coming months to focus on its fight against inflation, a strong NFP data could further revive the Fed hawks and the prospects of more aggressive Fed over the next couple of meetings, whereas a soft data could bring in some Fed doves.

But again, the Fed must make a choice as it can’t boost growth and tame inflation at the same time.

Wednesday’s ADP report disappointed as it printed 250’000 new private job additions versus around 400K expected by analysts, and the consensus of analyst estimates point at 400K new nonfarm job additions in April.

Wages growth will matter as higher wages mean more pressure on inflation. US wages may have grown 5.5% annually in April, with an unemployment rate seen down to 3.5% - quite a solid number that should justify the Fed not being concerned about the health of the jobs market for a while, to fight inflation.

Elsewhere

Inflation in Switzerland hit 2.5%, the European producer prices printed a scary 36% and the consumer prices in the UK advanced 7%, as the Bank of England (BoE) warned that it should progress past the 10% in the coming months. The BoE raised the interest rates for the fourth consecutive meeting, but alas, the pound dived as the fear of higher inflation, and the warning of a possible recession before the end of the year sent Cable tumbling to around 1.2350 yesterday.

Meanwhile, the EURUSD eased back below the 1.06 mark, as German factory orders plunged 4.7% in March due to the war, inflation and disrupted supply chains, while the expectation was a 1% drop. And things are about to get worse with the abandon of the Russian energy. In this respect, the ECB, which is already much less reactive to inflation than its major peers, will stay as dovish as possible and that divergence between the policy outlooks will likely continue weighing on the EURUSD. Medium term traders already have parity on their radar, and the next natural target for the bears is the 1.05 psychological level.
If you think 10% inflation is bad, read this

Turkish inflation officially hit 70% in April, and the unofficial inflation printed 156%. The lira didn’t move much against the US dollar as the exchange rate is being artificially kept steady by the officials, but the fact that the Turkish policy rate is kept at 14%, which is significantly lower than inflation (both official and unofficial) means that the pressure on the lira is growing, and the cost for Turkey to keep the lira steady against a globally appreciating US dollar is rising, hence rising the fear that Turkey may, at some point, abandon its actual monetary and FX, and FX-linked deposit policy.

Market movers today

After the shift in risk sentiment yesterday as markets digested the Fed message, the US jobs report will be in focus today. We expect the job market continued to tighten in April, with an increase in nonfarm payrolls of around 400k and possibly a further drop in the unemployment rate to 3.5%. This should keep the pressure high on Fed to hike rates in the coming months and comments from Fed's Bullard and Waller speaking today will be scrutinized for any hints in that respect.

German industrial figures for March will likely make for a gloomy reading today, after the weak factory orders released yesterday. Waning foreign demand and supply bottlenecks have again started to weigh on German industry after the tentative rebound at the start of the year.

Riksbank releases the April 28 monetary policy minutes and markets will look for how Board members were leaning in relation to the repo rate path.

The 60 second overview

Risk sentiment: The Wednesday's FOMC-driven rally reversed course yesterday, as equities sold off broadly, yields rose and EUR/USD fell back near 1.05. In equities, the decline was led by growth sectors and Nasdaq had its worst day since June 2020, falling by almost 5%. Despite Powell's message of Fed only considering 50bp hikes in the coming meetings, markets are now back to pricing almost an 80% probability of a 75bp hike for the June meeting. We continue to expect 50bp hikes in the coming two meetings, but see risks clearly tilted towards even more aggressive tightening. In today's US jobs report, more signs of labour shortages or persistently high wage inflation could further support the rate hike speculation.

Other central banks: Yesterday's central bank meetings provided a mix of dovish and hawkish signals. Bank of England hiked rates by 25bp as expected, still signalling high inflation pressures but also highlighting clear downside risks for growth. BoE maintained its softer forward guidance from the March meeting leading to EUR/GBP rising above 0.85, but we continue to see risks tilted towards more, rather than less rate hikes. See more in Bank of England Update Review: Another rate hike but mixed signals, 5 May. As usual, Norges Bank provided little new signals from its interim meeting, policy rate will likely be hiked again in June. Among CEE central banks, the Czech National Bank hiked rates by 75bp, compared to 50bp expected by markets and consensus. In contrast, the National Bank of Poland fell short of expectations, hiking only by 75bp vs. 130bp priced in before meeting.

Equities: And just like that, US equities plunged by 4-5%. Equities came under significant pressure just at the opening bell, reversing the post-FOMC rally. All sectors were notably lower, but growth names were the standouts with tech, cars and semis slaughtered. Cyclicals underperformed defensives massively, as energy, consumer staples and utilities held up very well. Dow -3.1%, S&P500 -3.6% (still up for the week though!), Nasdaq -5.0% and Russell 2000 -4.4%. US futures are directionless this morning.

FI: A significant sell-off led by the US dominated the European market and lead to a bearish steepener. While the initial reaction to the FOMC decision on Wednesday was a dovish hike, risk sentiment changed markedly yesterday. US Treasuries ended 8bp higher on the day, after being almost 13bp higher during the session. Bunds rose 7bp to above the 1% mark. Spreads in core and semi-core tightened marginally, and widened in the periphery as the BTPs-Bund spread continues to flirt with the 200bp mark.

FX: Oil prices bounced around yesterday where another uneventful OPEC meeting. EUR/GBP rose on dovish BoE. The Powell-induced rally in risk-disposed currencies like the SEK proved short-lived.

Credit: Though credit markets opened sharply tighter following the FOMC meeting, sentiment quickly turned and credit took another leg significantly wider, with iTraxx Xover widening 19bp and Main 3bp.

Nordic macro

Sweden: In Sweden all eyes are on the Risksbank minutes. We will look into the reasoning of each of the six governors with regards to the uniform u-turn they provided (no dissenters) in the April meeting. Also, governor Skingsley gives a speech with the title: High inflation and a rising repo rate - what happens to the Riksbank's balance sheet? at noon (12 CET).

Also a variety of macro data for March is released including house price statistics from Svensk Mäklarstatistik, and central government payments for April. As we had a negative (-0,4% QoQ) BNP indicator for the first quarter in Sweden, today's data should give some more clarity on the composition of the slowdown.

DXY:

On the H4, with price expected to reverse off the stochastics indicator, we have a bearish bias that price will drop from our 1st resistance to our 1st support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the 127.2% Fibonacci extension is.

Areas of consideration:

• H4 time frame, 1st resistance at 103.779
• H4 time frame, 1st support at 102.948

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 102.900 where the 23.6% Fibonacci retracement and pullback resistance is to our 1st support at 1849 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 time frame, 1st Resistance at 1876
• H4 time frame, 1st Support at 1849

GBP/USD:

On the H4, with price expected to bounce off the ichimoku cloud, we have a bullish bias that price will drop from our 1st resistance at 1.24327 where the swing high resistance and 38.2% Fibonacci retracement is to our 1st support at 1.22709 in line with the 161.8% Fibonacci extension.

Areas of consideration:

• H4 1st resistance at 1.24327
• H4 1st support at 1.22709

USD/CHF:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 0.99411 where the 161.8% Fibonacci extension is from our 1st support at 0.98405 in line with the horizontal pullback support. Alternatively, price may break 1st support structure and head for 2nd support.

Areas of consideration

• 1st support level at 0.98405
• 1st resistance level at 0.99411

EUR/USD :

On the H4, with price moving below the ichimoku, we have a bearish bias that price will drop from our 1st resistance to our 1st support at 1.04994 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the 161.8% Fibonacci extension is.

Areas of consideration :

• H4 1st resistance at 1.06194
• H4 1st support at 1.04994

USD/JPY:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 131.240 where the swing high resistance is from our 1st support at 129.028 in line with the horizontal swing low support. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal swing low support is.

Areas of consideration:

• H4 time frame, 1st resistance at 131.240
• H4 time frame, 1st support at 129.028

AUD/USD:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 0.72252 where the swing high resistance is from our 1st support at 0.70722 in line with the horizontal swing low support. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal swing low support is.

Areas of consideration

• H4 1st resistance at 0.72252
• H4 1st support at 0.70722

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 0.65394 where the 23.6% Fibonacci retracement is to our 1st support at 0.64088 in line with the horizontal swing low support. Alternatively, price may break 1st resistance structure and head for 2nd resistance.

Areas of consideration:

• H4 time frame, 1st support at 0.64088
• H4 time frame, 1st resistance at 0.65394

USD/CAD:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 1.29076 where the swing high resistance is from our 1st support at 1.27197 in line with the horizontal swing low support. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal swing low support is.

Areas of consideration:

• H4 time frame, 1st resistance at 1.29076
• H4 time frame, 1st support at 1.27197

OIL:

On the H4, with price moving above the ichimoku cloud, we have a bullish bias that price will rise to our 1st resistance at 108.77 where the swing high resistance is from our 1st support at 112.93 in line with the horizontal pullback support. Alternatively, price may break 1st support structure and head for 2nd support where the horizontal pullback support is.

Areas of consideration:

• H4 time frame, 1st resistance of 108.77
• H4 time frame, 1st support of 112.93

Dow Jones Industrial Average:

On the H4, with price expected to reverse off the ichimoku cloud, we have a bearish bias that price will drop from our 1st resistance at 33193 where the horizontal pullback resistance and 38.2% Fibonacci retracement is to our 1st support at 32422 in line with the pullback support. Alternatively, price may break 1st resistance structure and head for 2nd resistance where the horizontal pullback resistance.

Areas of consideration :

• H4 time frame, 1st resistance at 33193
• H4 time frame, 1st support at 32422

Daily Pivots: (S1) 129.79; (P) 130.04; (R1) 130.38; More...

USD/JPY is still staying in range below 131.24 and intraday bias remains neutral. Also, near term outlook stays bullish with 126.91 support intact and further rally is expected. On the upside, break of 131.24 will resume recent up trend to 261.8% projection of 109.11 to 116.34 from 114.40 at 133.26. However, considering bearish divergence condition in 4 hour MACD, break of 126.91 will confirm short term topping and turn bias back to the downside for 121.27/125.09 support zone.

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.

Dollar is back in control as markets turned back into risk-off mode, just a day after the rallies triggered by Fed Chair Jerome Powell's comments. Investors are apparently not too convinced by the ruling out of 75bps hike after a second thought. Focuses will turn to non-farm payroll report today, which should prompt even more volatility.

Staying in the current markets, Aussie is still the strongest one for the week, followed by Canadian. But both are starting to look vulnerable against the third-placed Dollar. Sterling is the worst performing one after BoE put stagflation into perspective. Swiss Franc is also weak followed by Kiwi. Yen and Euro are mixed for now.

Technically, attention will be on whether Dollar would finally break out of range against Euro and Yen today. Levels to watch are 1.0470 support in EUR/USD and 131.24 resistance in USD/JPY. Firm break of theses levels should confirm the underlying broad-based strength of the greenback.

In Asia, at the time of writing, Nikkei is up 0.58%. Hong Kong HSI is down -3.65%. China Shanghai SSE is down -2.18%. Singapore Strait Times is down -1.22%. Japan 10-year JGB yield is up 0.0143 at 0.244. Overnight, DOW dropped -3.12%. S&P 500 dropped -3.56%. NASDAQ dropped -4.99%. 10-year yield rose 0.149 to close at 3.066

RBA SoMP: 2022 GDP forecasts downgraded to 4.5%, CPI raised to 6%

In the Statement on Monetary Policy, RBA reiterated that a further lift in interest rates is required over the period ahead. Also, the Board will continue to closely monitor the incoming information and evolving balance of risks as it assesses the timing and extent of future interest rate increases

In the new economic projections:

• 2022 GDP growth forecast was downgraded from 5.50% to 4.50%.
• 2023 GDP growth was upgraded from 2.50% to 2.75%.
• 2022 year-end headline CPI forecast was raised from 3.25% to 6%.
• 2023 year-end CPI headline forecast was raised from 2.75% to 3.25%.
• 2022 year-end trimmed mean CPI was raised from 2.75% to 4.75%.
• 2023 year-end trimmed mean CPI was raised from 2.75% to 3.25%.
• 2022 year-end unemployment rate was unchanged at 3.75%.
• 2023 year-end unemployment rate was us lower from 3.75% to 3.50%.

Also from Australia, AiG Performance of Services Index rose from 56.2 to 57.8 in April.

Bitcoin accelerating down towards 33k low, follow risk-off sentiment

Bitcoin continued to gyrate lower this week and accelerated to as low as 35565 overnight. The move came with broad based risk-off selling in the US markets. Technically, the fall is seen as continuation of the decline from 48226, and outlook will stay bearish as long as 40014 resistance holds. Next near term target is 33000 low.

Structurally, rebound from 33000 to 48226 is seen as a three wave corrective pattern. The current stay below 55 day EMA is also a medium term bearish sign. Decline from 48226 is likely the third leg of the whole down trend from 68986 low. Current downside momentum doesn't warrant a strong break of 33000 yet. But in that happens, bitcoin could easily falls through 30k handle to 61.8% projection of 68986 to 33000 from 48226 at 25986.

NFP in focus as 10-yr yield hit 3.1%

Focus will turn to US non-farm payroll report today. Markets are expecting 400k job growth in April. Unemployment rate is expected to be unchanged at 3.6%. Average hourly earnings is expected to stay strong at 0.4% mom.

Looking at related data, ISM manufacturing employment dropped sharply from 56.3 to 50.9, barely in expansion. ISM services employment dropped from 54.0 to 49.5, back in contraction. ADP report showed only 247k private job growth. Four-week moving average of initial claims also ticked up from 178k to 188k.

The figures on wages growth would be the most important ones to watch. Fed Chairman Jerome Powell talked down the prospect of a 75bps rate hike earlier this week. But the markets seemed not buying into this rhetoric after second thoughts.

10-year yield rose 0.149 to close at 3.066 overnight, after hitting as high as 3.108. Recent up trend is still in force towards 3.248 long term resistance level (2018 high). The reaction to NFP from 10-year yield would provide the guide to Dollar's next move, in particular against Yen.

Elsewhere

Japan Tokyo CPI core rose from 0.8% to 1.9% yoy in April, above expectation of 1.8% yoy. Monetary base rose 6.6% yoy in April, below expectation of 8.2.% yoy.

Swiss unemployment rate and foreign current reserves, Germany industrial production, Italy retail sales, and UK construction PMI will be released in European session.

Later in the day, in addition to US NFP, Canada will also release employment and Ivey PMI.

USD/JPY Daily Outlook

Daily Pivots: (S1) 129.79; (P) 130.04; (R1) 130.38; More...

USD/JPY is still staying in range below 131.24 and intraday bias remains neutral. Also, near term outlook stays bullish with 126.91 support intact and further rally is expected. On the upside, break of 131.24 will resume recent up trend to 261.8% projection of 109.11 to 116.34 from 114.40 at 133.26. However, considering bearish divergence condition in 4 hour MACD, break of 126.91 will confirm short term topping and turn bias back to the downside for 121.27/125.09 support zone.

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.

Economic Indicators Update

Focus will turn to US non-farm payroll report today. Markets are expecting 400k job growth in April. Unemployment rate is expected to be unchanged at 3.6%. Average hourly earnings is expected to stay strong at 0.4% mom.

Looking at related data, ISM manufacturing employment dropped sharply from 56.3 to 50.9, barely in expansion. ISM services employment dropped from 54.0 to 49.5, back in contraction. ADP report showed only 247k private job growth. Four-week moving average of initial claims also ticked up from 178k to 188k.

The figures on wages growth would be the most important ones to watch. Fed Chairman Jerome Powell talked down the prospect of a 75bps rate hike earlier this week. But the markets seemed not buying into this rhetoric after second thoughts.

10-year yield rose 0.149 to close at 3.066 overnight, after hitting as high as 3.108. Recent up trend is still in force towards 3.248 long term resistance level (2018 high). The reaction to NFP from 10-year yield would provide the guide to Dollar's next move, in particular against Yen.