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In focus today

In the euro area, two notable surveys, the ECB's SPF and SMA, will provide insights into analyst expectations for ECB policy rates and the region's economic outlook. The SPF also features special questions about the war in Iran regarding the expected duration of the war, duration of disruptions, and the economic impact. Additionally, the May Sentix investor sentiment indicator and final manufacturing PMI for April will be released.

Danmarks Nationalbank is set to publish its April FX reserve report, shedding light on whether there was any currency intervention as EUR/DKK reached a historic high of 7.4735.

In Sweden, the manufacturing PMI has remained robust, rising further to 56.3 in March. While the overall level will continue to attract attention today, significant focus will be on the subcomponent tracking raw material and input prices, which saw a sharp surge of 9.6 index points last month.

In the US, Fed's Williams is scheduled to speak this afternoon.

Overnight, we expect the Reserve Bank of Australia to hike rates by 25bp. Market pricing suggests an 80% likelihood for the hike, though the decision remains uncertain.

Key labour market reports will dominate the US economic calendar this week, culminating in Friday's jobs report. On Thursday, we expect Norges Bank to hike policy rates by 25 bp, while the Riksbank is expected to leave its policy rate unchanged.

Economic and market news

What happened over the weekend

In US-Iran conflict, Donald Trump announced "Project Freedom," a plan to guide ships through the Strait of Hormuz from Monday, though Iran strongly criticised the move as a violation of the ceasefire. Iranian officials dismissed US claims of positive discussions. Energy markets remain heavily impacted, with US gas prices rising to an average of USD 4.45 per gallon on Sunday, a nearly 50% increase since the conflict began, according to AAA data. Meanwhile, Israeli evacuation orders in southern Lebanon underscored growing regional instability. Despite a temporary pause in US-Israeli bombing, the conflict continues to disrupt energy markets, fuelling inflation risks.

What happened Friday

In the US, the April ISM manufacturing index held steady at 52.7 in April, marking the fourth consecutive month of expansion. However, underlying trends reveal vulnerabilities, with employment contracting and supply chain challenges persisting, including slowing deliveries and low inventories. Prices surged to its highest since 2022, driven by metals, tariffs, and energy costs linked to Middle East tensions, raising inflationary concerns.

Equities: Most equity markets finished higher on Friday across the relatively few markets that were open, again led by tech and growth. One of the most notable developments last week, however, was that we are starting to see the good old negative correlation between equities and bonds returning. There is no doubt that Iran, and of course the higher oil price, has been a major factor, but the very strong earnings season has also had an impact. As a result, last week ended with both higher equities and higher yields. Yes, there is still potential downside risk from Iran and the conflict in the Middle East, but there is also potential upside risk in equities from the strong earnings momentum. The strong earnings backdrop also means that even though equity markets are up around 6-7% year-to-date, not that many of the negative equity voices can point to valuation as the key argument, because returns primarily have been driven by positive earnings growth.

On Friday, tech lifted not only hardware, but also software, and we are increasingly seeing the largest part of the HALO trade is now behind us, also given the valuation differentiation we now have within the tech space. When talking about technology, look at Asia this morning. Asian markets are higher, driven by tech. If in doubt, look at South Korea and Taiwan this morning. We will not mention the numbers here, check your own monitors if you are in doubt about the tech run we are currently in. European futures are in a small catch-up move this morning, while US futures are close to flat, with support still coming from the tech side.

FI and FX: The focus remains on the war between Iran and US and the closure of the Strait of Hormuz. The continued uncertainty surrounding the war and the rise in the oil price is putting pressure on global bond yields and interest rates. Last week, the 2Y Treasury rose 10bp despite a small setback. 10Y US Treasury yields rose 7bp. In Europe, 2Y and 10Y German government bond yields rose 10bp and 4bp, respectively. We are pricing less than 1 cut in the US and 3 hikes by ECB in 2026. In the currency market, EURUSD has been trading above the 1.17-level, while it looks like there was intervention in JPY last week, which suddenly strengthened the JPY versus the USD and moved the cross towards 156, but there has been no official confirmation. This morning EURUSD is trading above 1.17 and USDJPY dipped shortly below 156.

Daily Pivots: (S1) 212.00; (P) 213.04; (R1) 214.26; More...

Intraday bias in GBP/JPY remains neutral for the moment. Risk will stay on the downside as long as 55 4H EMA (now at 214.53) holds. Below 210.43 will target 209.58 support first. Break will target 38.2% retracement of 184.35 to 216.58 at 204.28.

In the bigger picture, while the fall from 216.58 is steep, there is no clear sign of trend reversal yet. The long term up trend could still extend to 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90 on resumption. However, sustained break of 55 W EMA (now at 205.45) will argue that it's already in medium term down trend for 184.35 support.

Daily Pivots: (S1) 182.95; (P) 183.78; (R1) 184.92; More...

Intraday bias in EUR/JPY remains neutral for the moment. Risk will stay on the downside as long as 55 4H EMA (now at 185.79) holds. Below 182.28 will extend the fall from 187.93 to 180.78 support.

In the bigger picture, the pullback from 187.93 is steep, there is no sign of reversal yet. Uptrend from 114.42 is still expected to resume at a later stage to 78.6% projection of 124.37 (2022 low) to 175.41 (2025 high) from 154.77 at 194.88. However, sustained break of 55 W EMA (now at 177.76) will argue that it's already in a medium term down trend to 175.41 resistance turned support and below.

Daily Pivots: (S1) 0.8623; (P) 0.8632; (R1) 0.8645; More…

Intraday bias in EUR/GBP is turned neutral first with current recovery. On the downside, decisive break of 0.8610 key support carry larger bearish implications and pave the way to 0.8466 fibonacci level next. However, firm break of 0.8652 will turn bias back to the upside for stronger rebound.

In the bigger picture, focus is back on 38.2% retracement of 0.8821 to 0.8863 at 0.8618. Sustained break there will confirm that whole rise from 0.8221 has completed at 0.8863. Deeper decline should then be seen to 61.8% retracement at 0.8466 at least. For now, risk will stay mildly on the downside as long as 55 D EMA (now at 0.8680) holds, in case of recovery.

Daily Pivots: (S1) 1.6243; (P) 1.6290; (R1) 1.6320; More...

Intraday bias in EUR/AUD remains on the downside, and fall from 1.6842 should target 1.6125 low. Decisive break there will resume whole fall from 1.8554. On the upside, above 1.6423 resistance will turn intraday bias neutral again first.

In the bigger picture, fall from 1.8554 (2025 high) is in progress and deeper decline should be seen to 61.8% retracement of 1.4281 to 1.8554 at 1.5913, which is slightly below 1.5963 structural support. Decisive break there will pave the way back to 1.4281 (2022 low). For now, risk will stay on the downside as long as 55 W EMA (now at 1.7069) holds, even in case of strong rebound.

Daily Pivots: (S1) 0.9152; (P) 0.9168; (R1) 0.9181; More....

Intraday bias in EUR/CHF stays neutral for the moment. Rise from 0.8979 is expected to continue as long as 0.9155 cluster support (38.2% retracement of 0.8979 to 0.9264 at 0.9155) holds. On the upside, firm break of 0.9264 will target 0.9394 resistance next. However, break of 0.9155 will turn bias back to the downside for deeper pullback to 61.8% retracement at 0.9088 and possibly below.

In the bigger picture, considering bullish convergence condition in W MACD, a medium term bottom should be in place at 0.8979. Sustained trading above 55 W EMA (now at 0.9268) will add more credence to this case. Further break of 0.9394 resistance will pave the way to 0.9660 resistance next. However rejection by the 55 W EMA will set up another fall through 0.8979 low at a later stage.

Daily Pivots: (S1) 1.1696; (P) 1.1741; (R1) 1.1767; More….

Intraday bias in EUR/USD remains neutral as range trading continues below 1.1848. Rise from 1.1408 is expected to continue as long as 1.1642 support holds. Firm break of 1.1848 will target 1.2081 high next. However, firm break of 1.1662 support will indicate the the rebound from 1.1408 has completed, and bring deeper decline back towards this low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1537). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Daily Pivots: (S1) 155.94; (P) 156.64; (R1) 157.75; More...

Intraday bias in USD/JPY stays neutral for the moment. Risk will stay on the downside as long as 55 4H EMA (now at 158.55) holds. Below 155.48 will extend the fall from 160.71 and target 152.25 cluster support (38.2% retracement of 139.87 to 160.71 at 152.74).

In the bigger picture, for now, corrective pattern from 161.94 (2024 high) is still seen as completed at 139.87. Rise from there is seen as resuming the long term up trend. So, break of 161.94 is expected at a later stage to resume the long term up trend. However, sustained break of 55 W EMA (now at 154.03) will dampen this view and bring deeper fall back towards 139.87 to extend the pattern from 161.94.

Daily Pivots: (S1) 1.3542; (P) 1.3601; (R1) 1.3634; More...

Intraday bias in GBP/USD stays neutral and some consolidations would be seen below 1.3657. Further rally is expected as long as 1.3453 holds. Above 1.3657 will target 61.8% projection of 1.3158 to 1.3598 from 1.3453 at 1.3725 first. Firm break there will target a retest on 1.3867 high.

In the bigger picture, current development suggests that price actions from 1.3867 are merely a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is in favor for a later stage, towards 1.4248 key resistance (2021 high).

Daily Pivots: (S1) 0.7787; (P) 0.7810; (R1) 0.7841; More….

Intraday bias in USD/CHF stays mildly on the downside for 0.7774 and then 61.8% projection of 0.8041 to 0.7774 from 0.7923 at 0.7758. Firm break there will extend the fall from 0.8041 to 100% projection at 0.7656. On the upside, above 0.7829 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 0.7923 resistance holds, in case of recovery.

In the bigger picture, rebound from 0.7603 medium term bottom is seen as correcting the fall from 0.9200 only. Rejection by 55 W EMA (now at 0.8042) will affirm this bearish case, and setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage. Though, sustained break of 55 W EMA will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high).