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USDCHF gathers pace ahead of US data

USDCHF has been capped below the resistance trendline of a former bearish channel, which the price re-entered to post a new two-year low of 0.8850.

Despite the unsuccessful attempts to return above 0.9 over the past few weeks, the technical indicators show improvement in sentiment. The RSI has marked a new higher high in the bearish territory and the MACD is deviating above its red signal line. The stochastic oscillator has also changed trajectory to the upside. If the bulls run above the 20-day SMA and beyond the 0.9000 psychological level, resistance could initially develop around the 0.9070 barrier. The 50-day SMA could next come in sight at 0.9155. Breaching that obstacle too may intensify upside pressures towards the almost one-year-old resistance line from June at 0.9300.

In the event the price pulls lower again, the bears will attempt to extend the downtrend below 0.8850 and towards the support trendline from May 2022 at 0.8760. Another failure here could confirm additional losses towards the channel’s lower bar at 0.8650.

Summing up, the short-term bias for USDCHF seems to be improving, though selling interest may not fade unless the pair climbs back above 0.9.​

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EURUSD in Breakout Mode​

• The EURUSD continues to go sideways in a tight trading range holding above the moving average (blue line).​
• The market is still Always In Long. However, the past five trading days have had a lot of overlapping bars. This increases the risk of more trading range price action.​
• The bulls want the tight bull channel to continue up, and the bears want a downside breakout and test of prior lower highs, such as April 17th.​
• The bears need to get a close below the moving average. Without it, traders will continue to buy at the moving average, betting it will act as support.​
• At the moment, the odds are that the bull channel that began in March will convert into a trading range and test prior lower highs. However, without a downside breakout, the market will probably have to go sideways and develop more selling pressure.​

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Today's calendar:

• 8:15 BST: PMI index for the industry in Spain
• 8:30 BST: PMI index for the industry in Switzerland
• 8:55 BST: PMI index for the industry in Germany
• 9:00 BST: PMI index for the EU area
• 9:00 BST: PMI index for the UK
• 3:00 BST: Durable Goods Orders and Factory Orders in the US
• 9:40 BST: weekly report on crude oil inventories - API

Bankers' speeches

• 12:20 BST: Philip Lowe from RBA

 

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Oil​

• Major Asian stock indexes ended the session lower after yesterday's slump on Wall Street.​
• Chinese and Japanese markets were closed today for holidays.​
• Retail sales data from Australia came in slightly better than expected. March retail sales came in at 0.4% on a monthly basis, against expectations of 0.3% month-on-month and the previous reading of 0.2% month-on-month.​
• The Reserve Bank of New Zealand released its latest Financial Stability Report today.​
• Governor Adrian Orr says that New Zealand’s financial system is well placed to handle the higher interest rate environment and international financial disruption.​
• New Zealand's labor market report for Q1 showed the addition of new jobs and a lower-than-expected unemployment rate.​
• Data from NZ, combined with the RBNZ's lack of stability concerns, increase the chances of a RBNZ rate hike at its next meeting. That is scheduled for May 24.​
• NZD/USD rose on the session to highs just above 0.6250.​
• Bank of Korea Governor Rhee spoke in an interview saying, amongst other points, that it’s a little bit premature to talk about a policy pivot.​
• Across major FX the USD lost ground against a higher JPY, CHF, EUR and GBP. AUD and CAD lagged.​
• Investors are awaiting a decision on interest rates in the US.​
• In addition to the Fed decision, today will see the release of the ADP report and the ISM index for services, as well as data on US oil inventories.​

Crude oil scored a weak session yesterday. OIL.WTI quotes are on track to test support at the round $70 level.​

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Oil

Oil prices, including Brent and WTI, dropped more than 5% after yesterday’s FED meeting regarding interest rates. Oil.WTI dropped below $69 - the lowest level since March 24, 2023. Prices fell from $71.5 per barrel to as low as $63.6 per barrel. However, prices have rebounded slightly from lows. Higher volatility was caused by rising concerns about the global economy and demand. The re-emergence of US banking problems and OPEC+'s unwillingness to intervene are also contributing factors. The collapse of First Republic Bank has increased the risk of recession in the United States and China's post-COVID demand recovery is slower than expected. The oil producers' calendar remains unchanged, with the next meeting scheduled for June.

Looking at the technical analysis of OIL.WTI on the H4 interval, after midnight the downward trend intensified and a tests of the lows from March occurred at $63.6 per barrel. However, the price decrease was temporary and bulls responded immediately at the support level resulting in a pro-growth hammer formation on the chart. If the upward trend continues, attention should be paid to two resistance levels. The first, at $71.30 is derived from measuring the 38.2% Fibonacci retracement of the last downward wave. The second resistance level is around $74 and set at the previous local lows and the next Fibonacci retracement - 50%. On the other hand, If the bearish sentiment extends, the support level should be at $66.30, which is the upper limit of the 1:1 formation breakout.​

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EURUSD is Recovering

The EURUSD pair’s decline stopped at 1.0966 level, to rebound bullishly and settle above the EMA50, to head towards recovering and resume the main bullish wave again, on its way to test 1.1075 level as a first station, noting that breaching this level will extend the bullish wave to reach 1.1150 areas as a next target.

Therefore, we expect to witness more bullish bias in the upcoming sessions, and the price needs to consolidate above 1.1010 to continue the suggested rise, as breaking it will put the price under new negative pressure to head towards visiting 1.0945 level initially.
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GBPUSD presses on the channel’s support line​

GBPUSD pair ended yesterday negatively, to test the intraday bullish channel’s support line, noticing that the price begins today with slight decline to move below this support, while stochastic reaches the oversold areas now, to form positive motive that we are waiting to assist to push the price to resume the main bullish wave and head to achieve gains that reach 1.2850.

Therefore, the overall bullish trend will remain valid for the upcoming period, supported by the EMA50, and the price needs to breach 1.2625 to confirm resuming the bullish track, noting that failing to achieve the required breach will push the price to achieve additional decline that its next target reaches 1.2550.​

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GBPJPY repeats the positive closes

The GBPJPY pair repeated providing positive closes above the extra support at 169.25 level, confirming its readiness to resume the bullish attack, to notice its fluctuation near 170.70.

note that stochastic begins providing positive momentum by its rally above 50 level will ease the mission of reaching the initial extra target at 172.13, then wait for attacking the extra barrier at 172.50 level, which represents the key for detecting the expected trend in the upcoming period. The expected trading range for today is between 169.70 and 171.40.​

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EURNZD​

EURNZD is one of the G10 FX crosses that experienced large moves so far today. The pair is trading higher as EUR got supported by hawkish comments from Joachim Nagel, Bundesbank President and ECB member. Meanwhile, NZD is the worst performing G10 currency after RBNZ lowered 1- and 2-year inflation expectations.

Starting with EUR news, Joachim Nagel said that inflation still remains too high and too strong. He continued saying that central bankers need to be sure that the inflation wave ends before they decide to pause policy tightening. He stressed it loud and clear that the latest rate hike delivered by the ECB won't be the last. While Nagel sounding hawkish is nothing new as he is one of the biggest ECB hawks, comments suggesting that more rate hikes are coming have been delivered throughout the week by various ECB members throughout this week.

Moving onto NZD news, the Reserve Bank of New Zealand lowered its 1- and 2-year ahead inflation expectations. 1-year expectations dropped from 5.11 to 4.28% while 2-year expectations were lowered from 3.30 to 2.79%. This can be seen as a dovish move as lower inflation expectations suggest that RBNZ is progressing in its fight against inflation and may not need to raise rates too much. Money markets currently see just 25 basis points of additional tightening through July.

Taking a look at EURNZD chart at D1 interval, we can see that the pair has halted recent sell-off at 50% retracement of the upward impulse launched in mid-December 2022. Recovery move was launched yesterday and gains accelerated today. The pair climb above resistance zone in the 1.7420 area, marked with 38.2% retracement and is looking towards a test of the 50-session moving average (green line).​

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EURTRY​

• Indices from Asia-Pacific are trading mostly higher today. Nikkei gains 0.7%, S&P/ASX 200 adds 0.1%, Nifty 50 jumps 0.4% and Kospi trades flat. Indices from China trade up to 1.2% higher​
• European and US index futures trade slightly above Friday's cash closing prices​
• NBC reports that meeting to discuss debt ceiling between US President Biden and congressional leaders was scheduled for Tuesday​
• With almost all votes counted, no single candidate managed to score an over-50% result in Turkish presidential elections, meaning that a run-off between incumbent president Erdogan and opposition candidate Kilicdaroglu is likely to take place in 2 weeks (May 28, 2023)​
• According to preliminary results, Erdogan's party AKP managed to win parliamentary elections with 35.6% votes and secure 268 seats in 600-seat parliament​
• Turkish lira has been rather calm so far today as investors wait for an official confirmation that run-off in presidential elections will be needed​
• According to Financial Times, G7 countries and European Union consider banning restarting of the Russian gas pipelines if Moscow has previously halted supplies via them​
• According to Reuters, G7 also aims to more strictly target sanctions evasion involving third countries​
• Iraqi oil minister said he does not expect OPEC+ to announce more oil output cuts at June meeting​
• ECB's De Guindos said that rate hike cycle in EMU is on the final stretch and that's why ECB decide to return to 25 basis point moves​
• According to Reuters report, it was advised during BoJ-government meeting that Bank of Japan considers changing its policy approach should CPI and wages keep rising​
• Energy commodities trade mixed - oil drops 0.3% while natural gas jumps 0.7%​
• Precious metals advance - gold gains 0.2% while silver and platinum trade 0.3% higher​
• AUD and NZD are the best performing major currencies while JPY and USD lag the most​

Turkish lira is trading a touch higher against USD and EUR today, as a run-off will be needed to decide the next Turkish president. It looks like there are expectations for a tight race with TRY seeing rather muted moves.​

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