Market Update by Solidecn.com

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EURUSD


Flash PMI indices for May from France and Germany were released at 8:15 am BST and 8:30 am BST, respectively. Data was expected to show a small improvement in the manufacturing sector as well as deterioration in the services sector.


Indeed, it was the case with French data with manufacturing index climbing in-line with expectations and services index dropping more than expected. However, things looked different in case of German data as manufacturing index there disappointed and dropped instead of improving while services gauge unexpectedly jumped. In both countries manufacturing sector remained below 50 points threshold, indicating a recession, while services sector remain above 50 points threshold, indicating an expansion.





EUR and European indices dropped in a knee-jerk move after the French release, with EURUSD dropping deeper below 1.08 mark. While equity indices managed to recover from those losses later on, they faced another wave of selling following German data. Meanwhile, EUR attempted to recover after German data and moved back towards the 1.08 mark.

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EURUSD

The EURUSD pair has been under pressure over the past few weeks; however, last Friday, bulls showed signs of strength once again.




EURUSD - 4 hours time frame chart

However, on the 4-hour chart, we can see that buyers regained control of the price near an important support zone marked by 1.0757. Currently, the price is approaching a significant obstacle - the downtrend line. If buyers manage to break above this zone, the upward movement may resume.




On the 4 hours time chart of the US Dollar Index, we can also see signs that the bearish scenario for the USD may indeed manifest. From a technical standpoint, we observe that sellers managed to break below the lower boundary of the rising wedge pattern, which could bring new selling pressures to the price.

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Oil


WTI (OIL.WTI) launched a new week's trade lower as failure to make progress on the US debt ceiling over the weekend brings us closer to the US default. On top of that, the Chinese decision to ban Micron chips is also risking reigniting tensions between the US and China.

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DE 30


German DAX rallied over the past two days, adding almost 2% over Wednesday and Thursday combined. The upward move was being continued on the futures market during the Asian session today as optimism over possible agreement on US debt ceiling drove equities higher. As a result, DAX futures (DE30) briefly traded above 16,300 pts mark at fresh all-time highs.


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Taking a look at DE30 chart at H1 interval, we can see that the upward move on the German index accelerated after breaking above the 15,810-16,085 pts range. While the index pulled back a bit after reaching a fresh ATH, there is still some room for gains from a technical point of view. A textbook range of the upside breakout from the aforementioned 15,810-16,085 pts trading range suggests a possibility of the upward move to as high as 16,355 pts - or around 0.6% higher from current market price.

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USDJPY

• Wall Street indices rallied for another day. S&P 500 gained 0.94%, Dow Jones gained 0.34% and Nasdaq surged 1.51%. Russell 2000 added 0.58%
• US President Biden said that negotiator teams are making a steady progress on debt ceiling
• Meanwhile, US Vice President Harriss and White House economic adviser Brainard warned that US debt default could trigger a recession
• Indices from Asia-Pacific traded mixed today - Nikkei and Kospi gained 0.8%, S&P/ASX 200 moved 0.6% higher, Nifty 50 dropped 0.2% and indices from China traded mostly lower
• European index futures point to a higher opening of the European cash session today
• DAX futures (DE30) briefly traded above 16,300 pts and painted fresh record highs earlier today
• G7 leaders will discuss new sanctions on Russian diamond trade as well as on countries that help Russia circumvent sanctions
• Reuters reports that Chinese state banks have intervened on the market to support falling yuan
• Japanese CPI inflation accelerated from 3.2 to 3.5% YoY in April (exp. 3.5% YoY). Core CPI inflation (ex-food) accelerated from 3.1 to 3.4% YoY (exp. 3.4%). So-called core-core CPI inflation (ex-food and energy) accelerated from 3.8 to 4.1% YoY (exp. 3.4% YoY)
• New Zealand's trade balance for April reached NZ$427 million (exp. -NZ$235 million)
• Cryptocurrencies are trading mixed - Bitcoin drops 0.3%, Dogecoin trades 0.1% lower, Ripple adds 0.4% and Litecoin rallies 1.5%
• Energy commodities trade mixed - oil gains 0.7-0.8% while US natural gas prices drop 0.6%
• Precious metals trade higher - gold gains 0.2%, platinum adds 0.3% while silver and palladium gain 0.6% each
• AUD and JPY are the best performing major currencies while EUR and GBP lag the most

Japanese yen is one of the best performing G10 currencies today following a beat in CPI data for April. USDJPY is pulling back and looking towards a test of a recently-broken resistance zone at 138.00.

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EURUSD


Philadelphia FED Manufacturing Index for May:
Actual: -10.4 Expected: -19.8, Previously: -31.3


Weekly Jobless Claims Data
Actual: 242k, Expected: 255k, Previously: 264k


US Dollar appreciates right after the publication of jobless claims data and the release of the FED Philly Index. EURUSD downward trend indicates growing strenghts of the US currency.

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AUDUSD


AUDUSD keeps its stability below 0.6668 level. Breaking 0.6630.level will provide strong negative motive that will push the price to achieve negative targets (0.6585 - 0.6560) area.





Therefore, the bearish trend will remain valid and active conditioned by the price stability below 0.6665 and 0.6705 levels.

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GBPUSD


GBPUSD is testing the monthly support at (1.2442).





If the daily candle closes above the (1.2423 - 1.2441) area the price will likely grow to retest recent highs around the (1.2520 - 1.2547) areas, and the bullish trend continues. The next major support is located in the area of 37 pips between (1.2386 to 1.2343). These zones provide opportunities for long positions.

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Crude Oil


Crude oil price shows some slight bullish bias now, affected by grand support (62.3 - 62.7) current positivity, and it might test the key resistance (82.29 - 85.31) .55 before turning back to decline again.





H4: Noting that the EMA50 meets this resistance to add more strength to it.





Until now, the bearish trend scenario still valid and active as long as (69.56) area remains intact, waiting to visit (72.7 - 73.7) area as a next main target, noting that breaching 73.7 will lead the price to recover and achieve gains that start at 76.7 direct.

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Jap225

Economic Outlook

Japanese NIKKEI 225 is on the rise trading near an all-time high following positive GDP data and supportive comments from country leaders. The Japanese economy grew at a faster-than-expected rate of 1.6% in Q1, surpassing the projected 0.7% growth. This strong economic performance has boosted market optimism.

The recent earnings season has been a positive catalyst for Japanese equities, supported by Warren Buffett's endorsement and improvements in corporate governance. The projected operating profit growth in the fiscal year ending March 2024 is about 6% for Tokyo Price Index (Topix) companies. Additionally, Goldman Sachs sees a potential in the Japan market, attributing the gains to corporate reforms and easy monetary policy.

The Bank of Japan (BoJ) may consider revising its Yield Curve Control (YCC) policy in the upcoming June meeting, supported by the robust GDP outcome. However, the BoJ is likely to remain patient in taking any policy actions and may wait until next year to make rate hikes, as they review recent developments in inflation and other macroeconomic data. Current interest rate is maintained at -0.1% level and has remained unchanged since 2016. The argument for the YCC policy to remain unchanged is the government's approval of an electricity bill rise, which likely will support inflation to stay above 2% for a longer period.



JAP225 (Nikkei 225) index is trading at 30,100 points, which is near its all-time high of 30,500. The price is also approaching the upper line of an uptrend channel (marked with blue line) that started in early March. The next significant resistance level should be expected at 30,500, indicating a potential target for further price gains. On the other hand, the support levels are identified at 29,300 and 28,300, which can act as price floors in case of a downward movement.

The MACD indicator, a momentum oscillator, indicates a strong bullish momentum without any signs of divergence at the moment. This suggests that the upward trend may continue, supporting the bullish outlook for the Nikkei 225 index. Traders and investors will be closely monitoring the resistance and support levels for potential trading opportunities.