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Gold

Hawkish comments from a number of Fed members as well as better-than-expected macro data from the United States is providing support for the US dollar today. Fed members speaking today have been reluctant to speak about any immediate rate cuts and instead hinted that rates may rise further if no sufficient progress on inflation is made. On top of that, retail sales and industrial production data for April, which was released today in the evening, turned out to be better-than-expected with retail sales ex-autos and gas jumping 0.6% MoM higher (exp. 0.2% MoM) and industrial production increasing 0.5% MoM (exp. 0.0% MoM). As a result, USD is the best performing G10 currency today. This in turn is putting pressure on precious metals, which are also benefitting from an increase in uncertainty amid lack of agreement on US debt ceiling.
Taking a look at GOLD at D1 interval, we can see that the price of this precious metal is dropping more than 1% today and has broken below the psychological $2,000 per ounce mark. A near-term support zone to watch can be found in the $1,980 area, where the 50-session moving average (green line) and 38.2% retracement of the upward move launched at the turn of February and March 2023 can be found. A break below this hurdle would pave the way for a test of the 50% retracement in the $1,940 area. However, a key support zone to watch can be found around 1% lower in the $1,922 area, where the lower limit of the Overbalance structure can be found.

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JAP225

1. Indices from Asia-Pacific struggles for direction today, with mixed performance from leading markets. This is a potential response to mixed closing of Wall Street session on Monday when US500 closed with +0.11% gains
2. S&P/ASX 200 gains 0.1%, Kospi trades 0.6% higher and Nifty 50 declines 0.1%. Indices from China trade fell 0.3% - HKComp performed slightly better.
3. The Japanese index adds 0.35% and is trading at 30,100 points. The NIKKEI 225 index is one of the best performing indices from the last couple of days and now is trading near an all time high after strong economic data and positive comments from country leaders.
4. DAX futures point to a slightly higher opening of the European cash session today, with DE30 trading 0.3% higher at 15.964 points.
5. Energy commodities are trading sideway - Brent and WTI trade 0.2% higher while US natural gas prices falls 0.6%
6. Precious metals continue weaker performance with gold trading once again below $2,000 per ounce and silver at $23,6 per ounce - over 10% lower than last month highs
7. The dollar held steady in trading, supported by positive US data, particularly in retail sales. USDJPY maintained its upward push above 136.00. Dollar pairs trade with limited volatility, which may persist during the European trading session.
8. Fed's Bostic highlights that if unemployment rises and inflation remains sticky, the Fed will face enormous pressure. The Fed must maintain a strong commitment to inflation, although it is unclear what actions they would take in the event of a debt default.
9. Japanese shares extended their gains due to stronger-than-expected economic growth, boosting market optimism. Goldman Sachs suggests that Japan's markets may be on the verge of a rare bull market. Wall Street strategists attribute the gains to corporate reforms and easy monetary policy, predicting another 10% increase in shares.
10. Japan's economy grew at its quickest rate in three quarters, according to the reading, which showed an annualized rate of GDP growth for Q1 at 1.6% versus 0.7% expected.
11. Economy Minister Goto emphasizes the need to carefully watch the impact of price rises on consumers. Future economic growth is expected to be moderate, supported by rising salaries, better attitudes, and company investment. The Japanese government approved an electricity bill rise, expected to keep inflation above 2% for longer than expected.
12. The BoJ may consider to revise its Yield Curve Control (YCC) policy at the upcoming June meeting. The stronger-than-expected GDP outcome supports the view that the BoJ could take a step toward normalization soon.

NIKKEI 225 index is one of the best performing indices. Price is near the all time high level at 30,500 points.

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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.

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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.
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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Wheat

Turkish media reports that Russian and Ukrainian negotiators with help from Turkey and the United Nations are closing in on an extension to Black Sea grain deal. This has triggered a drop on the WHEAT market with grain price erasing all of today's gains. Nevertheless, the news has not been confirmed yet and Russian media reported over the weekend that any extensions are likely to be just for 60 days (similarly to previous extensions).

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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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Oil

US Energy Information Administration (EIA) released a weekly report on change in US oil and oil-derivative inventories at 3:30 pm BST today. API data released yesterday in the evening suggested a quite significant build of 3.69 million barrels during the previous week as well as a drop in gasoline and distillate inventories.

Official data released by EIA today showed an even bigger build in US crude oil inventories and a deeper draw in gasoline inventories. Distillate inventories were barely changed compared to a week ago.

Report can be seen as bearish for prices and the market saw it exactly as that. Oil moved lower following the release of EIA report and is now attempting to break below 50% retracement of the downward move launched on May 10, 2023.

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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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AUDJPY

Australian jobs market data for April was released during the Asian trading session today and turned out to be a big disappointment. Employment declined by 4.3k in the previous month while the median estimate among economists was for a 24.5k jobs gain. This has led to a jump in unemployment rate from 3.5 to 3.7% (exp. 3.5%). Moreover, the composition of the employment drop is worrying as it was driven by full-time jobs, which fell 27.1k, while part-time jobs increased by 22.8k.
Report was clearly AUD-negative as it showed weakening of the labor market and could be an important factor for the Reserve Bank of Australia when deciding on rates. Major financial institutions are split in their expectations - some, like for example Goldman Sachs, expect one more 25 bp rate hike from RBA in this cycle while others, like for example Commonwealth Bank of Australia, say that RBA is done with hiking already. Money markets are currently pricing in RBA staying on hold at its next meeting on June 6, 2023.

Australian jobs data released trigger a pullback on AUD market. Taking a look at AUDJPY chart at D1 interval, we can see that the pair managed to climb above 200-session moving average (purple line) and attempted to move above the resistance zone ranging below 91.50 mark. However, today's pullback puts this breakout under question. If we see a daily close below the 200-session moving average, the pair may be set for a correction. However, one should remember that the overall trend is upward with the pair trading in a bullish price channel.

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EURUSD

Philadelphia FED Manufacturing Index for May:

1. Actual: -10.4 Expected: -19.8, Previously: -31.3

Weekly Jobless Claims Data

1. 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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USDJPY

1. 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%
2. US President Biden said that negotiator teams are making a steady progress on debt ceiling
3. Meanwhile, US Vice President Harriss and White House economic adviser Brainard warned that US debt default could trigger a recession
4. 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
5. European index futures point to a higher opening of the European cash session today
6. DAX futures (DE30) briefly traded above 16,300 pts and painted fresh record highs earlier today
7. G7 leaders will discuss new sanctions on Russian diamond trade as well as on countries that help Russia circumvent sanctions
8. Reuters reports that Chinese state banks have intervened on the market to support falling yuan
9. 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)
10. New Zealand's trade balance for April reached NZ$427 million (exp. -NZ$235 million)
11. Cryptocurrencies are trading mixed - Bitcoin drops 0.3%, Dogecoin trades 0.1% lower, Ripple adds 0.4% and Litecoin rallies 1.5%
12. Energy commodities trade mixed - oil gains 0.7-0.8% while US natural gas prices drop 0.6%
13. Precious metals trade higher - gold gains 0.2%, platinum adds 0.3% while silver and palladium gain 0.6% each
14. 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.

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Economic Calendar for Today

1. European indices set to open higher
2. Powell to speak on the economy in the evening
3. Canadian retail sales data for March

Futures markets point to a higher opening of the European cash session. DAX futures (DE30) painted a fresh all-time high above 16,300 pts earlier today but has pulled back a bit since. Moods on the markets are upbeat as traders are being constantly reminded that debt ceiling negotiations are progressing with House Speaker McCarthy saying yesterday that the debt ceiling deal could be put to a vote on the House floor as soon as next week.

Economic calendar for the final trading day of the week is light. Traders were offered German PPI data for April this morning and it showed a smaller year-over-year drop than expected - from 6.7 to 4.1% YoY while the market expected 4.0% YoY. Nevertheless, the release did not have a major impact on the market. CAD may see some moves in the early afternoon when Canadian retail sales data for April is released at 1:30 pm BST. However, central bankers' speeches may be the biggest source of FX volatility in the afternoon as there is a number of them scheduled, including speeches from Fed Chair Powell and ECB President Lagarde.

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NATGAS

NATGAS drops 1.5% today but weather forecasts suggest potential for more gains

NATGAS rallied yesterday, supported by:

1. Smaller-than-expected natural gas inventory build reported by EIA. Inventories rose 99 bcf while the market expected 110 bcf increase. Gain, however, was in-line with 5-year average
2. New weather forecast for summer period from NOAA was released and it show potential for a very high temperatures in key states in terms of demand for air conditioning

Moreover, some factors that could also trigger upward pressure surfaced recently:

1. Gas output in Canada is dropping hard. Drilling activity in Canada started to decline much earlier than in the United States. This suggests that US output may also drop significantly in coming weeks given recent declines in the number of active gas rigs
2. Comparative inventories are at cyclical highs, what may be seen as a contrarian signal
3. Freeport LNG terminal exports up to 2.3 billion cubic feet of gas per day, reaching new record levels
4. Of course, one should keep in mind that contract rollover will occur next week (currently around +$0.12 per MMBTu). Given current NATGAS prices, it would result in a test of the $2.70 per MMBTu area. Prices jumped around $0.15 per MMBTu following the latest rollover but launched another downward impulse later on. One cannot rule out the situation of sellers returning to the market after the contract rolls over and prices at near-term contract are once again attractive for bears. On the other hand, seasonal patterns suggest that NATGAS may be set to rebound after reaching local low in mid-June.

Natural gas inventories increase in line with seasonal patterns. Comparative inventories are at extremely high levels (inverted axis), signaling a potential local low on natural gas prices. Nevertheless, prices traded sideways for as much as 6 months after similar situations back in 2017 and 2020.

NATGAS pulls back from the $2.6 per MMBTu area. Range of the largest correction in the current upward impulse suggests a possibility of price dropping to around $2.4 per MMBTu. On the other hand, such a correction may not occur ahead of contract rollover (May 23, 2023). Seasonal patterns suggest a potential for range trading until June 3, followed by small correction and significant gains starting from around June 18 when demand for air conditioning increases due to the beginning of summer period.

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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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Economic Calendar

1. European indices set for flat opening
2. ECB and Fed speakers dominate calendar
3. FOMC minutes later into the week

Futures markets point to a more or less flat opening of the European cash session today. German DE30 is trading near all-time highs reached on Friday while S&P 500 futures (US500) hover near 4,200 pts area. Energy commodities, base metals and precious metals are pulling back. NZD and EUR are the best performing G10 currencies while AUD and CAD lag the most.

Economic calendar for today is very light when it comes to macro data. There won't be any data releases apart from Polish data pack for April. However, a number of speeches from Fed and ECB members is scheduled so EUR and USD may see some volatility. Things get more interesting later into the week with RBNZ decision and flash PMIs for May on Tuesday, FOMC minutes on Wednesday, CBRT rate decision on Thursday and US PCE data on Friday.

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USDCNH

People's Bank of China (PBOC) left interest rates unchanged today, in-line with market expectations. 1-year prime lending rate was left at 3.65% while 5-year rate, which is used for majority of mortgage loans in China, was left at 4.30%.

China experienced a clear setback after the initial euphoria associated with the reopening of the economy after the pandemic, although at the same time, Goldman Sachs believes that with the current momentum, the government's target of 5% growth should be achievable. In such a case, GS does not see the possibility of any additional stimulus in the country. However, it believes that there is potential for a cut in reserve requirement ratio, as a cut to main interest rates is unlikely given the significant spread between the rates in the USA or a recent depreciation of yuan. On the other hand, the weakness of the yuan could be seen as a way to increasing competitiveness of the economy, which declined significantly in the latter part of 2022. There is also a strong correlation with copper, which means that further problems in China could lead to an attempt to test of $8,000 per ton area.

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US100

A new week has begun and there is still no agreement on the US debt ceiling. Moreover, comments made by Democrats and Republicans suggest that two sides grew more apart in their positions over the weekend. Nevertheless, talks are still ongoing and US president Biden is set to meet with House Speaker McCarthy today to look for solutions. US Treasury once again warned that deadline to reach the agreement is June 1, 2023 and failure to do so by then could risk US defaulting on its obligations. Goldman Sachs assesses that US default would happen on June 8-9, 2023 without an agreement.

Deadline to reach the deal is looming large but, interestingly, markets barely reacted to the latest setbacks and launched new week's trading little changed. This shows that there is a strong belief in the markets that the deal will eventually be reached and sides to the negotiations are just trying to win as many concessions from the other as possible. Nevertheless, failure to reach a deal this week could see markets start to get nervous.

Taking a look at Nasdaq-100 futures chart (US100) at D1 interval, we can see that the index reached a 13-month high last week. While a small pullback occurred last week, price remains close to recent high. While markets seem to ignore negative news on debt ceiling negotiations, it does not mean that positive news will be similarly ignored. Headlines suggesting that definite agreement was reached would likely trigger a positive reaction on indices with US100 possibly moving above 14,000 pts. Apart from debt ceiling talks, US tech index may also move on FOMC minutes (Wednesday, 7:00 pm BST) this week or Nvidia earnings (Wednesday, after market close).

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META.US

The European Union, on behalf of the Irish Data Protection Commission, has imposed a record €1.2bn ($1.3bn) fine on Meta Platforms (META.US), managed by Mark Zuckerberg, for data privacy breaches. The European body also set a categorical ban on sending user data. Within the next five months, the company is to suspend all future transfers of personal data to the US and US security services and six months to stop unlawful processing, including storage, of EU users' personal data.

The decision itself, however, does not directly cover the Instagram and WhatsApp platforms.The move by the control authorities in this case was itself foreseeable, however, in view of the fact that Meta, the US and the European Union have already had disputes in the past on the data line. The current decision and, in particular, the implemented preparatory period for the cessation of data transfer to the US, gives space for the US and the Union to modify their policies regarding the sharing of user data. Discussions on this matter are already underway and are expected to be implemented operationally in the coming months.

Meta Platforms is expected to appeal the fine.

Following the fine, Meta's shares are losing more than 1.2% before the open.

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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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Bitcoin

1. US debt deal was reached during a weekend
2. Beijing “Web3 Innovation and Development White Paper” introduction

Bitcoin experienced a price increase over the week, reaching above $28,000, attributed to various factors. One significant development was the announcement of a debt ceiling deal by the White House, which boosted market sentiment and led to a 4.9% increase in Bitcoin and a 4.9% increase in Ether. Additionally, a Chinese governmental agency released a white paper outlining suggestions for China's Web3 policy, signaling progress in a country that has been reevaluating its approach to cryptocurrencies.

The release of the white paper in Beijing coincided with new digital asset regulations in Hong Kong, sparking further interest in China's stance toward the crypto industry. The document, titled "Web3 Innovation and Development White Paper," recognizes Web3 technology as an essential aspect of future Internet industry development. Beijing's municipal government aims to establish the city as a prominent global innovation hub for the digital economy, allocating a minimum of 100 million yuan annually until 2025 for this purpose. As a reminder, retail investors in Hong Kong are allowed to trade cryptocurrencies starting from the 1st of June.

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