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US Data Show Strong Inflation, Improving Job Market, Sentiment Stabilizing

Overall market sentiment stabilizes mildly entering into US session. Major European indexes pared back much of earlier losses, while US futures also turned positive. Even though US PPI showed stronger than expected reading, slightly better than expected jobless claims is support sentiment, in a way. Dollar attempt to extend rebound earlier, but quickly lost momentum again. As for today, Swiss Franc and Kiwi are the strongest one so far. Aussie and Sterling are the weakest.

Technically, we’d maintain that Dollar need to take out some near term levels to prove its underlying strength. The levels include 1.1985 support in EUR/USD, 1.4008 support in GBP/USD, 0.7673 support in AUD/USD, 0.9163 resistance in USD/CHF, and 1.2265 resistance in USD/CAD.

In Europe, at the time of writing, FTSE is down -1.37%. DAX is down -0.44%. CAC is down -0.3%. Germany 10-year yield is up 0.009 at -0.110. Earlier in Asia, Nikkei dropped -2.49%. Hong Kong HSI dropped -1.81%. China Shanghai SSE dropped -0.96%. Singapore Strait Times dropped -0.67%. Japan 10-year JGB yield rose 0.0158 to 0.095.

US initial jobless claims dropped to 473k, continuing claims down to 3.66m

US initial jobless claims dropped -34k to 473k in the week ending May 8, better than expectation of 487k. That’s the lowest since March 14, 2020. Four-week moving average of initial claims dropped -28k to 534k, lowest since March 12, 2020.

Continuing claims dropped -45k to 3655k in the week ending May 1. Four-week moving average of continuing claims dropped -13k to 3665k, lowest since March 28, 2020.

US PPI up 0.6% mom, 6.2% yoy in Apr, core PPI up 0.7% mom, 4.1% yoy

US PPI rose 0.6% mom, 6.2 yoy in April, above expectation of 0.3% mom, 6.0% yoy. The annual increase was the highest since November 2010. PPI core rose 0.7% mom, 4.1% yoy, above expectation of 0.2% mom, 3.1% yoy. The annual rate was highest since August 2014.

BoJ Kuroda: Important to respond to pandemic’s impact for now

BoJ Governor Haruhiko Kuroda told the parliament today that “economic activity will remain below pre-pandemic levels for the time being.” Also, “risks to the economic outlook are skewed to the downside.” Nevertheless, the economy as a whole is picking up momentum thanks to robust exports and productions.

“We’ll take into account the effects and cost of our policy, and aim to achieve moderate inflation accompanied by growth in corporate profits, jobs and wages,” he said. “It’s important to respond to the pandemic’s impact for the time being” by maintaining the central bank’s ultra-loose monetary policy.

Nikkei dived through medium term channel support, correction to extend to 25k

As global risk sentiments turned sour, Nikkei closed down -2.49%, or 699.50 pts, today, to close at 27448.01. The development is now more bearish with medium term channel support firmly taken out. We’re now seeing price action from 30714.52 as correcting the whole up trend from 16358.19.

With that in mind, near term outlook will now stay bearish as long as 28419.84 support turned resistance holds. The correction could extend to 38.2% retracement of 16358.19 to 30714.52 at 25230.40 before completion. We’d see if other global stocks would move in tandem.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9048; (P) 0.9071; (R1) 0.9112; More….

USD/CHF is staying in consolidation from 0.8984 is still in progress and intraday bias remains neutral first. Outlook remains bearish with 0.9163 resistance intact and further decline is expected. On the downside, break of 0.8984 will resume the fall from 0.9471 to retest 0.8756 low. Nevertheless, firm break of 0.9163 will turn bias back to the upside for stronger rebound.

In the bigger picture, rejection by 61.8% retracement of 0.9901 to 0.8756 at 0.9464 argues that rebound from 0.8756 was probably just a corrective move. That is, larger down trend from 1.0237 might be still in progress. Medium term bearish is also affirmed as the pair is now far below falling 55 week EMA. Firm break of 0.8756 low will target 61.8% projection of 1.0237 to 0.8756 from 0.9471 at 0.8556 next.

Economic Indicators Update

GMTCcyEventsActualForecastPreviousRevised
23:01GBPRICS Housing Price Balance Apr75%55%59%54%
23:50JPYBank Lending Y/Y Apr4.80%6.30%
23:50JPYCurrent Account (JPY) Mar1.70T1.79T1.84T
05:00JPYEco Watchers Survey: Current Apr39.149
12:30USDInitial Jobless Claims (May 7)473K487K498K507K
12:30USDPPI M/M Apr0.60%0.30%1.00%
12:30USDPPI Y/Y Apr6.20%6.00%4.20%
12:30USDPPI Core M/M Apr0.70%0.20%0.70%
12:30USDPPI Core Y/Y Apr4.10%3.10%3.10%
14:30USDNatural Gas Storage74B60B
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