Swiss Franc Jumps on Risk Aversion, Dollar and Yen Lag Behind

Market overviews

Markets are back in risk-off mode as down dropped more than -1100 pts overnight. Dollar and Yen tried to rebound but there was no follow through buying. Indeed, both remain the worst performing ones for the week. Instead, safe-haven flow seems to be benefiting Swiss Franc more this time. Franc is also helped by buying against Euro and Sterling. Aussie is firm despite weaker than expected job data.

Technically, EUR/CHF’s break of 1.0360 support is the first sign that whole corrective rebound from 09970 has completed. Deeper fall is now in favor to retest this low, with prospect of resuming medium term down trend. At the same time, GBP/CHF’s consolidation from 1.2112 might also be finished after rejection by trend line resistance. Next focus will be 1.2075 support. Firm break there will also resume the down trend from 1.3070. Such developments are worth monitoring for the next few days.

In Asia, at the time of writing, Nikkei is down -1.74%. Hong Kong HSI is down -2.48%. China Shanghai SSE is down -0.09%. Singapore Strait Times is down -0.36%. Japan 10-year JGB yield is down -0.0031 at 0.243. Overnight, DOW dropped -3.57%. S&P 500 dropped -4.04%. NASDAQ dropped -4.73%. 10-year yield 0.082 to 2.886, after rejection by 3%.

Fed Harker: The economy can withstand a measured, methodical approach to tightening

Philadelphia Fed President Patrick Harker said yesterday, “I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”

“I still am in the camp that we can have, if not a soft landing, a safe landing,” he said. He expected the economy to grow between 2% and 3% this year, adding that “this economy can withstand a measured, methodical approach to tightening financial conditions.”

Japan exports rose 12.5% yoy in Apr, imports rose 28.2% yoy

Japan exports rose 12.5% yoy to JPY 8076B in April. Imports rose 28.2% yoy to JPY 8915B, a new record. Trade deficit came in at JPY 839B.

Trade with China shrank notably. China-bound shipments fell -5.9% yoy, the biggest drop since March 2020.  Imports from China also fell -5.5% yoy, the most since September 2020. On the other hand, exports to the US jumped 17.8% yoy while imports rose 15.3% yoy.

In seasonally adjusted terms, exports rose 1.0% mom to JPY 7629B. Imports rose 7.9% mom to JPY 9248B. Trade deficit came in at JPY -1619B, larger than expectation of JPY -1520T.

Australia employment rose just 4k in Apr, unemployment at record 3.9%

Australia employment rose just 4k in April, missing expectation of 30k growth. Full time jobs rose 92.4k while part0time jobs dropped -88.4k.

Unemployment rate was unchanged at 3.9%, matched expectations. Participation rate dropped -0.1% to 66.3%. Monthly hours worked rose 23m hours, or 1.3% mom.

Bjorn Jarvis, head of labour statistics at the ABS, said, “3.9 per cent is the lowest the unemployment rate has been in the monthly survey. The last time the unemployment rate was lower than this was in August 1974, when the survey was quarterly.”

Looking ahead

Eurozone current account and ECB minutes will be released in European session. Later in the day, Canada will publish new housing price index, RMPI and IPPI. US will release Philly Fed survey and existing home sales.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.0283; (P) 1.0389; (R1) 1.0446; More….

EUR/CHF’s break of 1.0360 minor support argues that rebound from 0.9970 has completed as a three-wave corrective move at 1.0513. That came after rejection by 100% projection of 0.9970 to 1.0086 from 1.0400 at 1.0516 and 1.0505. Intraday bias will be turned back to the downside for 1.0186 support first. For now, risk will stay on the downside as long as 1.0513 resistance holds, in case of recovery.

In the bigger picture, as long as 1.0505 support turned resistance (2020 low) holds, long term down trend from 1.2004 (2018 high) is expected to continue. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. However, firm break of 1.0505 will suggest medium term bottoming, and bring stronger rebound towards 1.1149 structural resistance.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD PPI Input Q/Q Q1 3.60% 1.00% 1.10% 1.20%
22:45 NZD PPI Output Q/Q Q1 2.60% 1.30% 1.40% 1.50%
23:50 JPY Trade Balance (JPY) Apr -1.62T -1.52T -0.90T -1.02T
23:50 JPY Machinery Orders M/M Mar 7.10% 3.70% -9.80%
01:30 AUD Employment Change Apr 4.0K 30.0K 17.9K
01:30 AUD Unemployment Rate Apr 3.90% 3.90% 4.00% 3.90%
08:00 EUR Eurozone Current Account (EUR) Mar 20.3B 20.8B
11:30 EUR Eurozone ECB Meeting Accounts
12:30 CAD New Housing Price Index M/M Apr 1.00% 1.20%
12:30 CAD Raw Material Price Index Apr 10.30% 11.80%
12:30 CAD Industrial Product Price M/M Apr 3.70% 4.00%
12:30 USD Initial Jobless Claims (May 13) 202K 203K
12:30 USD Philadelphia Fed Manufacturing Survey May 16.2 17.6
14:00 USD Existing Home Sales Apr 5.63M 5.77M
14:30 USD Natural Gas Storage 90B 76B