• USD/JPY down nearly 1% as stocks and Tsy yields slide

• Global growth angst amid CB tightening takes its toll, lifts haven yen

• Prices probing 30-DMA and kijun at 128.23-24; May's 127.535 low next

• Lack of BOJ tightening expectations actually a plus for haven yen

• Fed, ECB et al tightening seen raising recession risks

• Key props are by 127 and 126, weeklies worrying nL2N2XA1CY

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• GBP/USD dips into NorAm close, -1.04% at 1.2361; NY range 1.2436-1.2359

• UK inflation rises to G7 leading 9% nL5N2XA17N, risk unwind sinks GBP

• Sterling soft after UK inflation rise exposes BoE approach nL2N2XA1GH

• BoE failing on growth & inflation-fight to keep downward pressure on GBP

• GBP$ supt Wed low 1.2359, 10DMA 1.2322, sub-10DMA bears eye 1.2156 '22 low

• Res May 17-18 double top by 1.25, 21-DMA 1.2509, 30-DMa at 1.2670

• Bulls need a rise abv 1.2652's 50% Fib of 1.3147-1.2156 to regain momentum

• EUR/GBP +0.3% to 0.8473, Wed range 0.8493-38; ECB set to begin normalization trumps steady BoE

ING Research discusses EUR/USD outlook and sees a limited scope for further rally in the near-term.

"Our view on the limited downside risk for the dollar beyond the very short term obviously implies that the room for appreciation in EUR/USD should also start to shrink soon. We also believe that markets are pricing in too much tightening by the ECB – though not by the Fed – and expect the theme of growth divergence (exacerbated by the EU-Russia standoff on commodities) to become more relevant into the summer," ING notes. 

"With this in mind, we suspect that any further rally in EUR/USD may start to lose steam around the 1.0650-1.0700 area, with risks of a return below 1.0500 in the near term being quite material," ING adds. 

• USD/CAD trickles higher +0.2% to 1.2843; Wednesday range 1.2851-1.2786

• Powell, Fed laser-focused on inflation boosts USD; risk slides

• CAD dip tempered by BoC's parallel hike path w/Fed; both near +200bp by YE

• Pair anchored by 21-DMA at 1.2834, supt at Wed low 1.2796, key Fib 1.2768

• Sub-1.2768, 50% of 1.2459-1.3077 bears gain momentum; 55-DMA in view 1.2704

• Res Tues-Wed high just below 1.2860, 10-DMA 1.2922

Bank of America Global Research discusses EUR/USD technical outlook on the daily chart.

"Our base case year ahead view was that euro could see the 1.08s and that would be an ideal place for a bottom to form. In March it fell to the 1.08s and rallied to 1.1180. Then it declined back to the 1.08s in mid-April but couldn't hold. The break lower led spot to test the 2017 lows at 1.0341. Tactically, euro is showing some support here due to two trend lines aligning," BofA notes. 

"We lack bottom or bullish signals at this point to say the euro will turn significantly higher. Until we do, we presume a rally will be sold. An optimistic scenario would be a rally back to retest the line in the 1.08s that was support and turns into resistance. Notable resistance for a bounce at about 1.0650," BofA adds. 

Rising UK inflation and the BoE's perfunctory attention to slowing price growth mean GBP/USD bears are likely to retest recent 2022 lows.

UK headline annual CPI came in at 9% in April, just below forecast but well above March's 7% and the BoE's 2% target.

Sterling came under renewed pressure, trading down 0.6% at 1.2416 after hitting a low of 1.2373, and off early European highs by 1.2492 ahead of the data.

The inflation rise challenges the BoE, which has focused on supporting economic growth as well as slowing prices, but this middle-way approach risks leaving neither problem solved -- a potential disaster for sterling bulls.

The Fed's singular focus on taming inflation by slowing demand while other banks, including the ECB ECBWATCH, increasingly talk tough on price growth, leaves sterling vulnerable.

Rate futures project the BoE BOEWATCHwill hike a further 125bps by year-end 2022 and Fed FEDWATCHby 200bps.

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CIBC Research discusses its reaction to today's Canada CPI print for the month of April.

"What goes up...must keep going up it appears, as Canadian inflation accelerated further to 6.8% in April, from 6.7% in the prior month and against consensus expectations for an unchanged reading. Food prices, as expected, were a key driver of inflation, as was shelter costs...The 0.5% seasonally adjusted gain in CPI excluding food and energy remains well above the trend consistent with a 2% inflation target, and the average of the Bank of Canada's three core measures also moved up to 4.2%, from 3.9% in the prior month," CIBC notes. 

"With gasoline and agricultural prices still on the rise, headline inflation could well accelerate again in May before finally slowing in the second half of the year and into 2023. With inflation continuing to accelerate further above its MPR forecasts, the Bank of Canada remains well on course to deliver another 50bp hike at its next meeting," CIBC adds. 

MUFG Research highlights 3 reasons for the limited correction lower in the USD at the start of this week.

"The correction lower for the US dollar at the start of this week has been driven by a number of factors. Firstly, there is building optimism that China is moving closer to easing the lockdown in Shanghai after it reported no new COVID infections in the broader community for a third consecutive day," MUFG notes. 

"Secondly, as we highlighted in yesterday’s FX Daily Snapshot there have been encouraging reports suggesting that the stand-off between the EU and Russia over paying for gas supplies is looking less likely to trigger further disruption to energy supplies and the euro-zone economy in the coming weeks/months. 

Thirdly, there has been an increase in market speculation that the major European central banks of BoE and ECB will be more active in tightening policy which is helping to narrow expectations for policy divergence with the Fed," MUFG adds. 

EUR/USD's strong recovery this week could be coming to an end and there are even tentative signs that spot to be set to reverse lower due to price action on the technical chart.

EUR/USD, which benefited from ECB policymaker Francois Villeroy de Galhau saying on Monday that a weak euro could threaten price stability in the currency bloc, rose further on Tuesday after hawkish comments from Dutch central bank chief Klaas Knot. nL2N2X91XR

EUR/USD on Tuesday closed above the 1.0546 Fibonacci level, a 23.6% retracement of the 1.1185 to 1.0349 recent drop, but has slipped back below it on Wednesday.
This is heightening the risk of a bull trap, which is set when a market breaks above a technical level but subsequently reverses.

Those that are bullish EUR/USD need another daily close above the 1.0546 Fibo, as this would avert the risk of a bull trap that could damage longs.
Related nL2N2X90OH

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• AUD/USD has traded a half-cent range thus far Wednesday; 0.6996-0.7046

• 0.7046 = one-week high, before slightly below forecast Australian wage data

• See: nL2N2XA02H. Australian jobs data due 0130 GMT; employment f/c +30k

• China ferrous futures tumble, with Dalian iron ore closing down 5.3%

• See: nL2N2XA0H1. Iron ore is Australia's biggest export earner

• Australia's LNG industry takes risky bet on carbon capture nL3N2XA0G2

• Cable slides to 1.2387 after UK April CPI comes in at 9%, slightly below f/c

• See: nL5N2XA17N. GBP/USD was at 1.2490 just before UK CPI data release

• Drop to 1.2387 influenced by lower probability of 50 bps BoE hike next month

• See: nL2N2XA0CU. 25 bps BoE hike to 1.25% expected on June 16 nL5N2X923D

• 1.2347 and 1.2329 (Monday's high) are cable support points below 1.2387

• 1.2347 was Tuesday's Asia high -- before GBP jumped on strong UK jobs data

• EUR/USD's recovered to see a daily close on Tuesday above the 1.0546 Fibo

• 1.0546 Fibo is a 23.6% retrace of the 1.1185 to 1.0349 recent drop

• Another close above this Fibo needed on Wed to avert the risk of a bull trap

• Bull trap: set when a market breaks above a tech level but quickly reverses

• For now the outlook for EUR/USD in the near-term is quite mixed

• This could be a good time to hedge against a EUR/USD dive nL2N2X90OH

• EUR/USD Trader TGM2334. Previous nL2N2X90N8

• Cable falls to 1.2437 on dovish shift in BoE expectations after UK CPI data

• 1.2437 = intra-day low. 1.2501 was Asia high (pre-UK CPI data) nL2N2XA0BK

• UK April CPI came in fractionally below forecast, at 9.0% YY nL5N2XA17N

• Probability of 50 bps BoE hike in June down to 18% vs 38% at Tuesday's close

• Percentages courtesy of Refinitiv measure based on I/R futures BOEWATCH

• 1.2420 and 1.2400 are support points (1.2420 = 23.6% Fibo of 1.2156-1.2501)

• Cable falls to 1.2464 after UK April CPI comes in slightly below forecast

• 9.0% YY vs 9.1% f/c, 40-year high nL5N2XA17N. 1.2501 was Asia high

• 1.2501 = high since May 5 (when GBP slumped on BoE's UK recession warning)

• 1.2498 was Tuesday's high, after GBP jumped on strong UK jobs/earnings data

• See: nL5N2X91BH. Retreat from 1.2498 based just shy of 1.2450

• Situation in N.Ireland is of grave concern - Truss nS8N2W402InL5N2X932J

• AUD/USD down 0.3% in Asia as Australia Q1 wage gains underwhelm nL2N2XA02H

• Aggressive 40bps hike bets trimmed but 25bps June hike almost fully priced

• Rally capped by Powell's reiteration of Fed's hawkish stance nL2N2X9228

• Downside limited as easing of China crackdown on tech, COVID-19 lifts risk

• Focus shifts to Thursday May jobs data; unemployment may fall below 4%

• Failure at pivotal 0.7048-53 resistance Wed technically bearish

• Break opens 0.7090-0.7100; support 0.6990-95, 0.6965-70

• For more click on FXBUZ

• EUR/USD opened +1.1% at 1.0550 after USD & JPY fell and equities soared nL2N2X91XR

• The mood remained buoyant early Asia and EUR/USD traded up to 1.0564

• The USD then firmed against risk currencies and Asian equity bounce faded

• The EUR/USD fell to 1.0524 and is around 1.0530 into the afternoon

• Resistance is at the 21-day MA at 1.0575 and break adds to upward momentum

• Support is at the 10-day MA @ 1.0500 and break would encourage EUR/USD bears

• EUR/USD rally dependent on calming equity and bond markets

• A return of volatility will leave EUR/USD vulnerable again

• For more click on FXBUZ

• AUD/USD slipped from 0.7035 to sub 0.7015 after softer than expected Aus WPI nAZN041C6X

• Miss was slight - so it is unlikely to shift RBA expectations significantly

• Support is @ the 10-day MA @ 0.6983 and break shifts pressure to downside

• For more click on FXBUZ

• AUD/USD moving higher and is trading above yesterday's 0.7040 high

• Asian equity markets rallying after strong lead from Wall Street

• The AXJ index is up 0.54% while the Nikkei is up around 1.35%

• AUD/USD resistance is at the 21-day MA at 0.7091 where sellers are tipped

• A break above 0.7100 would confirm a short-term bottom is in place

• The 5, 10 & 21-day MAs still in bearish alignment, but 5-day turning higher

• Aus wage price index to be released shortly and will impact RBA expectations

• For more click on FXBUZ

Strong UK jobs data nL5N2X91BH and a weak U.S. dollar saw GBP/USD jump 1.5% on Tuesday, providing an opportunity for bears, as the pound faces many lingering problems.

The Bank of England is stuck between a rock and a hard place on the pace of rate hikes, with inflation expected to hit 10%, while the economy stalls as consumers' spending power recedes nL5N2X853M.
The BoE and the market will be data-driven in turbulent circumstances.

The Brexit endgame approaches, as the UK has set out a new law to circumvent the Northern Ireland protocol that was agreed in the Brexit deal with the European Union nL5N2X91DJ.
Should the UK proceed to implement the legislation, trade barriers could follow, and as the EU is the UK's largest trading partner, sterling would suffer nL5N2X932J.

The health of Britain's finance sector is key to post-Brexit prosperity.
A significant group of economists sounded the alarm on Monday on the dangers of the government's 'competitiveness' focus nL5N2X70NU.

Sterling's 2.75% bounce off Friday's 1.2156 2022 trend low leaves mixed signals on the daily chart, while weekly signals trend south.
The 21-day moving average, which comes in at 1.2514, has capped the move lower since mid-March. Shorts with a stop on a close above the 21 DMA, looking for a return to the 2022 low, provide strong risk-reward.

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• EUR/USD opens 1.1% higher after USD and JPY fell across the board nL2N2X91XR

• Hawkish comments from ECB's Knot helped to underpin EUR in Europe nL5N2X9343

• Fed Chair Powell was also hawkish but market took comments in stride nL2N2X9228

• EUR/USD closed above the 10-day MA, which is now support at 1.0501

• Key resistance is at the 21-day MA at 1.0576

• A close above the 21-day MA would suggest a bottom is in place

• For more click on FXBUZ

• AUD/USD opens 0.83% higher as safe haven USD and JPY sold on risk rally nL2N2X91XR

• AUD/USD closed above the 10-day MA to shift the pressure to the upside

• The 10-day MA descends to 0.6983 and is now support on dips

• Key resistance is at the 21-day MA at 0.7090, which has held since start of trend lower

• A break above 0.7090 ends the trend lower and suggest bottom is in place

• China optimism helping to support key commodities and underpin AUD

• Aus wage price index out today and has the potential to impact RBA expectations

• For more click on FXBUZ

Nordea Research discusses its expectations for the ECB policy trajectory.

"The ECB’s signals have constantly become more hawkish, pointing to a hike as early as the July meeting. This is also our baseline forecast. We see further 25bp moves in September and December this year and then quarterly in 2023, which would leave the deposit rate at 1.25% at the end of next year. Net asset purchases could be concluded already at the end of June, or by mid-July at the latest," Nordea notes. 

"In addition to the ECB’s signals, we find support for such a path from our growth and inflation views. We see Euro-area growth slowing only to around potential next year, and see core inflation above the ECB’s 2% target for practically our entire forecast horizon," Nordea adds. 

The dollar fell on Tuesday as robust U.S. economic data and hawkish comments from Fed Chair Jerome Powell nW1N2UD02B failed to offset the reversal of safe-haven trades triggered by hopes that China's COVID lockdowns could be relaxed nL3N2X91HL.

Hawkish ECB comments nL5N2X9343 and stellar UK employment data nL5N2X91BH put further pressure on the dollar, which was joined by the yen in the unwanted among suddenly unpopular haven currencies.

EUR/USD's roughly 1% advance was shepherded by a nearly 20bp rise in ECB rate-hike pricing from Friday's low to Tuesday's high after ECB official Klaas Knot said the central bank shouldn't rule out a 50 basis point rate hike in July.

Though a 25bp move in July remains favored, the market's pricing in over 100bp of ECB rate hikes by year-end and a terminal rate above 1.5%.
The fed funds terminal rate increased to 3.2%, but remains below recent peaks.

U.S.
retail sales and industrial production nL2N2X911Z showed the economy doing well in handling inflation at 40-year highs, sending Treasury yields higher by 10-12bp, flattening the curve.

Powell's comments reinforced existing rate hike expectations nW1N2UD02B with limited added support for the dollar.

The dollar's data-inspired bounce stalled after the rates-sensitive NAHB home-builders' index hit its lowest since June 2020 nN9N2TD02B.

EUR/USD's recovery from Friday's failed attempt to break 2017's 1.0340 low on EBS has benefited from unwinding of oversold pressures and prior risk-aversion dollar gains but faces stiff resistance around 1.0636-42 from 2020's lows, May's high and the daily kijun nL2N2X91C3.

Sterling rose 1.1%, after surprisingly strong UK employment data nL5N2X91BH boosted 2-year gilt yields almost 22bp on faster BoE rate hike expectations nL2N2X91BM.
Cable hit 1.2498, near the pivotal 1.2500 level and highest since May 5's post-FOMC and BoE meeting breakdown session.

USD/JPY was up 0.2% as the yen's haven status in a risk-on session left it vulnerable to rebounding Treasury-JGB yields, and was capped at 129.78 by the 200-hour moving average and the weak NAHB nL2N2X91KL.

Aussie gained 0.6% after bigger gains following RBA minutes that showed consideration for an even bigger rate hike at the last meeting and on hopes China's sharp slowdown will improve as COVID lockdowns are reduced.

USD/CNH fell 0.7% to its lowest in five sessions on lockdown-end hopes and government efforts to bolster growth.

Bitcoin and ether managed modest gains after huge losses in April and thus far in May, with BoE Deputy Governor Jon Cunliffe Tuesday warning about risky crypto currencies nL9N2VE01D.

The U.S. data calendar is light on first-tier releases Wednesday, so UK inflation might be the best watched.

For more click on FXBUZ

• AUD$ joins broad risk rally, rises 0.72% to0.7020; Tues range 0.7040-0.6968

• Less-dovish RBA minutes in spite of rising inflation buoys AUD nL2N2X902Z

• AUD up on less-dovish RBA talk as USD rate dominance diminishes nL2N2X91JL

• AUD$ res 0.7040 Tues high, ahead of key 50% Fib of 0.7267-0.6829 at 0.7048

• A close abv 0.7048 shifts momentum to bulls puts 21-DMA at 0.7107 in view

• Significant res abv upper the 30d Bolli (0.7609) at 50/200/10-DMAs 0.7243-95

• Support at 10-DMA by 0.7006, 0.6968 Tuesday's low, lower 30-w Bolli at 0.6908

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