FED: KC's Schmid: Inflation Is Primary Concern; Fed Transparency Is Key

• Crude has extended its move lower today after the WSJ reported that the US will allow Iran to begin exporting and selling its oil immediately, boosting expectations for increased global supply following the de-escalation of the US-Iran conflict.
• WTI Jul 26 is down by 5.9% at $76.0/bbl.
• A VLCC carrying crude left Iran’s port of Chabadar and crossed the US blockade line sailing out of the Gulf of Oman, suggesting that the US was no longer enforcing the blockade.
• Iran’s foreign minister said that US-Iran negotiations will begin on the day the MoU is signed, followed by 60 days of talks to reach a final deal on both Iran’s nuclear programme and sanctions lifting.
• From a technical perspective, a short-term bearish theme in WTI futures remains intact as the corrective cycle extends. However, key support at $77.22, the Apr 17 low, has been pierced. Clearance of this level would strengthen a bearish theme, exposing $71.64 next, the Mar 10 low.
• Meanwhile, spot gold has edged higher, as the fall in oil prices provided a moderate bearish bias for the US dollar.
• Spot gold is up by 0.7% at $4,341/oz.
• For gold, a bear theme in gold remains intact and short-term gains are corrective.
• However, the metal has narrowed the gap to initial firm resistance at $4,385.8, the 20-day EMA. A break of this level would open $4,524.2, the 50-day EMA.

• RES 4: 161.46 1.618 proj of the Jan 27 - Feb  - 12 price swing
• RES 3: 161.00 round number resistance 
• RES 2: 160.72 High Apr 30 and the bull trigger 
• RES 1: 160.59 High Jun 11
• PRICE: 160.43 @ 16:33 BST Jun 16
• SUP 1: 159.71 20-day EMA 
• SUP 2: 159.06/157.32 50-day EMA / Low May 14 
• SUP 3: 156.78 Low May 12
• SUP 4: 156.52 Uptrendline drawn off Apr’ 25 low

USDJPY is trading closer to its recent highs and a bull cycle remains in play for now. Sights are on key resistance at 160.72, the Apr 30 high. A clear break of this hurdle would strengthen the uptrend. Note that a breach would also cancel an existing  bear threat highlighted by the large bear candle on Apr 30 - it is still possible that the recovery since May 6 is a correction. Initial firm support to monitor is 159.06, the 50-day EMA. 

As implied by consensus, analysts are generally constructive on core retail sales in May though caution against over-interpreting gains due to the upward impact of inflation:

• BofA: "We look for above-consensus increases of 0.8% and 0.7% m/m in retail sales ex-autos and the control group, respectively, in May. BAC aggregated credit and debit card data show solid gains in retail ex-auto spending on the month. Moreover, favorable Census Bureau SFs should boost the May retail sales figures relative to the signal from the BAC card data. Our forecast is consistent with the narrative of consumer resilience."
• RBC: "retail sales likely rose in May, but details will be closely watched for signs whether higher spending on gasoline from higher prices is beginning to squeeze spending on other products. U.S. consumer spending has remained resilient so far, but through a drawdown in savings that isn’t sustainable. Still, vehicle sales rose in May and we look for control sales to edge up 0.3%."
• SocGen: "In inflation-corrected terms, the retail sales control group, the subcomponent of retail sales that feeds into real goods PCE, went up 0.4% m/m in April – an easing compared to the 0.6% for March but still a solid print. In May the ISM Services release suggested a higher pace of expansion amongst service sector firms, which is usually a decent indicator for pace of real household spending growth and thus we should expect it to be fairly strong... weekly Redbook Retail Sales data suggested an accelerated pace of retail sales in April, with May likely to have come at a similar higher pace. With core goods inflation coming in weaker in May this may well mean a further pickup in inflation-corrected goods spending in May."
• TD: "We look for retail sales growth to pick up slightly in May at 0.8% m/m, as outlays continue to benefit from strength in auto and gas sales. Control group will likely slow again to 0.4% m/m."
• Wells Fargo (sees 0.5% headline retail sales): "In April, nominal sales were boosted entirely by higher goods prices—particularly gasoline—while real retail sales slipped about 0.3%. There is little reason to expect a materially different story in May. Motor fuel prices rose another 6.8%, and high-frequency card data point to limited momentum outside of gas stations. Control group sales remained modestly positive in real terms, suggesting underlying spending has not rolled over. But the composition continues to do the heavy lifting—higher energy costs are increasingly taking first claim on the consumer wallet. The upshot: spending is holding up for now, but the longer elevated energy prices persist alongside softer income growth, the greater the risk to broader demand. [The] report should show goods PCE started Q2 on a decent, but unspectacular, footing."