GBP: Sterling Crosses in Focus Given Significance of US Inflation Release
Jun-10 09:49
- Given the importance of the greenback trajectory in determining the depth of GBPUSD’s correction (as mentioned earlier in our 0904 bullet), and the close proximity to US CPI data on Wednesday, it is worth highlighting some important technical levels for sterling crosses, potentially providing a more direction signal following the soft labour market data this morning.
- The brief pop higher for GBPJPY on BOJ Ueda comments overnight saw the cross broadly match the April highs around 196.40. Since then, the cross has now sits 130 pips off these highs, currently down 0.38% on the session. There have been continued failed attempts to breach the trendline drawn from the October highs, and today’s reversal lower could signal scope for a deeper pullback. The 50-day EMA has remained technically significant across May, and would be an obvious target for the move. The average currently intersects at 193.05.
- GBPAUD stands out on the chart, showing nascent signs of breaking an uptrend line, drawn from the February lows. Furthermore, the cross has breached the 50-day EMA, extending the pullback from the May highs to 1.6%. A cluster of daily lows just below the 2.05 mark provides the initial target for the move. Below here, the December high provides next support at 2.03.
- In similar vein, GBPNZD (shown below) is now threatening a trendline break, drawn from the November lows seen following the US election. While the trendline was moderately pierced in early May, a daily close below would provide a more bearish signal. This may signal scope for a move towards the April low at 2.2140 and a Fibonacci projection at 2.2076.
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
