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Asian equity markets traded predominantly higher; however, gains were limited as the market digested the aftermath of the Federal Open Market Committee (FOMC) meeting. Initially, there was a hawkish reaction to the Fed's dot plot projections, but it was partially reversed during the press conference as Chairman Powell distanced himself from the projections. Attention in the region then turned to a series of significant data releases. The Nikkei 225 increased by 0.4%, supported by ongoing currency depreciation and positive data releases from Japan, including exports and machinery orders, which generally surpassed expectations. The Hang Seng advanced by 0.8%, while the Shanghai Composite gained 0.1%. Hong Kong outperformed after the Hong Kong Monetary Authority (HKMA) kept rates unchanged for the first time since March 2022, aligning with the Fed's decision.

Following the monetary policy announcement Stateside, today's focus shifts to the European Central Bank (ECB) and its update on Eurozone monetary policy. In contrast to the Federal Reserve, it is highly likely that the ECB will raise interest rates by 25 basis points, bringing the total increase to 400 basis points since last summer. ECB President Lagarde has previously emphasised the need to address the remaining challenges to bring inflation back to the target level. Despite revised data indicating a mild recession in the Eurozone over the winter, inflation continues to be a concern. Headline consumer price index (CPI) inflation is declining, but both headline and core inflation, which represents more persistent price trends, remain well above the target of 2%. If the rate hike is delivered as anticipated, the market's attention will turn to the prospects of further interest rate increases in July and potentially beyond. Investors will closely scrutinise Lagarde's comments during the post-meeting press conference to gauge whether her tone will be as hawkish as before or if recent weaker-than-expected data will temper expectations. Previous indications have suggested that the June hike is unlikely to be the last, with markets partially pricing in another 25 basis points increase in July. Additional insights will be provided through today's forecast updates. The ECB has highlighted that policy decisions will be guided by three criteria: incoming data, underlying inflation dynamics, and the impact of previous policy actions on the economy. These factors will be reflected in the ECB's forecast updates, which may indicate that inflation is not projected to reach the target until 2025, making it challenging to halt rate hikes prematurely.

Stateside, market participants will keep an eye on today's US data for indications of the duration of the Fed's current "pause." May's retail sales figures will be of particular interest, as April's numbers surprised on the upside, suggesting that consumer activity remains relatively strong. Although May is expected to show some weakness, core sales are anticipated to remain solid. Jobless claims will also be monitored, as they provide insights into employment  market conditions and any potential easing of pressures in that area.
 

CFTC Data As Of 05-06-23

• USD net spec short in May 31-Jun 5 period, $IDX +0.08% in period
• Rates key driver of CCY moves, marts on edge ahead of Fed, ECB next wk
• EUR$ -0.36% in period specs -7,304 contracts long cut to 158,421 contracts
• $JPY -0.1% in period large short grew by 8,624 contracts, spec -104,817
• GBP$ +0.09%, specs -751 contracts long 12,484; GBP eyes 23 highs abv 1.26
• AUD$ +2.39% in period on hawkish RBA, specs -12,342 into rise now -56,468
• $CAD -1.45%, CAD bid on exp'd BoC hike; specs -8,415 now short 38,329 contract
• BTC -2.96% in period, specs buy 582 contracts on dip now long 769 (Source: Reuters)
   

FX Options Expiries For 10am New York Cut 

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

• EUR/USD: 1.0700 (618M), 1.0770-80 (777M), 1.0800 (467M), 1.0830-35 (944M)
• 1.0875 (641M), 1.0895-1.0900 (941M)
• USD/CHF: 0.9000 (200M), 0.9050 (634M), 0.9090 (400M)
• GBP/USD: 1.2545-55 (262M), 1.2700 (292M)
• USD/CAD: 1.3180 (300M), 1.3200 (540M), 1.3320 (300M)
• USD/JPY: 139.00 (451M), 140.00 (330M)
   

Overnight News of Note

• Federal Reserve Expected To Pause Aggressive Rate Rising Campaign
• China May Cut Key Policy Rate And LPR, Buoying Bonds - Newspaper
• Barclays Sees China Rate Cuts Every Quarter Through Early 2024
• Goldman Bumps Up Japan Price Forecasts To Widen Gap With BoJ
• New Zealand Annual Current Account Deficit Unexpectedly Narrows
• Le Maire Pledges To Put France’s Finances Back On Track With Spending Cuts
• USD Skids To 3 Week Low As US Inflation Data Reinforces Fed Pause View
• Bond Market Decrees Inflation Readings Will Let Fed Skip Rate Hike In June
• Ken Griffin Ramps Up Credit Trades, Anticipating US Recession
• Oil Holds Advance As Broad China Stimulus Plan Aids Sentiment
• API Shows U.S. Crude, Fuel Stocks Rose Last Week - Market Sources
• US Plans To Buy 12 Million Barrels Of Oil For Reserve This Year
• Asian Shares Up, Dollar Wobbly As US Inflation Data Reinforces Fed Pause Bets
• AMD Gives Peek At AI Accelerator Meant To Rival Nvidia Chips

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
 

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4335

• Below 4300 opens 4260
• Primary support is 4200
• Primary objective is 4384
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

EURUSD Bias: Intraday Bullish Above Bearsih Below 1.0750 - Target Hit New Pattern

• Below 1.0710 opens 1.0670
• Primary support is 1.0666
• Primary objective is 1.009
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2600 - Target Hit New Pattern

• Below 1.2590 opens 1.2560
• Primary support  is 1.2430
• Primary objective 1.2752
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

USDJPY Bias: Bullish Above Bearish Below 141 - Target Hit New Pattern

• Below 140.90 opens 140.30
• Primary support  is 139.50
• Primary objective is 143.49
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

AUDUSD Bias:Intraday Bullish Above Bearish Below .6740 Target Hit New Pattern

• Below .6740  opens .6680
• Primary support  is .6660
• Primary objective is .6917
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

BTCUSD Bias: Intraday Bullish Above Bearish below 26000

• Above 26300 opens 26900

• Primary resistance is 27160

• Primary objective is 23300

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

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