Today's Economic Spotlight

Market Overview

Ahead of PCE data, markets started moving after prelim GDP q/q was released yesterday. It was right on expectations as the result showed a great slowdown from last year's data of 1.6% to yesterday's 1.3%. 

Under unemployment, the reports released an increase of +3,000 to 219k from 216k, showing a slightly weaker economy than the expected 217k.

US Apr pending home sales fell -7.7% m/m, weaker than expectations of -1.0% m/m and the biggest decline in more than three years.

All reports show a slowdown in the economy, away from the report released by the FED's beige book telling of a rising economy overall. 

Wednesday evening, Atlanta Fed President Bostic said many of the different measures of inflation he looks at on his dashboard “are moving back into the target range,” and he's “looking at the end of the year, the fourth quarter, as the time where we might actually think about and be prepared to reduce interest rates.”

New York Fed President Williams said, “With the economy coming into better balance over time and the disinflation taking place in other economies reducing global inflationary pressures, I expect inflation to resume moderating in the second half of this year.”

The markets are discounting the chances for a -25 bp rate cut at 0% for the June 11-12 FOMC meeting and 12% for the following meeting on July 30-31.

The easing of the hawkish outlook on the economy allowed the discount on yields and the fall of the dollar. This allowed the metals market to maintain strength. US Stocks also slide down.

Yesterday's 10Y yields fell to 4.548% from Wednesday's close of 4.620%.

“The initial reaction was that the Fed is more likely to cut rates now than before because a cooling in the economy and consumption might mean slightly less inflation,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. But he sees the outlook for rates as only one factor.

“It's possible you've got a little bit of a push and pull where there's stock market investors looking for a rate cut, which could potentially put prices higher,” he said. “But there's also fundamental investors looking at a slowing economy and corporate profits start to slow as more of a negative than a positive for the stock market.”

Earlier, Jamie Cox, managing partner for Harris Financial Group, said the “move down in yields reflects the reality that the economy is slowing” implied by the GDP data.

Now, we wait for the PCE data to come out to allow us to decide how the markets may move from here.

GOLD - GOLD is held up by 2332.174 and is staying consolidated. It is positioned well for either an upward movement or a break below the structure to continue selling. Currently, the price is still respecting bullish structures. Thus, we continue to call the market bullish.

SILVER - Silver is positioned well for either move. As of the moment, the price is held up by 30.938 and is expected to be supported. However, the price is also looking like an M pattern waiting to be completed. With that, we wait for more price action to confirm either side of the market. Currently, it stands as consolidated despite respecting bullish structures. Thus, we remain bullish.

DXY - The DXY is once again rejected by 105.071. Although the price failed to reach 104.607 for another retest, it is still early in the day to anticipate where this price will go. However, as it stands, it is respecting bearish structures while finding momentum from sellers every time it attempts to breach the upside. Currently, we still view the dollar to be bearish.

GBPUSD - As we expected from yesterday's call, the price did hold steady at 1.27006. What was beyond expected was the buyers' momentum after the price attempted to break beyond structure. We can see that the price is respecting a bullish structure. Thus, we still see this market as bullish. Although, it is primed to complete the SHS formation. We await further price action to confirm either side of the market movement.

AUDUSD - The AUD has made a W formation right after an M formation, showing a more probable buying setup than a seller's market. At the same time, it is held up by 0.65869, showing that the market is still bullish. We are waiting for further confirmation with price action.

NZDUSD -As we expected, the price tested 0.60954 and has extended its stay within the range, below 0.61408. We expect it to stay within the range until a news release later unless buying pressure from fundamental traders comes in. The price is respecting bullish structures showing a bullish market.

EURUSD - The EUR gained against the dollar and has once again failed to break below the trendline. It is now primed in the middle of the chart to go either direction. The consolidation in the market does show lower highs and lower lows, making it more probable for a sell to happen as sellers are looking to enter the market. However, the COT reports go against this as the buying pressure coming into the market is more than the sellers, as proven by the consistent rejection of the trendline. We wait for more price action to happen and confirm market movement.

USDJPY -the Yen gained an opportunity to recover after lower GDP data from yesterday, dropping to 156.516. Though there wasn't enough pressure to break the below-said structure, we waited for further price action to occur before calling a sentiment on the Yen. However, we do expect in an economic perspective that the YEN will attempt to increase its currency's strength.

USDCHF - The Market has indeed showed the completion of a huge M formation after the CHF outperformed the dollar. The market broke through multiple structures after SNB Chairman Thomas Jordan made a statement.

“In particular, Governor Jordan highlighted that a weaker CHF is now the most likely source of higher Swiss inflation and that the SNB could counter this by selling FX. He also added that there were reasons to believe that the neutral rate 'has increased somewhat, or might rise over the coming years,'” HSBC strategists said in a note to clients on Thursday.

USDCAD -With the price failing to reach 1.36435, there was strong bearish momentum that came in after it. We are waiting for further price action to happen from here. But, as it stands, the bearish structure is still being respected as there is a clear bearish movement coming in.