EUR/USD, EUR/CHF forecast: European open inflation and US housing data on tap

Asian Indices:

• Australia's ASX 200 index fell by -24.6 points (-0.34%) and currently trades at 7,210.10
• Japan's Nikkei 225 index has risen by 231.35 points (0.78%) and currently trades at 30,074.34
• Hong Kong's Hang Seng index has fallen by -110.38 points (-0.55%) and currently trades at 19,867.87
• China's A50 Index has fallen by -58.28 points (-0.44%) and currently trades at 13,075.24

UK and Europe:

• UK's FTSE 100 futures are currently down -8.5 points (-0.11%), the cash market is currently estimated to open at 7,742.58
• Euro STOXX 50 futures are currently down -6 points (-0.14%), the cash market is currently estimated to open at 4,309.51
• Germany's DAX futures are currently down -5 points (-0.03%), the cash market is currently estimated to open at 15,892.93

US Futures:

• DJI futures are currently up 57 points (0.17%)
• S&P 500 futures are currently up 9.5 points (0.23%)
• Nasdaq 100 futures are currently up 36.5 points (0.27%)

• Japan’s GDP report surprised to the upside, growing 1.7% y/y (0.7% forecast) and 0.4% q/q (0.1% forecast)
• The GDP deflator (price of goods within GDP) rose to a near 8-year high, and focus now shifts to tomorrow’s trade data and Friday’s inflation report to see if it can maintain strong data in Q2 and tempt the BOJ in some action sooner than later
• The Nikkei rose above 30k for the first time in 20-months, although the yen was little changed
• Australia’s wage price index rose 3.7% y/y in Q1 (3.6% expected, 3.4% prior) I don’t think today’s wage data alone will be enough to trigger a hike, given wage pressures are easing according to RBA’s business contacts. But if we’re too see another strong employment report coupled with a surprise uptick in inflation, then bets are on for a hike. Either way, the RBA remain as data dependent as ever
• Fed members remained predominantly hawkish overnight, with a few standout comments including “premature to be talking about rate cuts”, “don’t quit [hiking] too soon”, “smaller, less frequent steps” could avoid financial instability, “I don’t think we’re at a hold rate yet”
• And whilst the annual rate of US retail sales was softer, it rose 0.7% m/m (0.3% expected) and core retail sales rose on target at 0.4% to show consumers are continuing to spend despite higher rates
• BOE governor Bailey delivers a keynote speech at the British Chambers of Commerce annual conference at 10:50, which may back up hawkish comments made by chief economist Pill in recent days

Eurozone inflation data is at 10:00 GMT+1

Inflation data never seems to go amiss, and today it is the final figures for the eurozone CPI report. Clearly, the rate of inflation has topped. But with German wholesale prices contracting, ZEW sentiment dipping for a third month and Dutch GDP contracting sharply this week alone, perhaps the inflation rate can move lower than anticipated. If so, that could further weigh on the euro whilst the Fed maintain their hawkish narrative, at least over the near-term.

EUR/USD daily chart:

EUR/USD could be setting up for a swing-trade short on the daily chart. After several failed attempts to test 1.1100 in recent weeks, momentum turned lower and prices broken beneath trend support and the 50-day EMA. Two-day of consolidation also produced a small bearish hammer yesterday which failed to hold above the 50-day EMA, and prices (and today’s high) are below the most heavily traded prices of the past two days. The bias remains bearish beneath yesterday’s high and for a move towards the 1.0800 handle.

EUR/CHF daily chart:

The cross may have sunk to a 2-month low yesterday, but momentum from its decline is stalling around a key support area as prices try to form a base above the November 2022 low. We can also see that its failed attempts to hold beneath 0.9700 back in March resulted in a couple of volatile rebounds, the second of which formed an elongated bullish outside day. And as a bullish divergence is also forming on the daily RSI (14) and RSI (2), we see it potential to mean revert higher towards 0.9800 over the near-term as part of a healthy retracement. A break beneath the YTD low assumes a resumption of its bearish move.

Economic events up next (Times in GMT+1)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge