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today analysis 19.05.2023

"Global Markets Surge as Japanese Stocks Hit 1990 High, ECB and BOE Central Bankers Share Insights"

Shares in Australia, South Korea, and Japan experienced gains, with the Japanese market continuing its winning streak by surging to its highest level since 1990. Most other Asia-Pacific markets also saw an increase, except for China, where mainland and Hong Kong shares declined, partly due to the underperformance of internet giants.

European markets are expected to open higher on Friday, buoyed by the positive sentiment stemming from U.S. debt ceiling talks. German stocks are also anticipated to extend the gains from Thursday, which led to the DAX index reaching its highest point since January 2022.

Several influential central bankers, including Fed Chair Jerome Powell, will be speaking at various events today, providing investors with ample commentary and similar perspectives.

Jonathan Haskel from the Bank of England is the first to speak, and the consistent messaging from the BOE since the 12th interest rate hike last week indicates that they are not finished yet. They believe the labor market is tight, and there might even be an acceleration in quantitative tightening.

As the week comes to a close, global markets are optimistic and bullish. There is optimism that a U.S. debt default will be avoided, and there is bullishness regarding the market's ability to withstand the increase in bond yields sparked by the recent wave of hawkish Fed statements.

Isabel Schnabel from the European Central Bank (ECB) will speak later in the day and has consistently emphasized that the ECB will continue to raise borrowing costs until there is a sustainable decline in core inflation. She believes that market expectations for rate cuts are unfounded.

In April, Japan's inflation re-accelerated after months of cooling. This development may revive speculation that the central bank will need to revise its price outlook, especially after dampened expectations for policy normalization in the previous session.


Market participants will closely analyze Powell's statements in search of fresh indications regarding the future actions of the US central bank. These remarks, combined with US bond yields, ongoing US debt-limit negotiations, and the overall risk sentiment, will influence the dynamics of the USD price and provide momentum to the EUR/USD pair on the final day of the week. However, spot prices are currently on course for substantial losses for the second consecutive week, and the fundamental factors mentioned earlier support the likelihood of further declines. Consequently, any attempted recovery may still be viewed as an opportunity to sell.

Earlier this month, the European Central Bank (ECB) raised interest rates, and there is a possibility of additional rate hikes in the future. ECB Vice President Luis de Guindos expressed particular concern about the rising inflation in the service industries during his statement on Thursday. Today, Lagarde, the President of the ECB, is scheduled to deliver a speech.According to data released on Friday, German producer prices increased by 0.3% in April, representing an annual rise of 4.1%, which is more than twice the ECB's targeted inflation level.From a technical perspective, EURUSD has experienced a significant movement and reached the strong support level of 1.0760. Currently, attempting to prepare for a correction. The Daily chart indicates a break of the 100MA, but the downward parallel of the bearish channel is still intact. In terms of the long-term perspective, we have not yet entered the selling territory as we need to surpass the current levels. Additionally, the DXY, which is the inverse image of EURUSD, is showing a temporary holding pattern at the 103.60 level and the upper parallel of the long-term bearish channel.

rebounding above 1.2400 after showing signs of exhaustion in its downward momentum. The British Pound, also known as Cable, is attempting a recovery as the US Dollar corrects lower in correlation with declining US Treasury bond yields. Market participants are eagerly anticipating Powell's speech today, as well as the ongoing Debt ceiling talks, which could potentially trigger a correction in the Dollar.

The value of the British Pound (GBP) remains undermined due to expectations that the Bank of England (BoE) will require fewer interest rate hikes in the upcoming months to address inflation concerns. These expectations were reinforced by underwhelming UK jobs data released on Tuesday and less hawkish remarks made by BoE Governor Andrew Bailey on Wednesday. Speaking at the annual British Chamber of Commerce Conference, Bailey mentioned that there were signs of inflation cooling down and a slight loosening in the labor market.From a technical standpoint, the GBP/USD currency pair has reached a significant support level, which aligns with the lower parallel of the bullish channel. This support level has the potential to initiate a corrective movement in GBP/USD, but further development is awaited. If this support level is broken, it could lead to a decline towards 1.2350, confirming a new bearish trend and exerting additional pressure on the pair.

According to the latest report, consumer prices in Japan continued to increase in April, with core CPI y/y (a significant measure of prices) reaching a 42-year high. Food prices witnessed a 9% surge compared to the same period last year, higher than the 8.2% increase observed in March. Additionally, services inflation rose by 1.7%, indicating that labor costs are permeating into the broader economy.Despite these developments, the Bank of Japan (BOJ) remains confident that the current pace of inflationary growth is not sustainable. This confidence is partly influenced by the slowdown in inflation observed in key trade partners such as China and across the world. Furthermore, the decline in trade data for April suggests a decrease in demand for products both domestically and internationally, potentially contributing to a form of deflation.

Hence, the BOJ's perspective that inflationary pressures will likely subside over time may have some basis, given the global context and weakening trade figures.

From a technical perspective, when examining the 1-day chart, the currency pair is currently encountering a noteworthy resistance level that has proven to be strong during the previous three attempts. This current attempt could potentially be the fourth, and if the pair manages to break above this level, it will likely move towards the next level at 142.2. Considering the recent trend of the US dollar, it appears probable that it might undergo a correction after six consecutive days of gains.


Gold prices (XAU/USD) have rebounded from support below $1,960.00 during the early European session. However, it is premature to interpret this as a complete reversal for the precious metal, as optimism surrounding US debt-ceiling matters continues. Furthermore, the forthcoming speech by Federal Reserve (Fed) Chair Jerome Powell is bolstering the appeal of the US Dollar.

S&P500 futures have extended their gains into Europe and Asia, signaling an increased risk appetite among market participants. The US Dollar Index (DXY) has been trading sideways within a narrow range below 103.60. Market participants are in a wait-and-see mode ahead of Powell's speech.

Investors are closely watching for guidance on interest rates during the June monetary policy meeting. They anticipate a neutral policy stance due to consistent declines in US inflation, a slight easing in labor market conditions, and challenges faced by small-scale businesses because of tight credit conditions imposed by regional US banks.

Despite concerns over the bipartisan negotiations between the White House and Republican leaders, investors remain optimistic that the US debt-ceiling will be raised. There is a belief that US President Joe Biden will exercise his 14th Amendment right to address the issue if necessary.From a technical perspective, gold has experienced a retracement after reaching the level of 1951 and is currently undergoing a correction. There is still a possibility of further selling pressure, and the next support level to watch for could be around the 100MA (Moving Average) and the downward parallel of the bullish trend line, which is around 1935.