Swiss Franc and Yen Soft on Rising Yields and Metals

Benchmark US and European government bond yields rose markedly on a day with relatively slow news flow. At the same time, copper extended its recent uptrend and gold hit a new record. European stock indexes are up sharply and US futures are off to a strong start.

These developments have left the Swiss franc and yen among the worst performers of the day so far. The Australian dollar is rising, leading other commodity currencies. The dollar, euro, and pound are somewhere in between, with the dollar at a slight disadvantage.

Technically, AUD/JPY is currently the month’s biggest mover, up over 1.5%. As long as support at 98.15 holds, the short-term outlook will remain bullish. If it continues to trade above the 61.8% forecast from 93.00 at 100.18 to 86.04 to 97.66, the upside may further accelerate to 100% forecast at 104.62 in the medium term.

In Europe, the FTSE is up 0.36% at the time of writing. DAX rose 0.80%. CAC increased by 0.85%. The UK 10-year bond yield rose 0.0344 to 4.108. The German 10-year bond yield rose 0.038 to 2.445. Early in Asia, the Nikkei average rose 0.91%. Hong Kong HSI rose 0.05%. China’s Shanghai Stock Exchange fell -0.72%. Singapore’s Straits Times fell -0.07%. Japan’s 10-year government bond yield rose 0.0201 to 0.792.

Eurozone Sentix confidence rises to -5.9, but momentum remains slow

The Eurozone Centix Investor Confidence Index rose to -5.9 from -10.5 in April, beating expectations of -8.3. This was the sixth consecutive increase and reached the highest level since February 2022. Similarly, the current situation index rose from -18.5 to -16.3, marking the highest level since June 2023 after six consecutive increases. Furthermore, the expectations index rose from -2.3 to 5.0, marking the seventh consecutive increase and the highest level since February 2022.

Centix’s analysis suggests that although economic momentum is in a positive direction, the pace remains subdued. The main reason for this downturn is the continued relative weakness of the German economy.

While the gradual improvement in the economy is a positive sign, it has also dampened expectations for lower inflation and subsequent central bank interest rate cuts.

Investors remain hopeful of a more accommodative monetary policy stance within the euro area. Nevertheless, if the global economy improves significantly, these interest rate reduction aspirations may not materialize as expected.

Japan’s nominal wages rose by 1.8% year-on-year in February, while real wages fell by -1.3% year-on-year.

Japan’s nominal worker cash salaries rose 1.8% year-on-year in February, in line with market expectations and marking the 26th consecutive month of increases. Monthly wages increased by 2.0%, and regular salaries increased by 2.2%. However, overtime pay decreased by 1.0% and special allowance decreased by 5.5%.

Real wages decreased by 1.3% from the previous year, marking the 23rd consecutive month of decline. This trend highlights the continuing problem that rising costs of living are eroding the purchasing power of Japanese workers.

A Ministry of Health, Labor and Welfare official said, “As price increases put pressure on real wages, we will keep a close eye on how nominal wage growth trends.”

USD/CHF intraday outlook

Daily Pivot: (S1) 0.8988; (P) 0.9029; (R1) 0.9061; More….

USD/CHF has recovered today but remains below the resistance level at 0.9094. Intraday bias remains neutral and we expect to see further consolidation. Although further decline cannot be ruled out, the outlook remains bullish as long as the resistance at 0.8884 turns into support. On the upside, a break through 0.9094 will resume a bigger rally to the key resistance levels at 0.8332 to 0.9243.

Broadly speaking, the price movement from the mid-term low of 0.8332 is tentatively seen to develop into a downward trend correction pattern from 1.0146 (2022 high). As long as the support at 0.8728 holds, further upside is likely. However, the upside should be limited by the resistance at 0.9243, at least on the first try.

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