The EUR/USD Rebounds From Oversold Territory

U.S. yields remained under 3% for the week and were steadied following the lower than expected budget surplus for April tax month. This comes on the heels of softer than expected inflation figures released this week. Both CPI and PPI were weaker than expected which was followed by softer than expected import prices.  The Fed’s Bullard said that rates were likely back at nuetral. Bullard is a dovish non-voter.

Technicals

The EUR/USD rebounded but ran into resistance, near the 10-day moving average at 1.1946.  Support on the currency pair is seen near an upward sloping trend line that comes in near 1.1725.  The 10-day moving average recently crossover below the 200-day moving average which means that a short-term downtrend is in place. The fast stochastic generated a crossover buy signal in oversold territory which means that short-term momentum is accelerating. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with an upward sloping trajectory which points to consolidation.

Fed’s Bullard Believes Rates are Now Nuetral

Fed’s Bullard said rates are probably back at neutral, in his prepared remarks on U.S. Monetary Policy. The dovish non-voter also argued for staying on hold to help re-center inflation expectations. He also worried that the FOMC risks inverting the curve if rates are increased further at this point. We don’t need to change rates to keep inflation at its goal. He also believes tax reform can boost growth with accelerating inflation.

U.S. import prices increased

U.S. import prices increased 0.3% in April, while export prices rose 0.6%. The flat reading on March import prices was revised down to -0.2% and February was bumped to 0.2% from 0.3%. The 0.3% March export price gain was not revised nor was February’s 0.2%. On a 12-month basis import prices are up 3.3% year over year, unchanged from March which was revised from 3.6% year over year. The 12-month export price index rose to a 3.8% year over year pace from 3.4% year over year. For April imports, petroleum prices bounced 1.6% versus the prior 2.2% decline which was revised from -1.3%. Excluding petroleum, prices were up 0.1% from unchanged which was revised from 0.1%. Import prices with China fell 0.1% after a 0.2% gain and were up 0.6% with Canada versus -0.4%. For export prices, agricultural price declined 1.2% after jumping 3.2% previously. Excluding ag, prices bounced 0.7% versus unchanged (revised from -0.1%).

Spanish Inflation Confirmed

The HICP rate was confirmed at 1.1% year over year, down from 1.3% year over year in the previous month, but in line with preliminary numbers. Core inflation fell back to 0.8% year over year from 1.2% year over year, but the details confirm that the uptick in March, as well as the fall back in April were impacted by the timing of Easter, which came earlier this year and left prices for recreation and culture jumping to 1.2% year over year in March from 0.7% year over year in February, only to fall back to -1.7% year over year in April. Like with growth numbers, it is too early to say whether the deceleration in inflation is entirely due to temporary factors.

Canada employment dipped

Canada employment dipped 1.1k in April after the 32.3k gain in March, coming in contrary to expectations for an increase the median was +20.5k. But full time jobs grew 28.8k in April after the 68.8k surge in March. Part time jobs fell 30.0k after a 35.9k contraction in March. The unemployment rate was 5.8%, holding at the 40-year low of 5.8% seen in March. The participation rate slipped to 65.4 from 65.5. Hourly earnings of permanent employees accelerated to 3.3% year over year in April from 3.1% in March.