All eyes on inflation

GBP/USD => The pair trades around a 13-day high
Target => The stock falls to $215
USD/JPY => The pair falls to 129.00


GBP/USD looks to UK inflation data

GBP/USD jumped 1.4% higher in the previous session after robust UK jobs data. Unemployment dropped to a pre-COVID low, and vacancies outstripped the number of unemployed for the first time on record. Wages, including bonuses, surged to 7%, prompting bets that the BoE could raise interest rates again in June, which would mark the 5th straight rate hike meeting. Looking ahead, UK inflation will be under the spotlight and is expected to rise over 9% as fears of a recession rise, with the BoE predicting that consumer prices will continue rising to double digits hitting household incomes hard.

UK unemployment

UK CPI YoY April

Actual: 3.7% (0.1%)

Expected: 9.1% (2.1%)

Previous: 3.8%

Previous: 7%

All eyes on inflation

Where next for the GBP/USD?

GBP/USD trades lower, snapping a three-day rally. Buyers pause for breath after rebounding from 1.2160 and running into resistance at 1.25 the 20 DMA. The rise above the month-old falling trendline and the bullish crossover on the MACD keep buyers hopeful of more upside. Buyers need to break above 1.25 to continue the rise higher towards 1.2635, the 5th May high, with a move above here exposing the 50 DMA at 1.2850. On the flip side, failure to rise above 1.25 could see the pair test the falling trendline support at 1.23 ahead of the 2022 low of 1.2160.

Target Q1 earnings

Big-box retailer Target is due to report Q1 earnings today. 2022 is turning into a more challenging year for the retailer as sales start to cool following the pandemic drive and as the company battles against rising costs. After rival Walmart disappointed yesterday, the market will be keen to see if customers are handling inflation more easily than at Walmart. Expectations are for comparable sales to rise 1.2% in the first three months of the year, significantly slower than the 12.7% growth seen in 2021. Overall revenue is expected to rise 2.2% year on year to $24.4 billion. Adjusted EPS is expected to decline 16.2% to $3.09 amid tough comparisons from the year before. The share price currently trades at a 6-week low.

USD/JPY falls after Japanese GDP data

While the USD fell versus its major peers, it rose 0.2% versus the Japanese yen as risk sentiment improved. US retail sales were strong, showing that consumers are happy to keep spending even as inflation hits a 40-year high and consumer confidence tumbled. The data supports a more hawkish Fed. Following the data, Fed Chair pledged to raise rates as high as necessary to tame the surge in inflation. These comments highlight the Fed – BoJ central bank divergence. Today the pair is falling after the Japanese economy contracted less than expected in Q1. GDP fell -0.2% amid the Omicron hit to the economy, but this was better than the -0.4% forecast. Attention now turns to mid-tier US data and sentiment.

Japan GDP QoQ

US retail sales MoM

Actual: 0.2% (0%)

Actual: 0.9% (0.1%)

Previous: 0.2%

Previous: 0.5%

 

Support can be found at 128.70 (weekly low) and 127.65 (May low).

Resistance for the pair can be seen at 130.00 (psychological level) and 131.35 (2022 high)



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