Fed hike fears ease ahead of inflation data

USD/JPY => The pair falls below 127.00
Baidu => The stock rises above $135
Oil => The commodity rises to a 2-month high

USD/JPY looks to US inflation data

USD/JPY edged 0.1% lower yesterday after mixed US data prompted markets to rein in expectations of a very aggressive Federal Reserve.

US Q1 GDP was downwardly revised, confirming that the US economy contracted in the first three months of the year. US pending home sales also fell for a sixth consecutive month, dropping to a two-year low. On the plus side, US jobless claims fell by more than expected, highlighting the tight labor market.

Today all eyes are on the US PCE index, the Federal Reserve’s preferred gauge for inflation. Core PCE is expected to ease, which could raise optimism that peak inflation has passed and drag the USD lower.



Actual: -1.5 (1.3)

Expected: 4.9% (0)

Previous: -1.4%

Previous: 5.2%

Where next for USDJPY?

USDJPY has been trending lower since May 9, trading within an ascending channel.

The price has broken below its 20 sma, and the RSI has fallen below 30 into bearish territory, suggesting that there could be more downside to come. The price has run into resistance at the 50 sma at 126.55. A break below here is needed to continue the downward trend towards 125.10, the March 28 high, and 124.60, the lower band of the falling channel.

On the flip side, resistance can be seen at 128.00, the weekly high, ahead of 128.85, and the 20 sma, with a move over here negating the near-term downtrend.

Baidu rallied 14% yesterday. Here’s why.

Chinese tech has been some of the worst performers in recent months, but yesterday was a pleasant change.

China’s search engine giant, Baidu, saw its share price surge over 14% yesterday after Q1 results beat forecasts. Baidu reported a surprise 1% rise in revenue to 28.4 billion yuan ($4.2 billion) for the first quarter, compared to the 27.9 billion yuan forecast. Meanwhile, the net loss was 885 million yuan, versus an estimated profit of 142 million yuan. The internet search giant is in the midst of a transformation, pivoting towards self-driving cars, cloud computing, and chips.

The COVID lockdown made this a challenging quarter, as firms advertising spends were slashed. However, the AI and cloud business expanded by 45%, while online marketing revenue declined 4%. 

Oil rises on tight supply

Oil prices jumped to a two-month high on Thursday and continue rising today on signs of tight supply and as the demand outlook also improved.

US driving season is ramping up; Shanghai is set to end its two-month lockdown, both of which are lifting demand. Meanwhile, the EU is still pushing for approval to ban Russian oil imports, with Hungary expected to agree within the coming weeks, and OPEC announced that they would not raise output by more than what was initially planned at the meeting next week, defying Western calls for a faster increase in production. Looking ahead, Baker Hughes oil rig count is due later.

Support can be found at 110.00 (round number) and 108.50 (20 sma).

Resistance for the pair can be seen at 116.33 (March 24 high) and 120.00 (round number).

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