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The decline of the yellow metal's price has extended itself, as the bullion continue to search for a strong enough support level to continue the surge. On Thursday morning the commodity price still remained in the middle of the medium term ascending channel pattern. There the metal faced the resistance of the 55-hour SMA at the 1,289.49 mark, while, meanwhile, being supported by the weekly R1 at 1,286.87. It is highly possible that the bullion will remain below the 1,300 mark until additional support is found. The additional support could come in the form of the 100-hour SMA, which on Thursday morning was located at the 1,282.73 level. In addition, the just mentioned SMA was supported by the lower Bollinger band of the hourly chart.

As we could see on yesterday's Live Trading webinar, straight after our live trading session, the AUD/USD has rejected and made pips in the bearish direction. That was a counter trade opportunity we had, but today the AUD/USD might proceed with the trend. The POC zone is 0.7510-20 (D L4, ATR pivot, bullish order block, EMA89) and if we see a retracement, the pair might reject from the POC zone targeting H3 and H4 camarilla pivots. 1 hour candle close above 1.7568 might target 1.7586 and further 0.7617 on a stronger momentum push. Have in mind that the ATR (range) of the pair is small, only 57 pips so 0.7580 zone is looking more realistic should the bullish momentum prevail.

Weekly
    •    Last Candlesticks pattern: N/A
    •    ime of formation: N/A
    •    Trend bias: Near term up

Daily
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 3 Feb 2016
    •    Trend bias: Up

EURGBP – 0.8677

Although the single currency rose to as high as 0.8771 earlier this week, the subsequent retreat suggests consolidation below this level would be seen and pullback to 0.8600-10 cannot be ruled out, however, reckon the Kijun-Sen (now at 0.8778) would limit downside and bring another rise later, above said resistance at 0.8771 would extend further gain to 0.8788 resistance, then 0.8850 but loss of upward momentum should prevent sharp move beyond 0.8900, risk from there is seen for another retreat later.

On the downside, whilst initial pullback to 0.8600-10 cannot be ruled out, reckon the Kijun-Sen (now at 0.8578) would limit downside and bring another rise later to aforesaid upside targets. Below the upper Kumo (now at 0.8550) would defer and risk weakness to 0.8524 support but only a daily close below there would signal top has been formed, bring retracement of recent upmove to 0.8500, then towards support at 0.8457. Looking ahead, a drop below this level would signal the rise from 0.8312 has ended, bring subsequent decline to 0.8400-10 and then test of indicated support at 0.8384. 

Recommendation: Buy again at 0.8580 for 0.8730 with stop below 0.8500.

On the weekly chart, as the single currency has eased after meeting resistance at 0.8771, suggesting minor consolidation would be seen and pullback to  0.8600 cannot be ruled out, however, reckon downside would be limited to 0.8570-75 and bring another rise later, above 0.8771 would bring test of previous resistance at 0.8788 but only break there would retain bullishness and encourage for a test of previous chart resistance at 0.8857 which is likely to hold form here.

On the downside, although initial pullback to 0.8600-05 cannot be ruled out, reckon the Kijun-Sen (now at 0.8585) would limit downside and bring another rise later. A weekly close below the Tenkan-Sen (now at 0.8542) would defer and suggest top is possibly formed, risk weakness to 0.8495-00 but a drop below support at 0.8457 is needed to add credence to this view, bring further fall to 0.8400-10, however, only a break of said support at 0.8384 would suggest the rebound from 0.8312 has ended instead, extend weakness to 0.8350-55 and eventually retest of 0.8312.

GBPJPY is in a downtrend since the May 10 high of 148.09. Prices reached a low of 140.70 this week. The RSI is below 50 in bearish territory and has no clear direction, so the market does not look like it can push any higher in the near term. It has reached a critical level at the 50% Fibonacci of the uptrend from 135.58 to 148.09. There is now a consolidation phase around this level.

The market is below the tenkan-sen line and there was a bearish crossover of this line below the kijun-sen on May 29, which gave a bearish signal and is keeping the bias to the downside. A move lower would target 140.36, which is the 61.8 Fibonacci. Breaking below this support would strengthen the bearish bias and open the way for a deeper fall towards 138 before heading to the April 17 low at 135.58.

The medium-term bias remains bearish as long as the market is in a descending channel. A rise above the June 2 high of 143.93 is needed to shift momentum back to the upside to target resistance at the 23.6 Fibonacci at 145.14. A move above 147 would help bring a resumption of the April to May uptrend.

Currency markets were showing signs of caution ahead of key risk events later in the day. Risk aversion supported gold and the yen. The euro and sterling held steady while the dollar index wallowed near seven-month lows. Investors are bracing for the European Central Bank's policy meeting and for the UK general election. All eyes will also be on former FBI Director James Comey's congressional testimony.

In terms of economic data, the downside miss on Australia's April trade surplus pushed the aussie to a session low of $0.7524 before recovering to $0.7553 after better-than-expected trade data out of China, which is a major trading partner for Australia.

Other data out in the session showed Japan's first quarter GDP data missed forecasts to rise 0.3% over the quarter versus 0.6% expected. The prior estimate was a rise of 0.5%. The yen was not greatly impacted by the data as the safe haven currency was being supported by risk aversion today. The greenback remained below the key 110-yen level during Asian trading today.

During James Comey's testimony, investors will be looking for any hints that US President Donald Trump may have been engaged in obstruction of justice, which is an offence that could lead to impeachment hearings. Comey will testify whether Trump asked him to drop the FBI investigation into fired National Security Adviser Michael Flynn. Political controversies surrounding the US President raise concerns among investors as they may delay passing legislation on Trump's growth agenda.

Sterling traded at 2-week highs to reach $1.2968 as the latest UK election polls suggest Prime Minister Theresa May's Conservatives Party will win a majority in today's vote and this would be positive for the British currency.

The euro was steady against the dollar to trade in a range around $1.1260 during the Asian session as investors turn their focus to the ECB's monetary policy announcement due later today. The central bank is widely expected to keep policy unchanged but markets will look for any hints on how and when it will start normalising its monetary policy.

Oil prices stabilized after a big tumble yesterday in reaction to the EIA report showing US crude inventories rose last week for the first time in 10 weeks, renewing concerns of a supply glut. WTI oil fell below $46 a barrel yesterday but rebounded slightly in Asia today to peak above the $46 mark.

Daily Pivots: (S1) 141.25; (P) 141.81; (R1) 142.89; More....

With 4 hours MACD crossed above signal line again, intraday bias is turned neutral again. As this point, we'll continue to look for bottoming signal around 61.8% retracement of 135.58 to 148.09 at 140.35 to bring rebound. Break of 143.93 will indicate near term reversal and turn bias back to the upside. However, sustained break of 140.35 will bring deeper fall to 135.58 key support level.

In the bigger picture, rise from 122.36 medium term bottom is still expected to extend to of 195.86 to 122.36 at 150.42. And decisive break there could pave the way to 61.8% retracement at 167.78. However, as the cross is starting to lose upside momentum, rejection below 150.42 and break of 135.58 support will indicate reversal and bring deeper fall back to retest 122.36 instead.

Today is a big day for the market with three major events upcoming: the market-focused UK general election, the Former FBI Director Comey’s testimony, and ECB’s rate decision and press conference at 12:45 and 13:30 BST respectively. The market is expected to be volatile across the board.

In terms of the UK general election, there are 650 seats in total in the House of Commons. To become a majority, a party must win more than half of the 650 seats, which is at least 326 seats. Be aware that the result of the general election outcome will cause volatility to GBP crosses and gold prices.

There will be four possible outcomes :

1. The Conservatives wins more than 350 seats (absolute majority)

The Conservative Party will have more control of the Parliament and reduce the level of opposition from other parties. The UK will be at a stronger position negotiating with the EU under Theresa May’s lead. The result will likely ease market concerns over uncertain UK prospect during the Brexit process to an extent, and hence lifting GBP.

2. The Conservatives wins 326 – 349 seats (narrow majority)

Currently the Tories have 330 seats in the House of Commons. The reason behind the snap election decision was to increase the Conservatives’ dominance in Parliament. If the outcome turns out to be that the Tories narrow majority remains unchanged it will likely result in market disappointment and weigh on GBP. Nevertheless, if the Tories win 340 – 349 seats, markets disappointment is likely to be comparatively moderate.

3. The Conservatives and the Labour both win less than 326 seats (the Tories lose majority, no majority in the Parliament )

If the Tories win less than 326 seats they will lose their current majority in Parliament and this will likely lead to significant market disappointment and a GBP sell-off.

If none of the parties win a majority (326 seats), the Tory and Labour Parties will likely unite with other smaller parties and make a joint government. In this situation, potential hurdles and disagreements caused by the lack of a majority in the Parliament will likely result in the impending 2-year Brexit negotiation process being difficult and weighing on GBP’s prospects.

4. Labour win more than 326 seats (Labour replaces the Tories becoming a majority)

The situation seems to be unlikely to happen, however, not impossible. This will likely shock the market resulting in an initial sell-off in GBP. In addition, market concerns over Corbyn’s soft stance on negotiating with the EU, will also likely weigh on GBP.

Although a weak GBP is likely to boost UK equities, with Labour’s manifesto to raise corporate tax rates this will weigh on UK equities.

To date GBP has been relatively stable ahead of the UK election with the market expecting a Tory win. However, market will likely react differently from a decent victory to a modest win after the release of the election outcome.

This morning, in the early European session, GBP/USD edged up and is currently trading in a range between 1.2950 – 1.2980. EUR/GBP broke through the psychological level at 0.8700 yesterday and is currently trading around 0.8675. GBP/JPY edged up and is holding above the psychological level at 142.00, currently trading around 142.35.

The FTSE 100 index broke through a significant support line at 7500 on Wednesday indicating increased selling pressure. It is currently trading around 7470.

'Crude, gasoline and distillates inventories are all at or above the top of their five-year ranges; supply remains plentiful.' — Matt Smith, ClipperData

US crude oil inventories rose unexpectedly last week amid lower refinery runs and exports. The Energy Information Administration reported on Wednesday that US crude stockpiles climbed 3.3M barrels in the week ended June 2, following the preceding week's drop of 6.4M barrels. Meanwhile, market analysts anticipated a 3.1M-barrel decline during the reported week. The 3.3M-barrel build in US commercial oil inventories marked the first increase in 10 weeks and raised concerns over the effectiveness of the OPEC production cut agreement. Following the release, WTI futures dropped more than 4% to trade at $46.12 per barrel. Refinery crude runs plunged 283K barrels per day to 17.2M bpd, compared to the prior week's 17.5M-bpd rate. The refinery utilisation rate dropped 0.9% to 94.1%. Crude stockpiles at the Cushing oil hub in Oklahoma fell 1.4M barrels last week. Exports dropped to 557K bpd from the previous week's 1.3M bpd, whereas crude imports advanced 1.1M bpd. Distillate inventories climbed 4.4M barrels, topping expectations for a 281K-barrel gain.

'We already know that after falling by 60% month-on-month in April, the volume of coal leaving the largest three ports in Queensland leapt by 130% in May, thereby taking it almost back to the level seen in March.' — Paul Dales, Capital Economics

Australia's trade surplus narrowed more than expected in April, official figures revealed on Thursday. The Australian Bureau of Statistics reported that the country's trade balance dropped to a surplus of A$0.56B in April, down from the preceding month's surplus of A$3.17, whereas analysts anticipated a fall to A$1.91B. Exports dropped A$2.8B, or 8%, during the reported month, on a seasonally adjusted basis amid a 45% decrease in the value of coal exports. The decline in exports was a result of the devastation wrought by Cyclone Debbie in March, which hit the north-eastern Australian state of Queensland, causing closures of ports, mines and rail lines. Thursday's trade data suggested that the negative impact of Cyclone Debbie on economic growth had transferred into the second quarter. Meanwhile, imports fell A$0.2B month-over-month in April, or 1%. In real terms, Australian exports dropped 1.6% in the first quarter of 2017, weighing on the country's economic growth. Following the release, the Australian Dollar dropped from 75.37 to 75.30 against its US counterpart.

The Euro is holding just under fresh multi-month high at 1.1285 in early Thursday's trading, with eyes on today's ECB policy meeting. The single currency maintains firm tone for eventual attack at 1.1300 barrier (09 Nov post US-election spike high), as is spent past two weeks in narrow consolidation under the target. Yesterday's dip to 1.1200 zone on news that the ECB needs more evidence of inflation before starts changing monetary policy and subsequent bounce that fully reversed the fall, was seen as bullish signal. Bullish technicals are supportive for probes above 1.1300 but no stronger acceleration is expected, as studies on daily and weekly charts are strongly overbought. Break above 1.1300 barrier would be bullish signal for extension towards next target at 1.1366 (18 Aug 2016 high). On the downside, rising 10SMA (1.1230) marks initial support, followed by daily Tenkan-sen (1.1197) and rising 20SMA (1.1180). Break of these supports would signal further weakness and expose key near-term support at 1.1109 (30 May trough). Traders are awaiting for ECB but other two events today, UK election and testimony of former FBI Director Comey to Senate committee are also in focus and may affect the Euro's performance.

Res: 1.1285, 1.1300, 1.1366, 1.1400
Sup: 1.1247, 1.1230, 1.1197, 1.1109