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Market movers today

We face the quietest day on the data calendar this week as focus turns to eurozone investor confidence, eurozone goods consumption and Scandinavian house prices.

In the euro area, Sentix investor confidence, retail sales and ECB QE details are due for release today. Sentix has climbed to levels not seen since 2007 with a figure of 27.4 in May and we expectit to rise further to 28.1 in June. We estimate retail sales will show another monthly increase of 0.3% in April, as consumer confidence rose in April and Easter is likely to have supported higher retail sales. Finally, the ECB is due to release the monthly QE details, which will not least at t ract at tention in Fixed Income markets (see page 2).

In Scandinavia, focus will be on house price statistics for Denmark and not least Norway. In Norway, Real Estate Norway's release may well show the first fall m/m since February last year. The combination of more restrictive bank lending practices and an increased supply of properties has brought a better balance in the housing market , including in Oslo. From a policy perspective, however, itis important to remember th at Norges Bank anticipated a stabilisation in housing prices back in March, so a slight correction will primarily ease upward pressure on interest rates rather than add a downward pressure.

Selected market news

Market sentiment has suffered somewhat at the beginning of the week with most major equities indices trading in red territory as we approach the key session on Thursday, with not least the ECB meeting, the UK parliamentary election and James Comey testifying to Congress. Also, the oil price has erased its gains following the diplomatic crisis in the Middle East between Qatar and a coalition led by Saudi Arabia accusing Doha of supporting terrorism.

Yesterday's economic data releases out of the US generally disappointed market expectations with the final estimates for Service PMIs and durable goods being revised lower. While the first release of the May ISM non-manufacturing still points to a healthy expansion, the release did disappoint slightly at 56.9 (consensus 57.1, previous 57.5). Also, the details revealed a deterioration in new orders. Meanwhile, the employment component reached a new high but 'prices paid' dropped to a sub-50 level, indicating prices fell for the first time in 13 months.

In the UK, May Service PMIs disappointed market expectations. On the slowdown in the new order book, respondents not least referred to uncertainties ahead of the Parliamentary election and general economic uncertainty. This underpins the importance of Thursday's parliamentary election where polls pointed recent ly to a much tighter race than expected previously. We do, however, stress thatin general one should be careful not to rely too much on the UK polls. First, polls did not foresee the absolute majority win for the Conservatives in the latest general election in May 2015. Moreover, it is difficult to predict the distribution of seats among the political parties because of the 'first -past -the-post ' system. Irrespective, markets and not least the GBP will continue to react to new polls as we approach Thursday.

As expected, the Reserve Bank of Australia this morning kept policy rates unchanged. The released statement had few changed but was on some points somewhat more upbeat on the domestic out look. AUD/USD is t rading a little higher following the announcement.

For the 24 hours to 23:00 GMT, the AUD rose 0.52% against the USD and closed at 0.7487.

LME Copper prices rose 0.49% or $27.0/MT to $5586.5/MT. Aluminium prices rose 0.05% or $1.0/MT to $1917.5/MT.

Overnight macro data showed that Australia’s seasonally adjusted current account deficit narrowed to A$3.1 billion in 1Q 2017, following a revised current account deficit of A$3.5 billion in the prior quarter. However, the data missed market expectations for a drop to a level of A$0.5 billion.

In the Asian session, at GMT0300, the pair is trading at 0.7470, with the AUD trading 0.23% lower from yesterday’s close.

Early today, the Reserve Bank of Australia (RBA) left the official cash rate unchanged at a record low 1.50% for the 10th consecutive month, as widely expected, while noting that some economic indicators such as wages showed signs of lagging.

The pair is expected to find support at 0.7444, and a fall through could take it to the next support level of 0.7418. The pair is expected to find its first resistance at 0.7497, and a rise through could take it to the next resistance level of 0.7524.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 110.27; (P) 110.50; (R1) 110.69; More...

USD/JPY's fall from 114.36 resumes by taking out 110.23 support an reaches as low as 109.65 so far. Intraday bias stays on the downside for 108.12 support next. Whole decline from 118.65 is seen as a correction and is still in progress. Break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. We'll look for bottoming signal around 106.48. On the upside, above 110.72 minor resistance will turn bias neutral first. But near term outlook will remain bearish as long as 111.70 resistance holds.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Aussie stays in tight range today after RBA left cash rate unchanged at 1.50% as widely expected. The central bank also maintained a neutral stance and noted that "the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time." Regarding the economy, the statement pointed out that "year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures." But Governor Philip Lowe is optimistic that "economic growth is still expected to increase gradually over the next couple of years to a little above 3 per cent."

Nonetheless, RBA also pointed out that "indicators of labour market remain mixed". While there was stronger employment growth, the growth in "total hours worked remains weak". Wage growth stays low and is "likely to continue for a while yet". And, as inflation will increase gradually, slow real wages growth will retrain growth in household consumption. RBA also stays alerted with the housing market. And it pointed out that "growth in housing debt has outpaced the slow growth in household income".

AUD/JPY gyrates in tight range after the release and overall outlook is unchanged. Recovery from 81.48 should have completed after failing to sustain above 55 day EMA. Fall from 88.21 is in expected to resume. Break of 81.48 will pave the way to 38.2% retracement of 72.39 to 88.21 at 78.43. This will be the favored case as long as 84.53 resistance holds.

Yen surges against dollar

Talking about Yen, it resumes recent rally against the greenback with USD/JPY diving through 110 handle. Markets are getting more nervous ahead of former FBI director James Comey's testimony before Senate Intelligence Committee on Thursday. Comey, dismissed by US President Donald Trump, will certainly be asked about the investigation into Russian interference in the presidential election last year. Also, Comey will be asked about Trump's interference in the investigation on former national security advisor Michael Flynn's tie to Russia.

Yesterday, the Intercept published a leaked report by the National Security Agency, detailing how Russian hackers conducted a spear-phishing scheme targeted at the US election infrastructure. And the scheme penetrated the system deeper than previously believed. The report was confirmed by the US government. Also, a private contractor was arrested for leaking the report to media.

Elsewhere...

UK BRC retail sales monitor dropped -0.4% yoy in May. Japan labor cash earnings rose 0.5% yoy in April. Australia current account deficit narrowed to AUD -3.1b in Q1. Looking ahead, Eurozone will release retail sales and Sentix investor confidence in European session. Canada will release Ivey PMI in US session.

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.27; (P) 110.50; (R1) 110.69; More...

USD/JPY's fall from 114.36 resumes by taking out 110.23 support an reaches as low as 109.65 so far. Intraday bias stays on the downside for 108.12 support next. Whole decline from 118.65 is seen as a correction and is still in progress. Break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. We'll look for bottoming signal around 106.48. On the upside, above 110.72 minor resistance will turn bias neutral first. But near term outlook will remain bearish as long as 111.70 resistance holds.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the EUR declined 0.11% against the USD and closed at 1.1259.

On macro front, the final composite PMI in the Euro-zone remained unchanged at a level of 56.8 in May, in line with the flash estimate and analysts' expectations, supported by strong growth of new business. On the other hand, the Euro-zone's PMI services PMI inched lower to 56.3 in May from 56.4 reported in the previous month, but was slightly above the preliminary estimate of 56.2.

Meanwhile, Germany's composite PMI unexpectedly rose to 57.4 in May from 56.7 in April and was up from the flash estimate of 57.3. Additionally, the nation's services activity remained stable in May from last month, with the final PMI reading coming in at 55.4. Markets were expecting the index to fall to level of 55.2. The preliminary figures had also recorded a drop to 55.2.

The US Dollar pared its initial gains against other major currencies, after reports showed that activity in the US service sector slowed more than expected in May and the nation's factory orders fell for the first time in five months in April.

Data showed that the US ISM non-manufacturing PMI dropped to a level of 56.9 in May, snapping its four consecutive months of gains, compared to market expectations of a fall to 57.1. The non-manufacturing PMI had recorded a level of 57.5 in the prior month. Moreover, the final Markit US services PMI reading for May came in at 53.6, up from 53.1 recorded in the previous month but lower than the initial estimate of 54.0.

In other economic news, the final durable goods orders fell more than expected on a monthly basis in April, after it registered a drop of 0.8%, compared to a revised rise of 2.3% in the prior month. The preliminary figures had indicated a fall of 0.7%, while markets were expecting durable goods orders to drop 0.6%.

Meanwhile, the US factory orders declined 0.2% in April, meeting the consensus estimate, from a revised rise of 1.0% in March.

In the Asian session, at GMT0300, the pair is trading at 1.1273, with the EUR trading 0.12% higher from yesterday's close.

The pair is expected to find support at 1.1245, and a fall through could take it to the next support level of 1.1217. The pair is expected to find its first resistance at 1.1290, and a rise through could take it to the next resistance level of 1.1307.

Moving ahead, investors will focus on the Euro-zone Sentix investor confidence for June along with retail sales data for April, both due to release today. Also, JOLTS job openings data for April in the US, scheduled to release later in the day, will be closely watched by traders.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.29% against the USD and closed at 1.2906.

Macroeconomic data showed that growth in UK's dominant service sector slowed more than expected in May as political uncertainty ahead of this week's general election and rising consumer prices weighed on the sentiment. The nation's services PMI fell to a three-month low of 53.8 in May from 55.8 reported last month. Investors had expected the index to fall to a level of 55.0.

Meanwhile, the latest opinion poll showed that the Conservative Party would win only 305 seats in the House of Commons, above Labour's 268 but well short of the 326 seats required for a majority.

Overnight data indicated that UK BRC like-for-like retail sales dropped by 0.4% YoY in May, from a rise of 5.6% reported last month, suggesting that the British consumers are feeling the strain from rising inflation and cutting their spending on discretionary items.

In the Asian session, at GMT0300, the pair is trading at 1.2919, with the GBP trading 0.10% higher from yesterday's close.

The pair is expected to find support at 1.2872, and a fall through could take it to the next support level of 1.2826. The pair is expected to find its first resistance at 1.2953, and a rise through could take it to the next resistance level of 1.2988.

Amid no economic release in the UK today, market participants will look forward to global macroeconomic events for further direction in the Pound.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.09% against the JPY and closed at 110.45.

Overnight data showed that Japan's labour cash earnings rose 0.5% on an annual basis in April, higher than market expectations for a 0.3% gain. In the previous month, labour cash earnings had registered a revised unchanged reading.

In the Asian session, at GMT0300, the pair is trading at 109.82, with the USD trading 0.57% lower from yesterday's close.

The pair is expected to find support at 109.46, and a fall through could take it to the next support level of 109.09. The pair is expected to find its first resistance at 110.46, and a rise through could take it to the next resistance level of 111.09.

Going forward, Japan's GDP growth data for the first quarter along with preliminary estimates of leading as well as coincident indices, both for April, slated to release tomorrow, would garner a lot of attention.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.11% against the CHF and closed at 0.9649.

In the Asian session, at GMT0300, the pair is trading at 0.9631, with the USD trading 0.19% lower from yesterday’s close.

The pair is expected to find support at 0.9619, and a fall through could take it to the next support level of 0.9606. The pair is expected to find its first resistance at 0.9654, and a rise through could take it to the next resistance level of 0.9676.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.14% against the CAD and closed at 1.3477.

In the Asian session, at GMT0300, the pair is trading at 1.3467, with the USD trading 0.07% lower from yesterday’s close.

The pair is expected to find support at 1.3450, and a fall through could take it to the next support level of 1.3434. The pair is expected to find its first resistance at 1.3492, and a rise through could take it to the next resistance level of 1.3518.

Trading trends in the pair today are expected to be determined by the release of Canada’s Ivey PMI data for May, due later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

Currency pair GBP/USD

The GBP/USD broke above the resistance trend line (dotted red) which invalidated yesterday's bearish wave count and could make a bullish variant more likely although both support and resistance levels remain nearby. The UK will hold general parliamentary elections on Thursday 8 June 2017.

The GBP/USD broke out above the smaller resistance line (dotted yellow) and is now challenging the resistance top (red).

Currency pair EUR/USD

The EUR/USD is moving higher in a bullish trend channel indicated by the support (blue) and resistance (red) trend lines. The new higher high is challenging the 100% Fib level at 1.13 of wave 2 (green), which is a break or bounce zone.

The EUR/USD is trying to break above the resistance trend line (dotted orange) but it has a major resistance zone (red) at 1.13 just above it. It remains to be seen whether price will break or bounce at 1.13.

Currency pair USD/JPY

The USD/JPY broke below the support trend line (dotted green) and is challenging the Fibonacci levels of wave B (brown).

The USD/JPY indeed completed a wave 4 (grey) as indicated earlier this week and is building one more lower low via a wave 5.