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Daily Pivots: (S1) 1.3305; (P) 1.3331; (R1) 1.3353; More....

Intraday bias in USD/CAD remains on the downside for the moment. Corrective fall from 1.3534 is resuming and break of 1.3263 will confirm. In that case, we'd expect strong support from 1.3184 cluster level (61.8% retracement of 1.2968 to 1.3534 at 1.3184, 100% projection of 1.3534 to 1.3263 from 1.3455 at 1.3814 too) to contain downside and bring rebound. On the upside, break of 1.3455 will turn bias back to the upside for 1.3534 resistance.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg from 1.2460 is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. However, break of 1.2968 will argue that the third leg has already started and should at least bring a retest of 1.2460 low. Meanwhile, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Daily Pivots: (S1) 1.2429; (P) 1.2462; (R1) 1.2523; More...

With 1.2505 minor resistance intact, intraday bias in GBP/USD remains neutral first. On the upside, break of 1.2505 will suggest that pull back from 1.2614 has completed at 1.2365. And rise from 1.2108 is resuming. In such case, intraday bias will be turned back to the upside for 1.2614 resistance and above. Also, that would mean that the consolidative pattern from 1.1946 is extending with another rising leg. On the downside, break of 1.2365 will revive that case that consolidation from 1.1946 has completed and turn bias to the downside for 1.2108 support.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 1.0578; (P) 1.0604 (R1) 1.0630; More....

Intraday bias in EUR/USD remains neutral for consolidation above 1.0569 temporary low. Upside of recovery should be limited by 1.0688 resistance and bring fall resumption. As noted before, corrective rise from 1.0339 is likely finished after being rejected by 55 week EMA. And, the larger down trend is ready to resume. Below 1.0569 will turn bias to the downside for 1.0494 support first. Break will confirm this bearish case and send EUR/USD through 1.0339 to 100% projection of 1.1298 to 1.0339 from 1.0905 at 0.9946. On the upside, however, break of 1.0688 resistance will delay the bearish case and turn focus back to 1.0905 resistance instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

Daily Pivots: (S1) 1.0054; (P) 1.0074; (R1) 1.0092; More.....

Intraday bias in USD/CHF remains neutral as the consolidation from 1.0107 continues. Outlook is unchanged that corrective fall from 1.0342 should have finished with three waves down to 0.9812. Hence, downside of retreat should be contained by 0.9980 support and bring rally resumption. Above 1.0107 will target 1.0169 resistance. Decisive break there will confirm this bullish case and target 1.0342 key resistance next. However, below 0.9980 will dampen this bullish case and turn bias back to the downside for 0.9812 low.

In the bigger picture, we're still maintain that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the cross. However, the corrective nature of the fall from 1.0342 to 0.9812 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

Key Points:

• Saudi Arabia signals potential extension to production cuts.
• Price action being pushed to the update by geopolitical risk.
• Medium term outlook remains unchanged despite recent rally

Crude oil prices have experienced a renaissance over the past week as concerted rallies have harkened back to the days of complete OPEC control. In particular, the price of West Texas Intermediate (WTI) has soared over the past 24 hours as, a combination of geopolitical risk and further potential supply cuts from Saudi Arabia, have buoyed the commodity. Subsequently, WTI prices currently trade around the $53.39 a barrel mark but it remains to be seen if oil can retain this level over the medium term.

The Saudi Announcement that they will seek an extension to the current production cuts during the May OPEC meeting was certainly well received by the market. Future prices immediately spiked on the prospect of additional production constraints but the reality is that this is far from a done deal given the various OPEC members propensity to cheat on production cuts. This risk is amplified given the fact that many OPEC members are currently experiencing pressures upon their foreign currency reserves and require the market share to balance their books. Subsequently, there are plenty of external pressures to suggest that the May meeting could be contentious

Additionally, the success of any future production cut agreement is likely to hinge upon the participation of a range of non-OPEC members. In the new oil reality, OPEC no longer is able to control the globally integrated oil markets without the tacit agreement, or direct collusion, of external producers. However, this is difficult to see given the levels of crude production currently being obtained in the Canadian oil sands and U.S. shale operations. It is relatively clear that advances in North American oil extraction is strongly altering the balance of power within the marketplace and sorely testing the cartel’s ability to respond.

Realistically, once most of the geopolitical risks around Syria and North Korea ebb away, so too will the upward pressure on oil prices. Rebalancing is still occurring within global markets and the rise in WTI prices is simply a distraction as U.S. shale production activity is likely to now increase, in response to the price rises. The reality is that there is plenty of pain still required before supply is balanced to a sustainable level globally.

In addition, there are also some specific concerns over the current level of demand as we head into what is effectively the driving season for the United States. There are some indications that consumer sentiment is slipping ahead of a planned tightening phase from the Federal Reserve. This could have a marked impact on crude prices, especially if we continue to see growing inventory figures emanating from the EIA.

Ultimately, Crude prices are unlikely to persist at their current level in the medium term, even with an extension of the OPEC production cut agreement. As long as we manage to avoid a conflict in either Syria or North Korea the price of oil is likely to slide back towards the $50.00 handle over the next month. This will especially be the case of EIA inventory figures continue to disappoint the market with builds. Subsequently, realise that the long play is running out of momentum and that the downside is beckoning regardless of any OPEC action.

EURUSD

The EURUSD had another indecisive movement yesterday. The bias is neutral in nearest term. Overall price is still in a short-term bearish phase after a false break above 1.0873 two weeks ago, but needs a clear break below the trend line support as you can see on my H4 below to continue the bearish phase testing 1.0500. Immediate support is seen around 1.0575. A clear break below that area could trigger further bearish pressure testing 1.500 region. Immediate resistance is seen around 1.0630. A clear break above that area could trigger further bullish pressure testing 1.0700 area. Overall I remain neutral.

GBPUSD

The GBPUSD had a bullish momentum yesterday topped at 1.2494. The bearish scenario after broke below the triangle formation is no longer valid and price is now traded back above the H1 EMA 200 as you can see on my H1 chart below suggests a potential bullish outlook. The bias is bullish in nearest term retesting 1.2615. Immediate support is seen around 1.2450. A clear break back below that area could lead price to neutral zone in nearest term as direction would become unclear. Overall I remain neutral.

USDJPY

The USDJPY had a significant bearish momentum yesterday, broke below 110.10 key support and hit 109.34 earlier today in Asian session. The bias is bearish in nearest term testing 108.50 area. Immediate resistance is seen around 110.10. A clear break back above that area could lead price to neutral zone in nearest term as direction would become unclear. I am bearish on this pair.

USDCHF

The USDCHF had another indecisive movement yesterday. The bias remains neutral in nearest term but price is still in a bullish phase with key support seen at 1.0060 – 1.0020 region targeting 1.0170 area. A clear break back below 1.0020 (H4 EMA 200) would interrupt the bullish phase started from 0.9813. On the upside, a clear break and daily close above 1.0170 would expose 1.0250 or higher. Overall I remain neutral.

Daily Pivots: (S1) 109.15; (P) 110.04; (R1) 110.49; More....

USD/JPY's strong break of 110.10 support confirms resumption of near term decline from 118.65. Intraday bias is back on the downside for 50% retracement of 98.97 to 118.65 at 108.81. At this point, there is no clear indication of reversal yet and it's staying comfortably inside a falling channel. Break of 108.81 will target 61.8% retracement at 106.48 and possibly below. Meanwhile, on the upside, break of 111.57 resistance is needed to be the first sign of reversal. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. Sustained trading below 55 week EMA (now at 111.15) will indicate that the second leg from 98.97 has completed at 118.65. And in that case, USD/JPY would start the third leg down through 98.97 low to 61.8% retracement of 75.56 to 125.85 at 94.77. On the upside, break of 115.49 resistance should resume the rise from 98.97 for a test on 125.85 high.

The financial markets are clearly in risk averse mode on escalating geopolitical tensions. Gold jumps to as high as 1281.8 so far, comparing to last week's close at 1257.3, and is heading towards 1300 handle. WTI crude oil also extends recent rally to as high as 53.6, still on course to 55.24 key resistance. Safe haven flows into US treasury also pushed yield lower with 10-year yield losing -0.063 to close at 2.298. And 10-year yield is now having last week's spike low at 2.271 in sight. Reactions in stock were relatively muted as DJIA dipped to 20512.56 but closed at 20651, down just -0.03%. Though, notable weakness is seen in Nikkei as it's trading down -1.2% at the time of writing.

In the currency markets, the Japanese Yen jumps broadly on risk aversion. And technically, USD/JPY, EUR/JPY and GBP/JPY are extending recent near term fall. Aussie and Kiwi are the weakest ones but Canadian Dollar is supported by oil price. Falling US treasury yield drags down Dollar, which is trading as the second weakest for the time being.

North Korea tension escalates

Geopolitical tension escalated again when US President Donald Trump tweeted saying that North Korea is looking for trouble. And, "if China decides to help, that would be great. If not, we will solve the problem without them! U.S.A." And then Trump sent an "Armada. Very powerful" to Korean peninsula in a show of force. North Korean government responded by warning to take "the toughest counteraction against the provocateurs". And, North Korea will "not miss a chance to sweep the imperialist group with a nuclear fire of justice." The official Rodong Sinmun newspaper also warned that "Our revolutionary strong army is keenly watching every move by enemy elements with our nuclear sight focused on the U.S. invasionary bases not only in South Korea and the Pacific operation theater but also in the U.S. mainland."

How about tensions with Russia?

Meanwhile, US Defense Secretary Jim Mattis said that the US and Russia tensions will not "spiral out of control" as the military operation in Syria was a one-off. Mattis put the responsibility on Russia and said that "I'm confident the Russians will act in their own best interest and there is nothing in their best interest to say they want this situation to go out of control." Separately, US Secretary of State Rex Tillerson arrived in Moscow yesterday, less than a week after US bombed Syria in response to the government's use of chemical weapons on civilians. Tillerson warned that Russia can choose to a part to "relieve suffering of the Syrian people", or "maintain" its alliance with Syria and Iran. Russian President Vladimir Putin said he knew about the panned "provocations" to blame Syrian government and emphasized that UN should first investigate the attack.

San Francisco Fed Williams Blasts tariffs

San Francisco Fed President John Williams said that "three to four rate hikes seem appropriate this year". And Fed should "also begin to normalize our balance sheet towards the end of this year". Meanwhile, William also criticized the idea of imposing tariffs on countries that run a trade surplus with US. He said that higher tariffs would be "bad for growth, bad for jobs and bad for inflation." And he hoped that "there may be some separating of campaign rhetoric from what actually happens". Separately, Minneapolis Fed President Neel Kashkari said Fed "can do a little bit better" on inflation and employment.

BoJ Kuroda sounds more conscious on stimulus exit

BoJ Governor Haruhiko Kuroda told the parliament that the central bank's policy "doesn't directly target exchange rate". Nonetheless, "it's true that if the yen weakens, it may quicken achievement of our price target." Meanwhile, Kuroda also noted there are "a lot of measures" at the central bank's disposal for stimulus exit. And he pledged that BoJ can "take the most appropriate policy steps while maintaining market stability, which would include reducing the size of our balance sheet." Some analysts noted that Kuroda sounds more conscious about stimulus exit. And that could either be because he's more confidence in inflation, or he just wanted to avoid criticism of not having a plan.

On the data front...

Japan machine orders rose 1.5% mom in February. Domestic CGPI rose 1.4% yoy in March. China CPI rose 0.9% yoy in March, PPI rose 7.6% yoy. Australia Westpac consumer confidence dropped -0.7% in April. UK job data will be the main focus in European session. BoC will also announce rate decision later in the day and is widely expected to keep interest rate unchanged at 0.50%.

USD/JPY Daily Outlook

Daily Pivots: (S1) 109.15; (P) 110.04; (R1) 110.49; More....

USD/JPY's strong break of 110.10 support confirms resumption of near term decline from 118.65. Intraday bias is back on the downside for 50% retracement of 98.97 to 118.65 at 108.81. At this point, there is no clear indication of reversal yet and it's staying comfortably inside a falling channel. Break of 108.81 will target 61.8% retracement at 106.48 and possibly below. Meanwhile, on the upside, break of 111.57 resistance is needed to be the first sign of reversal. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. Sustained trading below 55 week EMA (now at 111.15) will indicate that the second leg from 98.97 has completed at 118.65. And in that case, USD/JPY would start the third leg down through 98.97 low to 61.8% retracement of 75.56 to 125.85 at 94.77. On the upside, break of 115.49 resistance should resume the rise from 98.97 for a test on 125.85 high.

Economic Indicators Update

STOCKS

Overall stocks are mixed. Some scope of rise is visible for the coming sessions.

Dow (20651.30,-000.03%) has bounced from very short term support near 20510. While that holds, the index could bounce back towards 20780 in the next couple of sessions.

Dax (12139.35, -0.50%) tested support at 12049 on the downside before closing at slightly higher levels yesterday. While the support holds, there is a fair chance of moving up towards 12200-12400 in the near term. Near term looks bullish.

Shanghai (3278.70, -0.31%) is unable to break above 3280 just now but could eventually test 3300 on the upside. Near term looks bullish.

Nikkei (18521.64, -1.21%) has come off below 18650 again and this could be an indication of a sharp fall as mentioned in our earlier editions. Initial target is 18200 for the coming sessions.

Nifty (9237, +0.61%) bounced back from 9174 instead of testing the lower support at 9130. Looking at the daily channel, there is scope of rising towards 9300-9400 in the medium term.

COMMODITIES

As we had expected yesterday, weakness in Dollar index (from 101 to 100.61) has boosted bullion significantly. Gold (1279) has closed above its crucial resistance of 1265. If it will penetrate 1285 on a daily basis then we may see 1300 levels within a couple of days. Due to the near term overbought nature, we may see some correction thereafter but buyer could take every dip as an opportunity for fresh buying.

Similar kind of move has been seen in silver (18.39) also but it is still under its crucial resistance of 18.5. Initial signs of a possible bounce to 19 are visible but confidence will come only on a close above 18.55 levels.

Copper (2.60) has been stuck in the range of 2.55-2.70, which may go on for another week. In the medium term 2.55-57 are going to be a strong support now but a close below that could open up 2.50 and 2.45 levels respectively.

Brent (56.40) and WTI (53.54) are trading within the range of 55-57 and 53-55 and considering the short term overbought state, possibility of a near term correction can’t be ignored. We have US crude oil inventory data at 8.00 pm IST and the U.S. forecast is -0.1M. But a lower than expected decrease or an increase in weekly inventory could open up 53.60 levels for Brent and 51 for WTI respectively.

FOREX

The geopolitical anxieties have increased after North Korea’s threat of nuclear retaliation if attacked and have driven money away from the risk assets.

Dollar Index (100.75) is in a grinding decline which may keep it range bound in 100.00-101.50 for the next few days till it makes up its mind for the next directional move. Interim support at 100.35

All Euro (1.0596) has managed so far is a feeble bounce to 1.0630 from the support of 1.0550 but the chances of a retest of the support looks strong, below which comes 1.0450.

The rejection from our resistance of 111.60 has pushed Dollar Yen (1.0947) sharply below the support around 110.00, in line with our expectations. As long as it trades below 110.00, the chances of further decline to 108.25-107.85 remain open. The possibility of Nikkei (18516.04, -1.24%) going down to 18200 in the coming sessions increases the possibility of Yen strengthening. (Check Equities section)

Pound (1.2485) has achieved our immediate upside target of 1.2465 and wiped out most of the losses incurred last week which keeps it in the sideways mode in the broader range of 1.2350-1.2600. The consolidation phase may continue for a few more sessions.

Aussie (0.7490) consolidates in the lower levels but may resume the larger downtrend in the next few days for our downside target of 0.7450 and 0.7375.

Dollar-Rupee (64.50) has come off the highs after it nearly tested our resistance of 64.70. While 64.70 holds, Dollar-

INTEREST RATES

The US yields have fallen sharply and is testing support at current levels. The 5YR 91.82%), 10yr (2.29%) and the 30YR (2.92%) are down from 1.88%, 2.35% and 2.98% respectively but could bounce back in the coming sessions,

The German-US 2Yr (-2.08%) and 10Yr (-2.08%) have moved up sharply and could both head higher towards -2.05% in the near term. Euro could see some strength in the next few sessions before again coming off in the medium term.

The UK-US 10YR (-1.23%) has started rising and could test resistance near -1.13% in the coming sessions. This could prevent further losses on the Pound just now and could keep the currency stable against the US Dollar.

Short term Elliott Wave view in Crude Oil (CL_F) suggests that cycle from 3/22 low (47.01) is unfolding as a double three Elliott wave structure where Minute wave ((w)) ended at 50.85 and Minute wave ((x)) ended at 49.88. Minute wave ((y)) is in progress and the internal is unfolding also as a double three Elliott wave structure where Minutte wave (w) ended at 52.94 and Minutte wave (x) pullback ended at 51.49. Cycle from 3/22 low is mature but near term, while pullbacks stay above 51.49, Crude has scope to extend higher to 53.71 – 54.61 area to complete Minor wave 1 and end cycle from 3/22 low, then Crude Oil should pullback in Minor wave 2 to correct cycle from 3/22 low before the rally resumes. We don’t like selling the pullback and expect buyers to appear once Minor wave 2 pullback is complete in 3, 7, or 11 swing for an extension higher.

CL_F 1 Hour Elliott Wave Chart