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European Commission Vice President Valdis Dombrovskis said that Italy will need a "substantial deficit correction in 2019 and 2020". He told La Repubblica daily a day after the Commission opened the way to so called "Excessive Deficit Procedure" on Italy. Dombrovskis also warned the coalition government's planned tax cut reform could be very expensive and risks further deteriorating Italy's public finances.

Economics Commissioner Pierre Moscovici told the European affairs commission of the lower house of France's parliament, "it's up to Italy to bear the burden of proof that it's reducing its deficits and debt." He reiterated that "my door is open to talk, to listen and to take note."

Italy's Deputy Prime Minister Luigi Di Maio insisted "there should not be a budget correction." The coalition will start negotiations with EU to avoid disciplinary proceedings over its rising debt. However, Di Maio emphasized that such negotiations should be led by politicians, not "bureaucrats".

The Euro attempts to stabilize above 55SMA (1.1214) after Wednesday's strong upside rejection (1.1306) and subsequent pullback that left bearish daily candle with long upper shadow.

Repeated failure to clear key barriers, provided by daily cloud top/100SMA (1.1277) despite spike higher, shifted immediate risk lower, however, strong bullish momentum underpins and expected to keep alive hopes for fresh upside attempts while the price holds above 55SMA.

On the other side, bearish divergence on daily stochastic warns and keeps the downside vulnerable.

Break of 55SMA and more significant 1.1202/1.1190 zone (daily cloud base/converged 10,20/30 SMA's) would generate strong bearish signal and risk further retracement of 1.1116/1.1306 recovery leg.

Better than expected German factory orders (Apr 0.3% vs 0.1% f/c), released earlier, offered mild support, as focus turns towards ECB's policy meeting due later today. The European central bank is expected to stick to its non-standard measures in order to boost bloc's economy, weakened by escalating global trade war that threatens to further slow global growth.

ECB's President Mario Draghi is expected to maintain dovish tone, but would likely keep some stronger measures on hold as the economic outlook darkens. Stronger dovish tone from the ECB, although the monetary policy ammunition is limited (as the ECB pushed its main interest rate below zero and bought 2.6 trillion euros worth bonds), is expected to weigh on Euro and keep near-term focus at the downside. Conversely, bullish scenario requires sustained break above 100SMA/daily cloud top to signal continuation of recovery from 1.1110 zone base.

Res: 1.1237, 1.1263, 1.1279, 1.1306
Sup: 1.1214, 1.1202, 1.1190, 1.1160

Trump reiterated his threat to further escalate trade war with China again as the told reporters today. He said "Our talks with China, a lot of interesting things are happening. We'll see what happens... I could go up another at least $300 billion and I'll do that at the right time. But he added that "China wants to make a deal" and "Mexico wants to make a deal badly."

On the other hand, China's Commerce Ministry blamed Trump's use of "ultimate pressure" has caused serious setbacks to trade negotiations. The ball is in the US court as future direction of talks would depend on Washington. MOFCOM also said China will have to adopt the necessary countermeasures if the United States decides to unilaterally escalate trade tensions.

Persistent expectations that the Federal Reserve will drive the car on interest rates into reverse and then accelerate at full speed in response to US-led trade disputes impacting economic sentiment have led to Dollar buyers hitting a brick wall.

Downbeat comments from St. Louis Fed President James Bullard on how a rate cut “may be warranted soon” have dealt the Dollar a knockout punch.

Market pessimism over US-led trade disputes negatively impacting the US economy is now threatening the Dollar’s previous position as a safe-haven in times of market uncertainty, and this view continues to be highlighted in price action for the Greenback.

The Dollar is very much on the ropes just one week after it reached a new milestone high for 2019; attention will now be drawn towards the US employment report scheduled for release at the end of the week. Dollar buyers need to see signs of resilient job growth in the United States to see some light at the end of the tunnel.

European Central Bank to repeat pessimism on global economy

Today’s highlight and major risk event for the Euro will be the European Central Bank meeting. It is widely expected that the ECB will leave monetary policy unchanged, but what everyone wants to know is what is the ECB’s take is on the pessimistic views that are surrounding the global economy.

The Eurozone remains bombarded by a storm of domestic and external headwindsand therefore, the likelihood is high that the ECB will deliver a downbeat assessment of its economy.

A sharp slowdown in EU inflation earlier this week, returning concerns over the Italian budget and Brexit, among many other risks,are pressuring the ECB to remain in a defensive position.

The risk factors that investors will be paying close attention to arethe ECB’s economic projections. Another potential slide lower in economic forecasts, in line with revisions elsewhere that have been downgraded in recent weeks will fuel speculation that the ECB will leave interest rates at record-low levels far beyond 2020.

Gold continues to glitter as window-shoppers loom

Gold has stormed back into fashion throughout the week following the acceleration in Dollar weakness.

Vulnerability in the Dollar has played an influential role in Gold’s rapid sprint up the hill, with prices punching above levels not seen in over three months to above $1340.

Warning lights flash red as IMF adds to market gloom

A sense of disappointment is lingering across financial markets this morning after the United States and Mexico failed to reach a deal to avoid proposed trade tariffs. This unfavourable development comes at a time when US-China trade talks remain at a standstill and other external uncertainties, including geopolitical risk factors, continue to strain market sentiment.

The mood across global equity markets is under the spotlight and expected to remain negative as we begin to conclude the trading week, especially when considering that the International Monetary Fund on Wednesday fired a warning shot that US-China trade tensions are a threat to global growth.

Market speculation over the Federal Reserve cutting interest rates amid trade tensions, a weaker Dollar and geopolitical risks should ensure Gold remains in demand moving forward.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.12514
Open: 1.12209
% chg. over the last day: -0.21
Day's range 1.12209 – 1.12359
52 wk range: 1.1111 – 1.2009

EUR/USD recovered a portion of the losses against the other majors. It is supported by the positive business activity reports in the non-indurstrial sector. At the same time, the ADP report on the labour market was remarkably weak. EUR/USD is consolidating, the local support and resistance are 1.12200 and 1.12500. Today the Central Bank of Europe will announce its decision on the key interest rate. It is expected to preserve the monetary policy at the same levels. Keep an eye on the statementes by the FOMC and CBE representatives and open positions from the key levels.

The Economic News Feed for 06.06.2019:

GDP report (EU) – 12:00 (GMT+3:00);

Key Interest Rate Announcement (EU) – 14:45 (GMT+3:00);

Primary Jobless Clains Report (US) – 15:30 (GMT+3:00);

The indicators do not provide precise signlas, the price fixed between 50 MA and 200 MA.

The MACD histogram is in the negative zone but above the signal line which gives a weak signal to sell EUR/USD.

The Stochastic Oscillator is in the overbought zone, the %K line started to cross the %D line. There are no signals right now.

Trading recommendations

Support levels: 1.12200, 1.11900, 1.11600
Resistance levels: 1.12500, 1.12750, 1.13000

If the price fixes above 1.12500, expect further growth towards 1.13000.

Alternatively, the quotes can correct further towards 1.11700-1.11500.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.26988
Open: 1.26834
% chg. over the last day: -0.08
Day's range: 1.26741 – 1.26939
52 wk range: 1.2438 – 1.3631

GBP/USD retreated from the local maximums. The demand for the USD recovered after the positive business activity reports. The GBP/USD quotes are consolidating at 1.26750 and 1.27100. The market participants are waiting for relevant data regarding Brexit. Some economists at Reuters expect the GBP to reach a paritet with EUR should the UK leave the EU without an agreement. Open positions from the key levels.

The Economic News Feed for 06.06.2019 is calm.

The indicators do not provide precise signals, the price fixed between 50 MA and 200 MA.

The MACD histogram is in the negative zone, which points to the bearish mood.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.26750, 1.26400, 1.26100
Resistance levels: 1.27100, 1.27450

If the price fixes above 1.27100, expect further growth towards 1.27400-1.27600.

Alternatively, the qutoes can descend towards 1.26400-1.26200.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.33923
Open: 1.34145
% chg. over the last day: +0.22
Day's range: 1.34075 – 1.34301
52 wk range: 1.2727 – 1.3664

USD/CAD is in a bullish mood. The trading instrument set the new local maximums. The pressure on the CAD is caused by the agressive sales on the oil market. Right now the quotes are consolidating around 1.34000-1.34300 and have prospects for further correction. Expect important economic reports and open positions from the key levels.

At 17:00 (GMT+3:00) Ivey will publish a business activity index for Canada.

The price fixed between 50 MA and 200 MA. There are no signals at the moment.

The MACD histogram is in the positive zone but below the signal line which gives a weak signal to buy USD/CAD.

The Stochastic Oscillator is in the oversold zone, the %K line is crossing the %D line. There are no signals at th moment.

Trading recommendations

Support levels: 1.34000, 1.33650, 1.33500
Resistance levels: 1.34300, 1.34600, 1.34850

If the price fixes above 1.34300 expect further correction towards 1.34600-1.34850.

Alternatively, the quotes can descend towards 1.33700-1.33500.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.136
Open: 108.464
% chg. over the last day: +0.17
Day's range: 108.070 – 108.464
52 wk range: 104.97 – 114.56

USD/JPY is trading in a flat. There is no single trend. Since the beginning of the month the key levels were 108.000 and 108.450. The demand for the safe assets remain high due to a high tension levels in the world trade. Keep an eye on the US Treasury bonds' yeild. You should open positions from the key levels.

The Economic News Feed for 06.06.2019 is calm.

The indicators do not provide precise signlas, the price has crossed 50 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the oversold zone, the %K line iscrossing the %D line. There are no signals.

Trading recommendations

Support levels: 108.000, 107.850, 107.500
Resistance levels: 108.450, 108.850, 109.200

If the price fixes above the round 108.000, expect further descend towards 107.600.

Alternatively, the quotes recover 108.800-109.000.

EURGBP stretched its four-week rally to an almost five-month high of 0.8900 on Tuesday before pulling slightly lower.

The MACD seems to be losing momentum below its red signal line, the RSI is still hovering around its 70 overbought mark and the red Tenkan-sen is flattening well above the blue Kijun-sen, all signaling a more cautious trading in the short term.

The market trend, however, is likely to hold on the upside as long as the price holds far above its moving averages and the Ichimoku cloud.

Should weakness extend below the 0.8800 mark, support to downside movements could be initially detected within the 0.8740-0.8720 area. Clearing that zone, the next stop could be around 0.8776, a frequently tested level since the start of the year.

Alternatively, the pair needs to overcome the 0.8900 top to meet a key barrier between 0.8935-0.8970. The 0.9000 mark could act as resistance too before a more important battle starts near 0.9060

In the three-month picture, the sentiment turned bullish after the price surpassed the 0.8676 number. The positive slope in the 50-day SMA, which moves closer to the 200-day SMA, also adds optimism for a brighter outlook.

All in all, EURGBP maintains bullish both in the short and the medium-term timeframes.

NZDUSD had one of its best trading sessions for this year, this week, gaining more than 1.4% to edge above its short-term moving averages in the daily timeframe and reach a fresh one-month high of 0.6665 on Wednesday.

The technical indicators are still flashing bullish, with the MACD stretching further above its red trigger line and the RSI moving above its 50 neutral level. The red Tenkan-sen line of the Ichimoku cloud could be an indication that the rally is overdone as it is flattening, and hence negative corrections should not be a surprise in coming sessions.

Traders would be eagerly looking for a break above yesterday’s top of 0.6665 to increase buying orders. If that’s the case, the rally could last until the 0.6705 – 0.6720 resistance zone. If bullish forces appear even stronger, 0.6840 should be another barrier to keep in mind.

Should the price retreat, the 40-day simple moving average (SMA) currently at 0.6603 could provide immediate support. Moving lower, the focus will shift to the 0.6560 region, which if broken would increase speculation that the short-term bullish phase has ended, and the way is open for a move back to the seven-month low of 0.6480.

In brief, even though the recent bullish action turned the short-term picture slightly positive, buyers could get more active if the price closes above the longer-term 200-SMA (0.6705).

EUR/USD

Current level - 1.1229

The peak at 1.1306 signals a negative bias, for a break through 1.1220 static support, towards 1.1100 lows again.

USD/JPY

Current level - 108.11

My outlook here is neutral due to the lack of trend dynamics in the tight range between 107.70 and 108.40.

GBP/USD

Current level - 1.2677

A minor reversal at 1.2750 signals a bearish bias, for a break through 1.2640, en route to 1.2560.

Daily Pivots: (S1) 137.24; (P) 137.51; (R1) 137.82; More...

Intraday bias in GBP/JPY remains neutral and more consolidation could be seen above 136.55 short term bottom. Upside of recovery should be limited by 38.2% retracement of 146.50 to 136.55 at 140.35 to bring fall resumption. On the downside, break of 136.55 will turn bias to the downside and extend the fall from 148.87 to 131.51 low.

In the bigger picture, current development suggests that GBP/JPY medium term fall from 156.59 (2018 high) is still in progress. Break of 131.51 will target 122.36 (2016 low). Structure of such decline is corrective looking so far, arguing that it's just the second leg of consolidation from 122.36. Thus, we'd expect strong support from 122.36 to contain downside to bring reversal.

Pivot (invalidation): 52.50

Our preference Short positions below 52.50 with targets at 51.25 & 50.60 in extension.

Alternative scenario Above 52.50 look for further upside with 53.00 & 53.40 as targets.

Comment The RSI is below its neutrality area at 50%