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The EUR/JPY currency pair appreciated about 85 base points during yesterday's trading session. The exchange rate breached the 50-hour simple moving average at 121.40 on Monday.

The pair tested the upper boundary of a descending channel pattern at 121.66 during the morning hours of Tuesday's trading session.

If the resistance level formed by the upper border of the channel pattern holds, a decline towards the 120.80 marks could be expected today.

On the other hand, if a breakout occurs, a surge towards the 200-hour SMA at 122.07 might be the target for bullish traders within this session.

The Australian Dollar appreciated more than 50 base points against the US Dollar on Monday. A breakout occurred through the upper boundary of an ascending channel pattern during the morning hours of today's trading session.

Given that a breakout had occurred, it is likely that the AUD/USD currency pair will continue its upside momentum within this session. The potential upside target for bullish traders will be near the 0.7020 area.

However, the currency exchange rate might make a brief pullback towards a support cluster formed by the combination of the weekly and the monthly PPs at 0.6955 during the following trading session.

A junior descending channel pattern guided the US Dollar lower against the Canadian Dollar on Monday. The currency pair depreciated about 0.66% in value during yesterday's trading session.

Everything being equal, it is likely that the junior descending channel might continue to guide the exchange rate lower today. The potential downside target will be near a support level formed by the weekly S1 at 1.3397.

On the contrary, the currency exchange rate might reverse from the current price level at 1.3425 and aim for the 200-hour simple moving average at 1.3480 during the following trading session.

The New Zealand Dollar appreciated about 61 base points against the US Dollar on Monday. The currency pair revealed a new junior ascending channel pattern at the end of yesterday's trading session.

The exchange rate is currently trading near the bottom border of the junior ascending channel pattern and could be set for a breakout.

If this breakout occurs, a decline towards the 50-hour simple moving average at 0.6556 might happen.

However, if the support level formed by the lower boundary of the channel pattern holds, the pair might continue its upward swing today.

The US dollar weakened against a basket of major currencies due to the impact of trade conflicts on the country's economy. The dollar index (#DX) closed in the negative zone (-0.62%). Global trade relations are escalating. Yesterday, the President of the Federal Reserve Bank of St. Louis, James Bullard said that the regulator might be forced to reduce interest rates due to low inflation and the threat posed by the US trade conflict with China. The greenback was under pressure due to weak statistics on economic activity in the manufacturing sector of the United States. In addition, US President Donald Trump entrusted to exclude India from the list of countries that had trade privileges from June 5. He believes that India does not provide equitable and reasonable access to its markets.

The Australian dollar strengthened slightly against the US dollar during the Asian trading session. Thus, the Reserve Bank of Australia, as expected, lowered the interest rate for the first time in three years from 1.50% to 1.25%. Also, a report on retail sales was published, the figure fell by 0.1% in April, while experts forecasted growth by 0.2%.

The "black gold" prices are declining due to global risks. At the moment, futures for the WTI crude oil are testing the mark of $52.90 per barrel.

Market Indicators

• Yesterday, there was a variety of trends in the US stock market: #SPY (-0.25%), #DIA (+0.11%), #QQQ (-2.20%).
• The 10-year US government bonds yield has become stable after a continuous fall. At the moment, the indicator is at the level of 2.10-2.11%.

The news feed on 2019.06.04:

• UK construction PMI at 11:30 (GMT+3:00);
• Consumer price index in the Eurozone at 12:00 (GMT+3:00).

EUR/USD

Current level - 1.1249

The violation of 1.1220 allows a test of 1.1270 and even 1.1330 hurdle. The outlook on the senior frames remains bearish, for a slide and break through 1.1110.

USD/JPY

Current level - 107.96

A break through the crucial 108.40 peak will confirm, that a bottom is in place and will set a rebound towards 109.05.

GBP/USD

Current level - 1.2661

Still positive here, for a tight test of 1.2690 and the latter should set the beginning of a dive towards 1.2470.

Negativity hits markets

The market has shifted into a defensive position as risks to the downside have increased. US Treasury yields came under pressure pushing 3m – 10Y spreads deeper into the inverted territory. USD was sold as St. Louis Fed President Bullard stated that a “downward policy rate adjustment may be warranted soon.” The market is now pricing in just under two Fed interest rates cuts in 2019 (significant shift from earlier expectations). Predictions for a protracted trade and rising Saudi oil production has sent crude prices lower. In the current macro environment, it is difficult to see any bright spots. With US President Trump calling host UK politician a “stone cold loser” and Duchess of Sussex “nasty” highlights how the general dialog has become toxic. This permeates the psychology of the markets, in our view. The downward trend in manufacturing sentiment continued in May, with China below the 50-expansion level and EU heading into contraction. The US ISM index has eroded meaningfully in recent months indicating only a slow expansion. However, the weak numbers do not take into account US 5% import tariff on Mexico. The risk that global growth fears will challenge overvalued asset prices indicates that the demand for safe-haven currencies will increase. JPY has the highest inverted correlation to VIX indicated that yen should be the risk-off trade of choice. CHF has been a broad gain in recent weeks as regional / EU specifics risk favors franc accumulation. The carrying cost of short USDJPY makes the trade painful, however, short EURJPY looks attractive in this environment. Should the ECB and BoJ keep their ultra-accommodating stance, deposit rates will be almost equal. EURJPY bounce today is likely a short-term relief rather than directional shift. But remember central banks actions is the dominate determinate of pricing, should the Fed indicated looser policy, US equity, and USD will rally.

AUD in demand despite RBA rate cut

The decision made by the Reserve Bank of Australian to cut its Cash rate by a quarter-percentage point to historical low 1.25% came as expected. The statement made by RBA Governor Philip Lowe two weeks ago already signaled the intention. Historically, the last rate move occurred in 2 August 2016 (-0.25% to 1.50%) while the last rate hike came in 2 November 2010. The recent development in employment, slackening inflation and global trade disputes are the main reasons for the call.

CPI in 1Q came at 1.30%, largely below 2% - 3% target band while unemployment rate rose 5.2% in April, highest in 8 months. RBA 2019 forecasts for GDP and inflation are now 2.75% (prior: 3%) and 2% (prior: 1.75%). Yet the rate decision appears to have a limited impact on the FX market, as the Aussie appears to be favored despite the rate cut. There is indeed an explanation to this, since US/Australian yield differentials are favoring AUD. 10-year spreads are lowest since March 2019 (0.6053) due to recent US yields fall, suggesting that AUD should continue to gain support short-term. However, the decline in AUD/USD should come soon enough

Eurozone Unemployment rate dropped to 7.6% in April, down from 7.7% and beat expectation of 7.7%. That's also the lowest rate recorded since August 2008. EU 28 unemployment rate was unchanged at 6.4% in April.

Among the Member States, the lowest unemployment rates in April 2019 were recorded in Czechia (2.1%), Germany (3.2%) and the Netherlands (3.3%). The highest unemployment rates were observed in Greece (18.5% in February 2019), Spain (13.8%) and Italy (10.2%).

Eurozone CPI slowed to 1.2% yoy in May, down from 1.7% yoy and missed expectation of 0.9% yoy. Core CPI dropped to 0.8% yoy, down from 1.3% yoy and missed expectation of 0.9% yoy. Looking at the components, energy is expected to have the highest annual rate in May (3.8%, compared with 5.3% in April), followed by food, alcohol & tobacco (1.6%, compared with 1.5% in April), services (1.1%, compared with 1.9% in April) and non-energy industrial goods (0.3%, compared with 0.2% in April).

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.11603
Open: 1.12407
% chg. over the last day: +0.64
Day's range: 1.12407 – 1.12576
52 wk range: 1.1111 – 1.2009

USD got weakened yesterday against the other majors. The quotes grew by 85 points. The trading instrument updated the key extremums. The demand for USD fell after the comments made by the FOMC representative Bullard. The official stated the quotes descend "can be justified soon", including the growing risks in the US economy which are caused by the growing tension in the world trade and weak inflation in the US. An additional pressure is caused by the weak business activity report in the industrial sector by ISM. The quotes are consolidating around 1.12350-1.12600. Open positions from these levels. The quotes can grow further.

The Economic News Feed for 04.06.2019:

Consumer Price Index (EU) – 12:00 (GMT+3:00);

Unemployment Rate Report (EU) – 12:00 (GMT+3:00);

Keep an eye on the statements by the head of the Federal Reserve.

The price fixed above 50 MA and 200 MA which points to the power of the buyers.

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

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: 1.12600, 1.13000
Resistance levels: 1.12350, 1.12150, 1.11900

If the price fixes above the local resistance 1.12600 expect further growth towards 1.30000

Alternatively, the quotes can fall towards 1.12000-1.11800.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.26264
Open: 1.26639
% chg. over the last day: +0.19
Day's range: 1.26558 – 1.26744
52 wk range: 1.2438 – 1.3631

GBP/USD shows an ambiguous technical picture. GBP is consolidating. The local support and resistance levels are 1.26400 and 1.26750. The demand for USD lowered due to the growing expectations for the Federal Reserve to dencrease the rates next year. The quotes have prospects for recovery. The investors are waiting for reports fromt he UK. Open the positions from the key levels

At 11:30 (GMT+3:00) the UK will publish a construction PMI report.

The price fixed above 200 MA which points to the power of the buyers.

The MACD histogram is in the positive zone and keeps rising which provides a strong indicator to buy GBP/USD

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: 1.26400, 1.26100, 1.25850
Resistance levels: 1.26750, 1.27000, 1.27450

If the price fixes above 1.26750, expect growth towards 1.27000-1.27400.

Alternatively, the quotes can fall towards 1.26100-1.25850.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.35168
Open: 1.34403
% chg. over the last day: -0.59
Day's range: 1.34328 – 1.34476
52 wk range: 1.2727 – 1.3664

The quotes started to descend and set the new local minimums. USD is under pressure after the FOMC represetatives' comments and weak economic releases. CAD is consolidating around 1.34300 and 1.34600. The quotes can descend further. Keep an eye on the oil quotes dynamics and open positions from the key levels.

The Economic News Feed for 04.06.2019 is calm.

The indicators point to the power of the sellers, the price fixed below 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 USD/CAD.

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: 1.34300, 1.34000
Resistance levels: 1.34600, 1.34850, 1.35250

If the price fixes below 1.34300, expect further descend towards 1.34000-1.33800.

Alternatively, the quotes can grow toward 1.34800-1.35000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.264
Open: 108.054
% chg. over the last day: -0.18
Day's range: 107.857 – 108.087
52 wk range: 104.97 – 114.56

USD/JPY keeps showing a negative trend and update the local minimums. The quotes are consolidating around 107.850-108.150. The JPY has a tendency to grow against th eUSD. The demand for safe assets remains high due to the growing risks in the world trade. Keep an eye on the US Treasury bonds' yield and open positions from the key levels.

The Economic News Feed for 04.06.2019 is calm.

The price fixed below 50 MA and 200 MA which points towards the power of the buyers.

The MACD histogram is in the negative zone and keeps descending which recommends selling USD/JPY.

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

Trading recommendations

Support levels: 107.850, 107.500
Resistance levels: 108.150, 108.450, 108.850

If the price fixed below 107.850, expect further descend towards 107.500-107.300.

Alternatively, the quotes can recover towards 108.450-108.800.

USD weakened against a number of its counterparts as arguments for a possible rate cut by the Fed increased. Yesterday, St. Louis Fed President James Bullard stated that an interest rate cut by the Fed “may be warranted soon”. Mr. Bullard also stated that the unexpected announcement of tariffs on US imports from Mexico have shaped an environment of elevated uncertainty. According to media reports he also mentioned that the trade dispute may have a larger impact on global markets in which case a rate cut may provide insurance on economic slowdown. Treasury yields had been already in a decline as investors had showed a strong demand for US treasury bonds in an effort to reduce risk. Also the ISM Manufacturing PMI reached its lowest reading in over two years, as US manufacturers expressed their concerns about the trade wars. It would be interesting to note that the USD had retreated even against currencies such as the EUR with weak fundamentals. Should the current uncertainty continue, we could see USD weakening even further, yet we wouldn’t be surprised if the market absorbed the news and USD stabilized within the day. EUR/USD rallied yesterday broke consecutively the 1.1175 (S2) and the 1.1220 (S1) resistance lines (now turned to support and tested the 1.1260 (R1) resistance level. Technically the pair is expected to maintain bullish tendencies, yet should the USD side start to correct we could see EUR/USD dropping. Please note that the RSI indicator in the 4 hour chart is also advising caution, as it is clearly above the reading of 70 and could be implying an overcrowded long position for the pair. Should the bulls continue to dictate the pair’s direction, we could see it breaking the 1.1260 (R1) resistance line and aim for the 1.1300 (R2) resistance level. On the flip side should the bears take over, we could see the pair breaking the 1.1220 (S1) support line and aim for the 1.1175 (S2) support barrier.

RBA cuts rates and the Aussie gains somewhat

AUD gained somewhat against the USD during today’s Asian session, as the RBA released its interest rate decision. The bank decided to cut rates by 25 basis points reaching +1.25% in comparison to prior level of 1.50%. In its accompanying statement, the bank maintained a rather cautious stance but no clear dovish bias towards another rate cut was evident. It should be noted that the bank seems to be focusing on the Australian labour market as the decision stems in the bank’s efforts to boost it. The decision does not seem to provide a stable support for the Aussie as uncertainty remains present in the bank’s outlook, however it should be noted that it is a record low level for RBA’s interest rates. AUD/USD had some bullish tendencies yesterday and during today’s Asian session, aiming for the 0.7000 (R1) resistance line. The pair could continue to have some bullish tendencies as the financial releases (today and early tomorrow) are expected to favor the AUD and weaken the USD. Should the pair’s long positions be favored by the market we could see it breaking the 0.7000 (R1) resistance line. Should the pair come under the selling interest of the market, we could see it breaking the 0.6920 support line.

Other economic highlights, today and early tomorrow

Today during the European session we get UK’s construction PMI for May and Eurozone’s preliminary CPI rate for May. In the American session we get the US factory orders growth rate for April and in tomorrow’s Asian session we get Australia’s GDP rate for Q1 as well as China’s Caixin non-manufacturing PMI for May. As for speakers please note RBA Governor Lowe, Chicago Fed President Evans, NY Fed President Williams, Fed Chair Powell, Fed’s Brainard and Dallas Fed President Kaplan speak. We expect Powell’s speech to be closely monitored by the market as it may include hints about the Fed’s future intentions, especially after James Bullard’s comments yesterday.

AUD/USD H4

Support: 0.6920 (S1), 0.6860 (S2), 0.6760 (S3)
Resistance: 0.7000 (R1), 0.7065 (R2), 0.7120 (R3)

EUR/USD H4

Support: 1.1220 (S1), 1.1175 (S2), 1.1125 (S3)
Resistance: 1.1260 (R1), 1.1300 (R2), 1.1340 (R3)