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The British pound has come under heavy downside pressure against the US dollar, following another bearish intraday reversal on Wednesday. The four-hour time frame is showing that the GBPUSD pair is close to the neckline of a large head and shoulders pattern. A break below the 1.2600 level will set-off the bearish pattern, which holds a downside target close to the 1.2450 level.

The GBPUSD pair is heavily bearish while trading below the 1.2600 level, key support is located at the 1.2550 and 1.2500 levels.

If the GBPUSD pair holds above the 1.2600 level, key intraday resistance is found at the 1.2640 and 1.2700 levels.

The Canadian dollar declined against the USD in spite of the hawkish statement from the Bank of Canada. The bank left interest rates unchanged at the 1.75% level for the fifth time in a row. In the statement, the governor said there was no need for the bank to move rates any time soon. He also said that when the bank finally changes rates, it will likely raise them. With his hawkish statement, Stephen Poloz became one of the world’s most upbeat Fed chairs. The statement said:

Overall, recent data have reinforced the Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased. In this context, the degree of accommodation being provided by the current policy interest rate remains appropriate. In taking future policy decisions, the Governing Council will remain data dependent and especially attentive to developments in household spending, oil markets, and the global trade environment.

The kiwi rose slightly after the country released mixed data. In April, the building consents declined by a MoM rate of 7.9%. This was worse than the expected 1.3% gain. The building approvals sank by -4.7%, which was lower than the expected gain of 0.1%. The building capital expenditure declined by -2.8% while the private house approvals declined by -2.8%. The country also released the annual budget, which was titled, ‘world-first well-being budget.’ The budget was designed to address the increasing disparity between the have and the have nots. Most of the funds will be spent on mental health, child well-being and measures to combat family violence.

The price of crude oil rose in overnight trading after the American Petroleum Institute (API) released inventory data. The number showed that crude supplies declined by 5.3 million barrels over the past week. This was a steeper contraction than the 2.4 million barrels released a week ago. Today, investors expect data from EIA to show a contraction of more than 857K. Meanwhile, gasoline stockpiles increased by 2.7 million barrels while distillates declined by 2.1 million barrels.

XBR/USD

The XBR/USD pair rose slightly after API released inventory data. The XBR/USD pair is trading at the 67.89 level, which is higher than yesterday’s low of 66.57. On the hourly chart below, the price is along the 50-day and 25-day moving averages. The dots of the Parabolic SAR are on the lower side while the pair appears to have formed a minor double bottom yesterday. The pair will likely remain unchanged as traders wait for inventory data from the US.

EUR/USD

After several days of consecutive declines, the EUR/USD pair paused in overnight trading. The pair is now trading at the 1.1137 level, which is slightly higher than yesterday’s low of 1.1125. On the hourly chart, the price is along the lower line of the Bollinger Bands while the RSI has emerged from the oversold territory of 30. The accumulation and distribution indicator has flattened. With no major economic data expected today, it is likely that the EUR/USD pair will continue to consolidate along these levels.

USD/CAD

The USD/CAD pair rose yesterday after the Bank of Canada (BOC) delivered its monetary policy decision. The pair reached a high of 1.3546, which was the highest level since January 4. On the four-hour chart, the price is above the 25-day and 50-day moving averages. The RSI has climbed to almost the overbought level of 70 while the signal line of the MACD continues to soar. The price will likely test the important resistance level of 1.3600.

USDJPY is struggling to recover last week's losses which drove the pair back into the 109 area but the positive slope of the RSI and the rebound in the Stochastics provide some optimism that the bears could stay on the sidelines in the short-term trading. The trend signals, however, are still negative as the pair has violated its January uptrend by creating a lower low and a lower high this month.

A descent rally above the 110 level and the 20-day simple moving average (SMA) could add more buyers into the market, pushing resistance towards the previous high of 110.66 and the 50-day SMA currently around 110.80. The 200-day SMA (111.34) could be another obstacle on the way up, though the main target remains the descending line drawn from the 114.54 peak.

On the downside, a drop below the 109 mark would bring the 50% Fibonacci of 108.50 of the upleg from 104.64 to 112.39 into view. Breaking that barrier, the market could come under fresh selling until the 61.8% Fibonacci of 107.57.

In the medium-term picture, the outlook holds neutral within the 112.39 and 107.57 boundaries.

The AUD/USD is now challenging the resistance trend line (red) of the bear flag chart pattern. A bullish breakout is expected to be limit if the pattern is indeed a bear flag. A break below support (blue) could indicate the start of the downtrend.

The AUD/USD seems to be building a bullish wave C (green) pattern within the wave 4 (blue). Usually price should stop and reverse at the Fibonacci retracement levels of wave 4 vs 3 such as the 23.6%, 38.2%, or 50% Fibs. A bearish bounce and bearish breakout would confirm this potential turnaround and the start of the wave 5 (blue) within wave 3 (purple).

General Trend:

• Utilities and drug companies weigh on the Nikkei, Softbank also drops
• Wanhua Chemical (world’s largest MDI producer) declines after announcing price cut for June
• Aussie bond yields rise after late day sell-off in US Treasuries on Wed
• Weaker Aussie Capex data has little initial impact, markets looking ahead to China PMI and next week’s RBA rate decision (June 4th)
• Australia’s Bank of Queensland cut mortgage rates ahead of June RBA meeting
• PBOC slows daily cash injection
• Bank of Korea (BOK) rate decision expected on Friday, traders expected to pay close attention to policy language
• New Zealand bond yields rise on increased issuance plan

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.3%
• (NZ) New Zealand Fin Min Robertson presents 2019 Budget: Cuts 2019 GDP 2.1% (prior 2.9%); see lower surplus due to increased spending, raises bond issuance plans
• (AU) AUSTRALIA Q1 PRIVATE CAPITAL EXPENDITURE Q/Q: -1.7% V 0.4%E; 2019-20 Capex estimate A$99.1B v A$92.1B prior
• (AU) AUSTRALIA APR BUILDING APPROVALS M/M: -4.7% V 0.0%E; Y/Y: -24.2% V -22.4%E
• (NZ) New Zealand National Party leader Bridges calls on Fin Min Robertson and Treasury Sec to resign
• (NZ) New Zealand Apr Building Permits m/m: -7.9% v -7.4% prior
• (AU) Australia Fair Work Commission raises minimum wage 3% to A$19.49/hour
• BOQ.AU Planning to cut rates on some fixed mortgages by 15bps or more across brands, effective May 31st

Japan

• Nikkei 225 opened -0.6%
• (JP) There is speculation that the BoJ might lower its bond purchases in June amid decline in yields – US financial press
• (JP) Japan BOJ Board Member Sakurai: It is inappropriate to recklessly seek price target with additional easing
• (JP) Japan Chamber of Commerce Chief: Want sales tax hike to go ahead in Oct; now is not the time for BOJ to move but want it to make policy flexible without insisting on 2% inflation
• 7201.JP Expected to plan to cut production at 10 locations around the world - Nikkei
• (JP) Bank of Japan (BOJ) reports FY18/19 Net profit ¥586.9B v ¥764.8B y/y, Op Rev ¥2.39T v ¥1.84T y/y; Special losses ¥928.6B (includes ¥815.5B transfer to provision for possible losses on bonds transactions) v ¥445.3B y/y

Korea

• Kospi opened +0.1%
• (KR) South Korea FX authorities suspected to have sold USD to curb Won weakness
• (US) Acting Def Sec Shanahan: Reiterates North Korean missile tests were in violation of UN resolutions
• (KR) South Korea Apr Department Store Sales Y/Y: -3.8% v 2.3% prior; Discount Store Sales Y/Y: -7.7% v -1.0% prior

China/Hong Kong

• Hang Seng opened +0.3%; Shanghai Composite opened -0.4%
• (CN) China Apr Swift Global Payments CNY: 1.88% v 1.89% prior
• (CN) China Vice Min Zhang: Ties with Russia will not be disrupted by 3rd party, China to sign 2 documents with Russia - speaking ahead of President Xi's visit to Russia
• (CN) China PBoC Open Market Operation (OMO): Injects CNY30B in 7-day reverse repos v CNY270B injected prior; Net: CNY30B injection v CNY250B prior
• (CN) China PBOC Gov Yi Gang: Solving SME financing difficulty is most important task; China able to manage risks in small banks; yuan is stable
• (CN) China PBoC sets yuan reference rate: 6.8990 v 6.8988 prior
• (HK) Hong Kong SFC Investigating Cryptocurrency exchanges and Initial Coin Offering (ICO) issuers
• (CN) China PBOC adviser: No problem for China to keep 2019 GDP above 6.2%

Other Asia

• (MY) Malaysia PM Mahathir has proposed gold based currency for stability

North America

• SPDR Gold Trust holdings +0.5% to 740.9 metric tons
• (US) Weekly API Oil Inventories: Crude: -5.3M v +2.4M prior

Europe

• (UK) Apr auto manufacturing 70.9K autos, -44.5% y/y - SMMT
• RNO.FR Chairman Senard: Not worried about regulatory hurdles, expect merger to take about a year; Nissan will benefit from Fiat merger

Levels as of 1:20 ET

• Nikkei 225, -0.5%, ASX 200 -0.8%, Hang Seng -0.6%; Shanghai Composite -0.7%; Kospi +0.3%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.2%
• EUR 1.1144-1.1130 ; JPY 109.64-109.47 ; AUD 0.6930-0.6915 ;NZD 0.6521-0.6510
• Gold -0.3% at $1,276/oz; Crude Oil +0.4% at $59.12/brl; Copper -0.1% at $2.664/lb

Daily Pivots: (S1) 137.97; (P) 138.28; (R1) 138.69; More...

With 139.64 resistance intact, further decline is expected in GBP/JPY. Sustained break of 61.8% retracement of 131.51 to 148.87 at 138.14 will pave the way to retest 131.51 low. Though, considering loss of downside momentum as seen in 4 hour MACD, break of 139.64 resistance will indicate short term bottoming. In such case, stronger rebound and lengthier consolidation would be seen first, before more decline.

In the bigger picture, current development suggests that GBP/JPY was rejected by 149.98 key resistance. And medium term fall from 156.59 is still in progress. Break of 131.51 will target 122.36 (2016 low). On the other hand, decisive break of 149.98 should confirm that medium term fall from 156.59 (2018 high) has completed at 131.51 already. Further rally would be seen back to 156.59 resistance and above.

Daily Pivots: (S1) 121.64; (P) 121.92; (R1) 122.27; More....

EUR/JPY recovered mildly after hitting 121.58 and intraday bias is turned neutral for some consolidations first. Upside of recovery should be limited below 123.73 resistance. Fall from 127.50 is still in progress. Break of 121.58 will resume the decline for a test on 118.62 low next.

In the bigger picture, current development argues that rebound from 118.62 is merely a correction and has completed at 127.50. EUR/JPY is staying in long term falling channel from 137.49 (2018 high). Decisive break of 118.62 will confirm resumption of this medium term fall and target 109.20 low. For now, this will be the favored case as long as 125.23 resistance holds.

Daily Pivots: (S1) 0.8799; (P) 0.8816; (R1) 0.8834; More...

Intraday bias in EUR/GBP remains neutral for consolidation below 0.8850 temporary top. Deeper retreat could be seen through 4 hour 55 EMA (now at 0.8790). But downside should be contained above 0.8681 resistance turned support to bring rebound. On the upside, break of 0.8850 and sustained trading above 0.8840 resistance will pave the way to 0.9101 key resistance next.

In the bigger picture, medium term decline from 0.9305 (2017 high) is seen as a corrective move. No change in this view. Current development argues that it might have completed with three waves down to 0.8472, just ahead of 38.2% retracement of 0.6935 (2015 low) to 0.9306 at 0.8400, after hitting 55 month EMA (now at 0.8511). Decisive break of 0.9101 resistance will confirm this bullish case. Nevertheless, as EUR/GBP is still staying inside long term falling channel, correction from 0.9305 could still extend to 0.8400 fibonacci level before completion.

Daily Pivots: (S1) 1.6073; (P) 1.6107; (R1) 1.6127; More...

EUR/AUD's correction from 1.6262 extends lower today and deeper fall could be seen. But downside should be contained by 38.2% retracement of 1.5683 to 1.6262 at 1.6041 to bring rise resumption. Current development argues that correction from 1.6765 has completed with three waves down to 1.5683. On the upside, break of 1.6262 will pave the way to retest 1.6765 high. However, firm break of 1.6041 will dampen this view and bring deeper fall to 61.8% retracement at 1.5904.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Up trend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.

Daily Pivots: (S1) 1.1203; (P) 1.1229; (R1) 1.1249; More....

Intraday bias in EUR/CHF remains neutral for the moment. In case of another fall through 1.1195, we'd still expect strong support above 1.1162 to bring rebound. Considering bullish convergence condition in 4 hour MACD, break of 1.1292 resistance should confirm short term bottoming. Further rise should then be seen back to retest 1.1476 resistance. Nevertheless, sustained break of 1.1162 could carry larger bearish implication and turn outlook bearish.

In the bigger picture, at this point, we're slightly favoring the case that corrective fall from 1.2004 has completed at 1.1162 after being supported by 61.8% retracement of 1.0629 to 1.2004 at 1.1154. Decisive break of 1.1501 resistance should confirm and target 1.1713 resistance next. On the downside, sustained break of 1.1154 will confirm resumption of decline from 1.2004 and target 1.0629 support next.