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USD/CAD has ticked higher in the Wednesday session. Currently, the pair is trading at 1.3506, up 0.09% on the day. On the release front, the Bank of Canada sets the benchmark rate and will release a rate statement. In the U.S., the sole event is the Richmond Manufacturing Index, which is projected to climb to 6 points. On Thursday, the U.S. releases Preliminary GDP and unemployment claims.

All eyes are on the Bank of Canada, with rate-setters expected to take a pass and maintain rates at 1.75%, where they have been pegged since October. With this in mind, investors will be looking for clues about future moves from the rate statement. Will policymakers sound positive about the economy? The labor market created a record number of jobs in April (106 thousand), and consumer spending has been solid. At the same time, trade tensions between the U.S. and China have soared, which has hurt risk appetite towards minor currencies like the Canadian dollar. As well, oil prices have fallen, which has weighed on the Canadian currency. USD/CAD has been fairly subdued in recent weeks, and the tone of rate statement, whether optimistic or dovish, could cause some volatility in the pair.

The U.S. economy continues to perform well, and first-quarter economic growth is expected to remain above the 3% level. Preliminary GDP will be released on Thursday and is expected to post a healthy gain of 3.1%. In April, the initial release came in at 3.2%, easily beating the estimate of 2.2%. If the revised reading also beats expectations, traders can expect the greenback to move higher.

Entering into US session, Swiss Franc and Yen are running as the strongest ones for today. US-China trade war is again the main theme. There are reports that China is weaponizing its dominance on rare earths. Some claimed that might risk serious disruption to US industries. We're skeptical on the impact of such move. And, the reactions from stocks are relatively mild too, considering DOW future is just down -167pts for the moment. Nevertheless, the message is reinforced. That is, China is not going to back down and rectify its own unfair practices. And the maximum pressure way of Trump is useless. Trade war is not as easy to as it seems to some people and it's going to drag on longer.

Staying in the currency markets, for now, Dollar is following as the third strongest for the day shrugging off persistent decline in treasury yields. 10-year yield is currently down -0.0368 at 2.228, and could hit 2.2 handle pretty soon. New Zealand Dollar is the weakest one for today s far, followed by Sterling. Canadian Dollar is a the third weakest as markets await BoC rate decision. Euro is mixed while markets await European Commission's formal warning letter to Italy for its deficit.

Some previews on BoC:

• BOC to Avoid Hinting Rate Hike Despite Improvement in Economic Data
• Will the BoC Strike a More Confident Tone at its May Meeting?
• Forward Guidance: International Trade Tensions Unlikely to Sway the Bank of Canada Rate Decision

In Europe, currently:

• FTSE is down -1.31%.
• DAX is down -1.34%.
• CAC is down -1.79%.
• German 10-year yield si down -0.0075 at -0.165.

Earlier in Asia:

• Nikkei dropped -1.21%.
• Hong Kong HSI dropped -0.57%.
• China Shanghai SSE rose 0.16%.
• Singapore Strait Times dropped -0.06%.
• Japan 10-year JGB yield dropped -0.0229 to -0.094.

The US dollar has remained under selling pressure against the greenback during the European trading session as safe-haven asset classes come back into favor with investors. The one-hour time frame is showing a bearish head and shoulders pattern with a downside target close to the 107.00 support level. Corrective upside moves for the USDJPY pair towards the 109.80 level still cannot be ruled out.

The USDJPY pair is heavily bearish while trading below the 109.00 level, key support is found at the 108.40 and 107.70 levels.

If the USDJPY pair trades above the 109.60 level, key technical resistance is found at the 109.80 and 110.00 levels.

The euro has fallen to a new weekly trading low against the US dollar during the European trading session as the bearish head and shoulders pattern continues to weigh on the pair. The intraday decline has so far reached the 1.1150 level, which now becomes key breakout support. The 1.1130 level will likely come into focus if sellers force price under the 1.1150 support level.

The EURUSD pair is heavily bearish while trading below the 1.1165 level, key technical support is now found at the 1.1150 and 1.1130 levels.

If the EURUSD pair trades above the 1.1165 level, key technical resistance is found at the 1.1190 and 1.1215 levels.

Manufacturing PMIs out of China in the coming days will provide investors with the first indication of how the world's second largest economy performed in May. The official manufacturing gauge is due first on Friday at 01:00 GMT, followed by the Caixin/Markit manufacturing PMI on Monday at 01:45 GMT. With no end in sight to the year-long trade dispute between the US and China, manufacturing activity is at risk of contracting again from the mounting uncertainty, while the yuan is in danger of breaching key support at the 6.92 per dollar level.

Growth rebound faltering?

It wasn't that long ago that things were looking up for the Chinese economy as a trade deal was within reach and exports were rebounding. But it's beginning to appear like the growth revival is going to be a slow process, with further monetary and fiscal stimulus likely required to support the economy. Potentially making the road to recovery significantly more difficult is the trade dispute becoming a long-drawn-out conflict and worse, evolving into a technology ‘cold war'.

Manufacturing activity could contract in May

With little respite therefore for Chinese businesses, manufacturing activity is expected to ease in May. The country's official manufacturing PMI is forecast to slip just below 50 into contraction territory, declining from 50.1 to 49.9 in May. The Caixin/Markit PMI is also anticipated to head lower, falling from 50.2 to 50.0.

A weak set of PMIs would probably increase speculation that authorities would step in and announce more stimulus measures to help the struggling economy. Data out earlier this week showed profits by industrial companies were down in April on an annual basis for the third month in a row. The recent US ban on Huawei has underscored the growing challenges facing Chinese firms and could be the start of further restrictions being imposed by the Trump administration on China's corporate giants.

Yuan getting dangerously close to 7.00 per dollar level

Negative headlines from the upcoming data risk driving the yuan to fresh yearly lows against the US dollar, which would only aggravate relations with the US and draw accusations of currency manipulation. Dollar/yuan has been hovering just below the 6.92 level for the past 12 days in onshore trading, possibly signalling state intervention to prevent steeper advances for the dollar.

A break above 6.92 would bring into range the 6.9565 region, which was a strong resistance area back in November. Higher up, the next target for yuan bears would be October's 10-year high of 6.9763 before attention turns to the psychologically important 7.00 level.

The DAX has posted sharp losses in the Wednesday session. Currently, the index is at 11,869, down 1.30% on the day. On the release front, German unemployment rolls climbed by 60 thousand, much higher than the estimate of -8 thousand. The ECB released its financial stability report, which is published twice a year. On Tuesday, the U.S. releases its second estimate of GDP for the first quarter.

Reports that China has raised the ante in a bitter trade dispute have rocked global equity markets. Chinese media has reported that China is threatening to curb the supply of rate metals to the U.S. These products are used in the production of items such as cell phones and electric cars, so any interruption in supply could hurt U.S. technology companies. The DAX has fallen sharply on the news, with bank and automakers stocks heading lower. Deutsche Bank has dropped 1.9%, while Daimler, BMW and Volkswagen have declined around 1.0%. May has been a dreadful month for the blue-chip DAX, which has declined 3.6%.

The ongoing trade war between the U.S. and China shows no signs of ending anytime soon, and this has weighed on investor risk appetite. A weak consumer confidence release out of Germany hasn’t helped matters. Consumer confidence took a hit in May, as GfK Consumer Climate slipped to 10.1 points, down from 10.4 in April. This was the lowest score since April 2017. With the escalation in U.S-China trade tensions, there is no end in sight to the tariffs which have been imposed on European goods, which has dampened consumer confidence. We’ll get a look at the health of consumer spending on Thursday, when Germany releases retail sales. After a decline of 0.2% in April, the markets are expecting a rebound in May, with a forecast of 0.4%.

EUR/USD has ticked lower in the Wednesday session. Currently, the pair is trading at 1.1151, down 0.08% on the day. In economic news, French GDP and consumer inflation were within expectations. German unemployment rolls swelled by 60 thousand, much higher than the estimate of -8 thousand. The ECB released its financial stability report, which is published twice a year. In the U.S., the sole event is the Richmond Manufacturing Index, which is projected to climb to 6 points. On Thursday, the U.S. releases GDP and umemployment claims.

The German economy has been showing signs of weakness, but the labor market has remained a bright spot. However, unemployment rolls balooned by 60 thousand in April, surprising the markets. The indicator has recorded consecutive declines for almost two years, and investors are hoping that the April spike was a one-time blip. If upcoming German employment numbers follow suit and miss expectations, the euro could lose ground.

As the locomotive of the eurozone economy, German indicators are a bellwether for the rest of the eurozone. Consumer confidence took a hit in May, as GfK Consumer Climate slipped to 10.1 points, down from 10.4 in April. This was the lowest score since April 2017. With the escalation in U.S-China trade tensions, there is no end in sight to the tariffs which have been imposed on European goods, which has dampened consumer confidence. We’ll get a look at the health of consumer spending on Thursday, when Germany releases retail sales. After a decline of 0.2% in April, the markets are expecting a rebound in May, with a forecast of 0.4%.

WTI price fell nearly 2% in European session on Wednesday, after renewed fears on threats that ongoing trade conflict can escalate and affect global demand, prompted investors to sell the contract. Comments that Russia is studying possibilities of increasing the output cut among OPEC+ group, but also pointed to all arguments that are in favor of extension but also at those against, leaving the subject open that additionally disappointed traders. OPEC+ group's agreement for reduction of oil output by 1.2 million bpd expires at the end of June and the group will meet either at the end of June of early July to discuss whether and how to extend the deal. Fresh weakness breached strong technical supports and generated fresh bearish signals that shifted near-term risk lower. Surge through the base of rising daily cloud ($58.91) and ascending 100SMA ($58.51) pushed the price below $58.00 handle and increased pressure on key near-term support at $57.32 (Fibo 38.2% of $42.36/$66.58). Close below daily cloud base is needed to signal further weakness, but violation of $57.32 pivot will confirm fresh bears and open way towards Fibo projections at $57.05 (176.4%) and $56.13 (Fibo 200% projection of bear-leg from $63.93. broken cloud base now reverted to strong resistance which needs to cap potential upticks to keep fresh bears alive. Releases of US crude stocks data (API report is due later today and EIA on Thursday) which were postponed due to US market holiday, are also eyed for fresh signals.

Res: 58.51, 58.51, 58.91, 59.53
Sup: 57.65, 57.32, 57.05, 56.13

The common European currency depreciated about 63 base points against the Japanese Yen on Tuesday. The pair was pressured south by the 50-hour simple moving average.

The currency pair is currently testing a support level formed by the weekly S1 at 121.83.

If the support level holds, a surge towards the 100-hour SMA at 122.51 might occur within this session.

However, if the currency exchange rate passes the weekly S1, sellers could aim for the lower boundary of a descending channel pattern at 121.19 today.

The Australian Dollar traded in a horizontal line against the US Dollar on Tuesday. The currency pair made about 17 base points movement during yesterday's trading session.

A breakout occurred through the lower boundary of an ascending channel pattern at 0.6924 during the morning hours of today's trading session.

Given that a breakout had occurred, it is likely that the AUD/USD currency exchange rate will aim for the 200-hour simple moving average at o.6902 within this session.

However, a support level formed by the weekly pivot point at 0.6909 could hinder such movement.