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Daily Pivots: (S1) 1.1182; (P) 1.1199; (R1) 1.1210; More.....

Intraday bias in EUR/USD remains neutral as consolidation pattern from 1.1111 is still extending. In case of stronger rise, upside should be limited by 1.1263 resistance to bring down trend resumption. On the downside, firm break of 1.1107 will target 100% projection of 1.1448 to 1.1183 from 1.1324 at 1.1059. However, sustained break of 1.1263 resistance will now be an early sign of trend reversal and turn bias to the upside for 1.1448 key resistance.

In the bigger picture, down trend from 1.2555 (2018 high) is still in progress. Such decline would target 78.6% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.0813 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Daily Pivots: (S1) 1.2645; (P) 1.2696; (R1) 1.2732; More....

GBP/USD is staying in consolidation above 1.2605 temporary low. Intraday bias remains neutral for some more sideway trading. . In case of stronger recovery, upside should be limited by 1.2865 support turned resistance to bring fall resumption. On the downside, break of 1.2605 will will target a test on 1.2391 low first. Firm break there will resume larger down trend to 61.8% projection of 1.4376 to 1.2391 from 1.3381 at 1.2154 next.

In the bigger picture, current development suggests that medium term decline from 1.4376 (2018 high) is not completed, and is possibly ready to resume. Decisive break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 1.0013; (P) 1.0038; (R1) 1.0064; More...

Intraday bias in USD/CHF remain s neutral for the moment. On the upside, decisive break of 1.0119 resistance will suggest that decline from 1.0237 is merely a correction and has completed. Intraday bias will be turned back to the upside for retesting 1.0237. That will also retain medium term bullishness in the pair. On the downside, through, firm break of 1.0008 should pave the way to retest 0.9879 key support next.

In the bigger picture, USD/CHF is losing upside momentum ahead of 1.0342 key resistance (2016 high). There is no clear sign of reversal yet. But even in case of another rise, we'd be cautious on strong resistance from 1.0342 to limit upside. On the downside, break of 0.9879 support will suggest that larger rise from 0.9186 (2018 low) has completed. Deeper fall will be seen to 0.9716 support for confirmation.

Daily Pivots: (S1) 109.35; (P) 109.46; (R1) 109.65; More...

A temporary low is likely in pace as USD/JPY recovered ahead of 109.02 low. Intraday bias is turned neutral first. But outlook remains bearish as fall from 112.40 is expected to resume sooner or later. On the downside, break of 109.02 will target 61.8% retracement of 104.69 to 112.40 at 107.63 next. On the upside, in case of stronger recovery, upside should be limited below 110.67 resistance to bring fall resumption eventually.

In the bigger picture, USD/JPY is staying inside falling channel from 118.65. Current development suggests that rebound from 104.69 is only a corrective move. And fall from 118.65 is not completed yet. Decisive break of 104.69 will extend the down trend towards 98.97 support (2016 low). For now, we'd expect strong support above there to bring rebound.

The forex markets are generally steady in Asian session today. Risk sentiments firmed up mildly in Asia with gains seen in major indices. In particular, China's Shanghai SSE is back above 2900 handle with around 0.9% gain. The moves are reflect in strength in Australian, New Zealand and Canadian Dollars. Meanwhile, Swiss Franc and Yen are the softest for today so far.

Nevertheless, technically, the retreats in Yen and Swiss Franc are nothing more than part of near term consolidations only. In particular, USD/JPY and EUR/JPY are still on track to retest recent low at 109.02 and 122.08 respectively, despite losing some downside momentum. Notable recovery was seen in EUR/CHF and USD/CHF yesterday, probably as relief reaction to European elections. But the recovery quickly lost steam. There is no confirmation of reversal in both Franc pairs. Judging from theses, risk aversion is still ready to come back any time.

In Asia, Nikkei is currently up 0.45%. Hong Kong HSI is up 0.49%. China Shanghai SSE is up 0.89%. But Singapore Strait Times is down -0.19%. Japan 10-year JGB yield is down -0.009 at -0.075.

Japan Motegi: Trade deal in August just Trump's hopes, two sides still narrowing the gap

Japan Economy Minister Toshimitsu Motegi said today that Trump's comment regarding a trade deal in August just reflects his own hope for quick progress in the negotiations. For now, the two sides are still working on "narrowing the gap".

Motegi told reporters, "When you look at the exact wording of his comments, you can see that the president was voicing his hopes of swift progress in talks toward something that is mutually beneficial." He also reiterated the differences between US and Japan, and no timetable had yet be set for more meetings. He noted, "we've agreed that we'll strive to narrow the gap, including through possibly holding working-level talks."

Trump said on Monday, after meeting Japanese Prime Minister Shinzo Abe in Japan, that he expected the two countries to be "announcing some things, probably in August, that will be very good for both countries" on trade.

Canada kicks start process to ratify USMCA

Canadian Foreign Minister Chrystia Freeland formally introduced a Ways and Means motion in the House of Commons yesterday, to kick start ratification process of USMCA. She noted the lifting of US steel and aluminum tariffs on Canadian imports, as announced on May 17, has paved the way for formal approval of the new North American trade agreement.

However, Freeland also emphasized, "the entry into force of this agreement does not depend solely on Canada... Insofar as possible, we intend to move in tandem with the United States." Prime Minister Justin Trudeau indicated last week he's eager to ratify the deal. Freeland also said the government is "full steam ahead". But She didn't indicate whether the government would push to get it done before parliament goes into recess, in four weeks.

On the data front

Japan corporate service price index rose 0.9% yoy in April, below expectation of 1.1% yoy. Swiss will release Q1 GDP in European session. German Gfk consumer sentiment, import price will be featured. Eurozone will release M3 and confidence indicators. UK will release BBA mortgage approval. Later in the day, US will release house price indices. But main focus will be on Conference Board consumer confidence.

USD/JPY Daily Outlook

Daily Pivots: (S1) 109.35; (P) 109.46; (R1) 109.65; More...

A temporary low is likely in pace as USD/JPY recovered ahead of 109.02 low. Intraday bias is turned neutral first. But outlook remains bearish as fall from 112.40 is expected to resume sooner or later. On the downside, break of 109.02 will target 61.8% retracement of 104.69 to 112.40 at 107.63 next. On the upside, in case of stronger recovery, upside should be limited below 110.67 resistance to bring fall resumption eventually.

In the bigger picture, USD/JPY is staying inside falling channel from 118.65. Current development suggests that rebound from 104.69 is only a corrective move. And fall from 118.65 is not completed yet. Decisive break of 104.69 will extend the down trend towards 98.97 support (2016 low). For now, we'd expect strong support above there to bring rebound.

Economic Indicators Update

Japan Economy Minister Toshimitsu Motegi said today that Trump's comment regarding a trade deal in August just reflects his own hope for quick progress in the negotiations. For now, the two sides are still working on "narrowing the gap".

Motegi told reporters, "When you look at the exact wording of his comments, you can see that the president was voicing his hopes of swift progress in talks toward something that is mutually beneficial." He also reiterated the differences between US and Japan, and no timetable had yet be set for more meetings. He noted, "we've agreed that we'll strive to narrow the gap, including through possibly holding working-level talks."

Trump said on Monday, after meeting Japanese Prime Minister Shinzo Abe in Japan, that he expected the two countries to be "announcing some things, probably in August, that will be very good for both countries" on trade.

STOCKS

Asians are trading positive. The way Shanghai Composite index is holding above 2835 is turning the bias positive. Is this an indication to get some positive development on the US-China trade negotiation front? We have to wait and see. Sensex and Nifty remains bullish. The US markets were closed yesterday on account of a public holiday.

DAX (12071.18, +60.14, +0.50%) can consolidate sideways between 12000 and 12200 in the near term. Though there is room on the upside to test even 12400, we prefer DAX to break 12000 eventually and fall to 12800 and 12600.

Nikkei (21272.46, +89.88, +0.42%) has risen further and is heading towards 21450 as expected. We have to wait and see if Nikkei can rise past 21500 or not.

Contrary to our expectation for a fall to 2800, Shanghai (2914.34, +21.96, +0.76%) has bounced again from around 2835 thereby retaining its sideways consolidation. A rise to 2950 - the upper end of the range is possible now. The price action is turning the bias positive for the Shanghai to break the range above 2950 and rise to 3000.

Sensex (39683.29, +248.57, +0.63%) and Nifty (11924.75, +80.65, 0.68%) have risen above their key resistance levels of 39500 and 11900 respectively. The bullish outlook is intact. Sensex can test 40200 and Nifty can move up to 12150

COMMODITIES

Gold, Silver and Copper remain stable and can rise in the near-term before reversing lower. The corrective rally in oil is coming closer to a key resistance which can halt the upmove and trigger a fall again.

Gold (1283.5) can test 1292 while it remains above 1280 and extend its upmove to 1300 on a break above 1292. The 1265-1300 sideways range is likely to remain intact.

Silver (14.55) can test 14.70-14.75 while it remains above 14.5 after. The downtrend can resume thereafter and target 14.25.

The corrective bounce in Copper (2.71) has room to test 2.72 or even 2.75. We expect the downtrend to resume thereafter and target 2.60 in the coming weeks.

Brent (70.14) is heading towards its key resistance at 71 which we expect to hold and keep the downtrend intact. A pull-back from there can take Brent lower to 68-67 initially and then to 66-64 eventally.

Lack of strength in WTI's (59.21) bounce-back move indicates the inherent weakness in it. The 60-61 resistance region is likely to cap the upside. A pull-back there after will keep the downtrend intact for a test of 56-54.

FOREX

Dollar trades strong just now but in the medium term, we could see the EM currencies strengthen against the US Dollar as the pairs trade near important resistance levels that could possibly hold in the coming sessions. Pound and Aussie is likely to see some range trade in the next 2-3 sessions.

Dollar Index (97.80) has risen well from levels near 97.50 and could attempt a re-test of 98.25/50 on the upside. Near term looks bullish for the Dollar index.

Euro (1.1181) has come down contrary to our expectation of a rise towards 1.1265 mentioned yesterday. Euro came down from 1.1215 itself and while the Dollar Index heads towards 98.25/50, Euro could fall towards 1.11 again.

Euro-Yen (122.42) has dipped slightly and while below 123, the pair could fall towards support near 122.0-121.5.

Dollar Yen (109.48) has support near current levels which could take it higher in the near term back towards 110.50. The rise in Dollar-Yen could get further support from the rise in Nikkei as US-Japan trade relations seem to be getting better. However, there could be some scope of testing 109.0-108.5 on the downside for USDJPY, which if seen would be short lived.

Aussie (0.6922) could see some ranged movement within 0.6850-0.6950 for the very near term.

Pound (1.2674) could spend some time within 1.2750-1.2600 region for the next 2-3 sessions before rising higher above 1.2750.

EM currencies all look for strength against the US Dollar in the medium term as the pairs trade closer to resistance levels. USDZAR(14.4476), USDMYR(4.19), USDBRL(4.0428) , USDRUB(64.429) and USDCNY(6.9046) have resistances near 14.60, 4.20, 4.12, 65.00 and 6.92 respectively which are likely to hold and push the currency pairs to lower levels. Strength in the EM currencies could eventually indicate some strength in Rupee as well going forward.

USDINR (69.5050) rose towards 69.6150 during the session yesterday before coming down to close lower. We could see trade within 69.75-69.25 to continue for a couple of sessions more as mentioned yesterday. A test of 69.70/75 could be likely before a fall back towards 69.50/40 or lower is seen.

INTEREST RATES

The US yields are heading towards near term supports and while that holds we could soon see a corrective bounce in the next 1-2 sessions. The US 30Yr (2.73%) could test 2.72/71%, the 10Yr (2.31%) could test 2.30% and 5Yr (2.12%) could bounce from 2.10% in the near term.

The US-Japan 10YR (2.38%) has dipped by 2bps and could now bounce back towards 2.45/50% in the medium term. View for the spread is bullish.

The Japan yields look bearish in the near term. A fall in the 10YR yield (-0.071%) towards -0.10% looks possible.

Canadian Foreign Minister Chrystia Freeland formally introduced a Ways and Means motion in the House of Commons yesterday, to kick start ratification process of USMCA. She noted the lifting of US steel and aluminum tariffs on Canadian imports, as announced on May 17, has paved the way for formal approval of the new North American trade agreement.

However, Freeland also emphasized, "the entry into force of this agreement does not depend solely on Canada... Insofar as possible, we intend to move in tandem with the United States." Prime Minister Justin Trudeau indicated last week he's eager to ratify the deal. Freeland also said the government is "full steam ahead". But She didn't indicate whether the government would push to get it done before parliament goes into recess, in four weeks.

Key Highlights

• The British Pound is trading in a downtrend below the 1.2800 support against the US Dollar.
• Two bearish trend lines are formed near 1.2735 on the 4-hours chart of GBP/USD.
• There is a risk of more downsides unless the pair settles above 1.2800.
• The US Consumer Confidence in May 2019 could increase from 129.2 to 130.1.

GBPUSD Technical Analysis

This past week, the British Pound declined heavily below 1.3000 and 1.2920 against the US Dollar. The GBP/USD pair even traded to a new monthly low at 1.2607 and settled below the 1.2800 support.

Looking at the 4-hours chart, the pair started a short term upside correction after trading as low as 1.2607. There was a decent increase above the 1.2680 and 1.2700 resistance levels.

Besides, there was a break above the 50% Fib retracement level of the downward move from the 1.2813 high to 1.2607 low. However, the recovery was capped by the 1.2740-1.2750 resistance area.

More importantly, the pair failed to stay above the 61.8% Fib retracement level of the downward move from the 1.2813 high to 1.2607 low. There are also two bearish trend lines are formed near 1.2735 on the same chart.

Therefore, a clear break above both trend lines and follow through above the 1.2765 level is needed for a decent recovery. Having said that, the main hurdle for buyers is near the 1.2800 level.

As long as the pair is trading below the 1.2800 pivot level, there is a risk of more downsides. An initial support is near the 1.2635 level, below which the pair could even break the 1.2600 support.

Conversely, if there is an upside break and close above 1.2800, GBP/USD might start a strong recovery towards the 1.3000 level.

Looking at EUR/USD, the pair seems to be struggling near the 1.1225 level, whereas USD/JPY could correct higher in the short term.

Economic Releases to Watch Today

• Germany's GfK Consumer Confidence June 2019 – Forecast 10.4, versus 10.4 previous.
• Euro Zone Economic Sentiment Indicator May 2019 – Forecast 108.1, versus 107.9 previous.
• Euro Zone Business Climate Indicator May 2019 – Forecast 108.1, versus 107.9 previous.
• US Consumer Confidence May 2019 – Forecast 130.1, versus 129.2 previous.

Wall Street steadies in holiday-subdued activity

Wall Street index futures traded marginally higher during the US Memorial Day holiday, ignoring comments from US President Trump that he was not yet ready to do a trade deal with China. Alibaba weighs a second listing in Hong Kong.

US30USD Daily Chart

The US30 index has edged higher for a third straight day in early trading this morning, despite negative comments from Trump about a China trade deal

The 200-day moving average at 25,419 is still acting as a support level. Prices are currently tracking the 100-day moving average higher, which is at 25,612 today

It's another slow day on the data front with the Dallas Fed manufacturing index for May the only item of note.

DE30EUR Daily Chart

The Germany30 index looks set to advance for a third straight day today as the market digests EU election results that were less anti-EU than feared

Support at the 55-day moving average at 11,941 remains intact and has supported prices on a closing basis since February 8

Euro-zone industrial confidence is expected to decline to -4.3 in May from -4.1 in April. That would be the lowest reading since August 2016.

CN50USD Daily Chart

The China50 index staged a modest rebound yesterday but may come under pressure today after Trump's overnight comments regarding the trade talks. However, news that Alibaba is considering a $20b share listing in Hong Kong may lend support

The index is above the 100-day moving average at 12,481. This average has supported prices on a closing basis since January 23

China's industry ministry has acknowledged that US tariff increases will lead to higher enterprise costs, lower competitiveness and fewer orders, but the impact on the manufacturing sector is manageable.