Sample Category Title

GBPAUD has touched the ascending trend line, which has been holding since December 2018, trading below the flat short-term moving averages. The RSI is moving sideways below the neutral threshold of 50, while the stochastic oscillator is moving in the oversold territory, turning even lower.

If the price slips further below the 1.8305 barrier and the rising trend line, immediate support could be faced from the 38.2% Fibonacci retracement level of the upleg from 1.7220 to 1.8880 near 1.8243. Further declines could flirt with the 1.8100 significant psychological level, shifting the bullish bias to neutral.

On the upside, the price could touch the 23.6% Fibonacci of 1.8485 and the 1.8530 resistance, which overlaps with the 20-day simple moving average (SMA). More advances could open the way for more bullish actions until the 35-month high of 1.8880.

Overall, GBPAUD seems to be in negative correction after the downfall from 1.8880. However, if the price remains below the short-term SMAs and drops beneath the ascending trend line, investors could become more confident on the downside.

EUR/USD has started the new trading week quietly. Currently, the pair is trading at 1.1195, down 0.08% on the day. There are no German or eurozone events. In the U.S., markets are closed for Memorial Day, and there are no U.S. indicators. With no data releases, traders can expect a quiet day for the pair. On Tuesday, Germany releases Ifo Business Climate, while the U.S. posts CB Consumer Confidence.

The votes have been tallied in the European parliamentary elections, as over 200 million voters went to the polls in 28 EU countries, including the U.K. The results were dramatic, as far-right parties across Europe made gains, at the expense of centrist parties. In France, Marine Le Pen’s National Rally party came in first, handing a stinging defeat to President Macron. In Germany, Chancellor Angela Merkel’s conservatives lost ground, and voters in the U.K sent a strong message to Labor and the Conservatives, as Nigel Farage’s Brexit party won the most seats. The ramifications are already being felt, as Greek Prime Minister Alexis Tsipras has called a general election after his Syriza party fared poorly in the EU elections. The euro has not shown much movement on Monday, but could face headwinds as investors digest the results.

German numbers were mixed last week. Manufacturing PMI pointed to contraction for a fifth straight month, with a reading of 44.3 in May. Ifo Business Climate slipped to 97.9, its lowest score since February 2010. However, GDP improved by 0.4% in Q1, compared to no growth in Q4 of 2018. The eurozone manufacturing PMI also showed contraction, with a reading of 47.7. There was better news from the services sector, as German and eurozone PMIs were above 50, pointing to expansion.

The U.S. ended the week on a disappointing note, as April durable goods orders were softer than expected. Durable goods orders slumped 2.1%, just below the estimate of -2.0%. This marked the sharpest decline since January 2018. The core reading slowed to 0.0%, down from 0.4% a month earlier.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.11812
Open: 1.12090
% chg. over the last day: +0.21
Day's range: 1.11985 – 1.12151
52 wk range: 1.1111 – 1.2009

EUR has retreated from the annual minimums. The investors have partially fixed the USD positions after the long rally. The escalation of the trade war has increased the chances of FRS decreasing the key interest rates this year. By preliminary reports, the pro-EU parties are leading in the election, which gives additional support to the EUR. The key levels are 1.11800 and 1.12150. The EUR/USD quotes have prospects for further recovery. Open positions from the key levels.

The Economic News Feed for 27.05.2019 is calm.

The price fixed above 50 MA and 200 MA which points towards 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 below the %D line which points towards the bearish mood.

Trading recommendations

Support levels: 1.11800, 1.11500, 1.11300
Resistance levels: 1.12150, 1.12400, 1.12600

If the price fixes above 1.12150, expect further correction towards 1.12400-1.12600.

Alternatively, the quotes can fall towards 1.11600-1.11400.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.26525
Open: 1.27261
% chg. over the last day: +0.45
Day's range: 1.27145 – 1.27478
52 wk range: 1.2438 – 1.3631

GBP/USD started to recover after a long fall. The trading instrument updated the local maximums. On Friday the GBP was supported by the positive retail sales report. As a reminder Theresa May confirmed that she is retiring on June 7th after three years of attempts to leave the EU. GBP/USD quotes are consolidating around 1.27000-1.27750. GBP has prospects for further correction. You should open positions from the key levels.

The Economic News Feed for 27.05.2019 is calm. The markets are closed due to the holidays.

The indicators do not provide precise signals, the price has crossed 200 MA.

The MACD histogram is in the positive zone and keeps rising, which points towards further growth of 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: 1.27000, 1.26500, 1.26000
Resistance levels: 1.27550, 1.28000

If the price fixes above 1.27550, expect further growth towards the round 1.28000.

Alternatively, the quotes can fall towards 1.26600-1.26400.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.34721
Open: 1.34358
% chg. over the last day: -0.27
Day's range: 1.34295 – 1.34466
52 wk range: 1.2727 – 1.3664

USD/CAD shows an ambiguous technical picture. CAD is consolidating. The local support and resistance are 1.34200 and 1.34500. The demand for the USD is weakened. The quotes have a tendency to descend. Keep an eye on the oil quotes dynamics and open positions from the key levels.

The Economic News Feed for 27.05.2019 is calm.

The indicators do not provide precise signals, the price has crossed 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 below the %D line which also points to the bearish mood.

Trading recommendations

Support levels: 1.34200, 1.34000, 1.33650
Resistance levels: 1.34500, 1.34700, 1.34900

If the price fixes below 1.34200, expect further descend towards the round 1.34000-1.33700.

Alternatively, the quotes can grow towards 1.34700-1.35000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 109.594
Open: 109.285
% chg. over the last day: -0.27
Day's range: 109.279 – 109.584
52 wk range: 104.97 – 114.56

USD/JPY stabilized after a long descend at the end of the week. The trading instrument is consolidating. The local support and resistance are 109.400 and 109.700. The demand for the safe assets remains due to the escalation of the trade war and Brexit ambiguousness. USD/JPY quotes have a tendency to descend further. Open positions from the key levels.

The Economic News Feed for 27.05.2019 is calm.

Economic Event (JPY) – 00:00 (GMT+3:00);

Economic Event (JPY) – 00:00 (GMT+3:00);

Economic Event (JPY) – 00:00 (GMT+3:00);

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 but above the signal line which gives a weak signal to sell USD/JPY.

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

Trading recommendations

Support levels: 109.400, 109.150, 109.000
Resistance levels: 109.700, 110.000, 110.350

If the price fixes below 109.400, expect further descend towards the round 109.000.

Alternatively, the quotes can grow towards 110.000-110.300.

UK opposition Labour Party leader Jeremy Corbyn said today that Brexit could only be revolved by either a general election or a public vote.

He said in a statement: "With the Conservatives disintegrating and unable to govern, and parliament deadlocked, this issue will have to go back to the people, whether through a general election or a public vote.

"We will not let the continuing chaos in the Conservative Party push our country into a no deal exit from the EU. Parliament can and will prevent such a damaging outcome for jobs and industry in the UK."

The euro currency is testing pivotal intraday support against the US dollar after the pair found strong technical resistance from its 200-period moving average on the four-hour time frame. Continued weakness below the 1.1190 level may prompt the EURUSD pair to test the key 1.1165 support level. Technical indicators on the four-hour time frame are starting to turn lower which may signal continued intraday weakness.

The EURUSD pair is only bullish while trading above the 1.1190 level, key technical resistance is found at the 1.1235 and 1.1265 levels.

If the EURUSD pair trades below the 1.1190 level, key technical support is found at the 1.1165 and 1.1135 levels.

The British pound has started to reverse direction against the US dollar after the pair found strong technical resistance from the 1.2747 level. If GBPUSD sellers force price below the 1.2700 level, the pair may start to target critical intraday support, at 1.2679. The bullish inverted head and shoulders pattern on the four-hour time frame continues to show the 1.2800 level as a possible upside target.

The GBPUSD pair is only bearish while trading below the 1.2700 level, key support is located at the 1.2679 and 1.2650 levels.

If the GBPUSD pair holds above the 1.2700 level, key intraday resistance is found at the 1.2747 and 1.2765 levels.

Recovery from new multi-month low at 1.2605 is running out of steam as attempts to extend higher, stalled at 1.2947 in early Asian trading on Monday, unable to break above Fibo 23.6% of 1.3179/1.2605/falling 10 SMA (1.2940/41). Bulls are losing traction despite formation of Doji reversal pattern on daily chart as overall outlook remains negative over no-deal Brexit fears and political turmoil in the UK. Daily studies are in bearish mode and current action was seen as positioning for fresh weakness, however, extended consolidation above 1.2600 zone, which proves to be solid support, may extend. Victory of Brexit party in the EU election and defeat of main Conservative and Labor parties shows that the UK is strongly divided over Brexit. Resignation of PM May and battle of candidates for the leadership, adds to political uncertainty that weighs on starling and may limit recovery. Near-term outlook is expected to remain negative while falling 10SMA caps, with extension and close below 5SMA (1.2685) to risk retest of 1.26 zone. Only close above 10SMA would keep in play hopes for further recovery and possible test of next pivotal barrier at 1.2824 (Fibo 38.2% of 1.3179/1.2605).

Res: 1.2740, 1.2763, 1.2810, 1.2824
Sup: 1.2685, 1.2647, 1.2605, 1.2580

Notes/Observations

• US and UK markets closed for holiday
• Markets assess the results of the EU parliament election; The pro-European camp becoming more fragmented; one question begs will the outcome affect the appointed to top positions regarding the succession of Juncker, Tusk and Draghi

Asia:

• Chinese regulators' takeover of Baoshang Bank to prevent systemic risks; moved said to have dealt a blow to market sentiment' move triggered an increase in smaller lenders' interbank funding costs
• China Apr Industrial Profits YoY: -3.7% v +13.9% prior
• China Banking and Insurance Regulatory Commission (CBIRC) Spokesman Xiao Yuanqi said those who speculate and short the yuan (CNY) will for sure suffer heavy loss EU Parliamentary

Elections:

• Mainstream European Union parties held their ground in EU Parliamentary elections seen winning approx. two-thirds of all seats in Parliament with the first increase in turnout in 40 years and the best since 1994. The centre-left and centre-right blocks were the biggest losers and would no longer hold a majority in parliament (total of 329 seats out of 751)
• EU elections saw the Far right had modest gains overall, but did very well in Italy and France; Overall populists and nationalists with approx. 25% of seats vs. 20% prior
• UK results in EU elections: Labour and Tories suffer heavy losses as Brexit party and Lib Dems surge

Europe/Mideast:

• Greece PM Tsipras called general snap elections; cannot ignore EU Parliamentary election results
• Former Brexit Sec Dominic Raab confirmed he would run for Conservative Party leadership. To fight to renegotiate a Brexit deal with the EU and if not then would leave on WTO terms (Note: other contenders via for PM position include Environment Sec Gove; Esther McVey; Andrea Leadsom and Health Sec Matt Hancock)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 +0.4% at 3,362, FTSE closed, DAX +0.4% at 12,064, CAC-40 +0.3% at 5,331, IBEX-35 +0.7% at 9,240, FTSE MIB +0.8% at 20,536, SMI +0.7% at 9,730, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

Equities

• European bourses were in the green as Autos & Parts sector was outperforming. Overall price action was subdued with both UK and US markets closed for holidays. Market participants assessed the results of the EU parliament election which saw mainstream European Union parties hold their ground in EU Parliamentary elections against the populist tide and winning approx. two-thirds of all seats in Parliament
• Consumer discretionary: Galliford Try [GFRD.UK] said to have gotten an approach from Bovis Homes [BVS.UK} about possible merger. Shareholders rejected offer from Bovis for being too low
• Financials: Nasdaq [NDAQ] withdrew its offer to acquire Oslo Børs [OSLO.NO]
• Industrials: Fiat Chrysler [FCAU) submitted 50-50 merger proposal with Renault [RNO.FR]

Speakers

• Turkey Central Bank raised the reserve requirement on FX Deposits by 200bps. The Measures said to withdraw around $4.2B of liquidity from the market
• Italy Dep PM Salvini (League) said not to seek a government reshuffle or demand more ministers in ruling coalition with 5-Star party following EU elections. EU vote showed Europe was changing with Le Pen winning in France and Nick Farage winning in the UK. Convinced that new EU Commission would be more friendly to Italy. Must re-discuss old and outdated EU fiscal rules
• Austria Chancellor Kurz said to face possible ouster as Nationalists back a no-confidence vote by the opposition Social Democrats
• Japan PM Abe joint press conference with President Trump: Trump agreed to accelerate bilateral trade talks; sought to achieve a win-win agreement. Trump expressed support for a Japan-North Korea Summit
• President Trump: US-Japan alliance was a cornerstone in the region and sought peace and stability in North Korea. US and Japan might reach a trade deal in August. US not ready to make a trade deal with China; Believed that China probably wish they made the deal that they had on the table before they tried to renegotiate it,
• China Foreign Ministry spokesperson Lu Kang reiterated stance that trade disputes should be resolved via dialogue

Currencies/Fixed Income

• EUR/USD was steady but holding below the 1.12 level as markets assessed the results of the EU parliament election. European parliamentary elections were much less anti-EU than feared but the pro-European camp was becoming more fragmented. One analyst noted that a looming question was whether the outcome could affect the appointed to top positions regarding the succession of EU's Juncker, EU's Tusk and and ECB's Draghi
• GBP/USD was steady with UK markets out for a bank holiday. More contenders threw their cap in for the upcoming Tory leadership challenge. pair at 1.2704 in mid-session.

Economic Data

• (FI) Finland May Consumer Confidence Index: -1.8 v -1.7 prior; Business Confidence: +1 v -1 prior
• (JP) Japan Mar Final Leading Index CI: 95.9 v 96.3 prelim; Coincident Index: 99.4 v 99.6 prior
• (DK) Denmark Apr Retail Sales M/M: -0.3 v +0.9% prior; Y/Y: 3.2% v 1.0% prior
• (CH) Swiss Weekly Total Sight Deposits (CHF): 578.6B v 578.3B prior; Domestic Sight Deposits: 485.0B v 487.2B prior
• (PL) Poland Apr Unemployment Rate: 5.6% v 5.6%e
• (PL) Poland Q1 Unemployment Rate: 3.9% v 3.6%e
• (HK) Hong Kong Apr Trade Balance (HKD): -35.1B v -49.4Be; Exports Y/Y: -2.6% v +0.1%e; Imports Y/Y: -5.5% v -0.1%e

Fixed Income Issuance

• None seen

Looking Ahead

• (IT) Italy Debt Agengy (Tesoro) announces details on upcoming BTP and CCTeu issuance for Thursday, May 30th
• 05:30 (DE) Germany to sell €2.0B in 3-month Bubills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IL) Israel Apr Unemployment Rate: No est v 3.9% prior
• 06:00 (IL) Israel to sell bonds
• 06:00 (RO) Romania to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:00 (BR) Brazil May FGV Construction Costs M/M: 0.2%e v 0.5% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Baltic Dry Bulk Index
• 09:00 (FR) France Debt Agency (AFT) to sell combined €B in 3-month, 6-month and 12-month Bills
• 09:30 (BR) Brazil Apr Current Account Balance: +0.5Be v -$0.5B prior; Foreign Direct Investment (FDI): $5.9Be v $6.9B prior

Monday May 27: Five things the markets are talking about

Global markets continue to weather some erratic turbulence now that the U.S and China have hit each other with increased tariffs and ended their latest round of trade negotiations without a resolution. But the prices of relatively risky assets have mostly stabilized, and stocks are still within touching distance of their all-time highs.

Overnight, equities are small better bid in Europe after a mixed session in Asia as investors contemplate this month’s declines amid escalating Sino-U.S trade tensions. And with a holiday today in the U.S and the U.K market volumes will be seen as much lower.

The EUR has rallied in overnight trading as the European parliamentary elections results were much less anti-EU than the market had feared. Established parties lost some ground, while anti-EU and populist parties gained some. However, pro-EU parties hold a fragmented majority of 2/3 of the seats in the next European Parliament. Technically, Eurosceptics will still find it difficult to block decisions unless the centrist pro-European parties fail to cooperate.

Elsewhere, sterling has held on to its Friday’s gains. U.K. Chancellor of the Exchequer Philip Hammond refused to rule out backing a “no-confidence” motion against the government if the next PM tries to force a “no-deal Brexit” on Parliament.

Finally, European core government bonds are trading higher in the absence of Treasuries trading.

On tap: UK inflation hearings, NZD financial stability report, ANZ Business confidence, RBNZ Gov. Orr speaks (May 28), BoC monetary policy announcement, AUD private capital expenditure & NZD annual budget release (May 29), CH, Fr. & DE bank holiday, US preliminary GDP & CNY manufacturing PMI (May 30), CAD GDP (May 31).

1. Stocks mixed results in holiday trading

In Japan, stocks edged higher overnight, on lower volumes, as investors looked-for details from trade talks between the leaders of Japan and United States. The Nikkei share average ended +0.3% higher while the broader Topix added +0.4%. The Nikkei index has lost -5% this month.

Down-under, Aussie stocks ended flat as weaker bank stocks offset miners’ gains. The S&P/ASX 200 index closed down -0.06%. Sentiment toward miners was helped by comments from China who said they “would look to keep value-added tax low for the manufacturing industry to boost the economy.” Banks extend losses on warnings of tighter regulations. In S. Korea, the Kospi index ended -0.05% lower for a third straight session on worries the China-U.S trade spat was turning into a technology cold war.

In China, equity markets climbed, rebounding from their three-month lows, as investors expected greater policy support to offset impact from U.S tariffs and cooling domestic demand. At the close, the Shanghai Composite index was up +1.4%, while the blue-chip CSI300 index gained +1.2%. In Hong Kong, the Hang Seng inched -0.24% lower, while the Shenzhen Composite Index, gained +0.15%.

In Europe, regional bourses are trading mostly in the green, however, price action remains subdued with both UK and U.S markets closed for holidays.

Indices: Stoxx50 +0.4% at 3,362, FTSE closed, DAX +0.4% at 12,064, CAC-40 +0.3% at 5,331, IBEX-35 +0.7% at 9,240, FTSE MIB +0.8% at 20,536, SMI +0.7% at 9,730, S&P 500 Futures +0.1%.

2. Oil under pressure from Sino-U.S trade war, but OPEC provides support

Oil prices are trading mixed overnight, with U.S crude under pressure from Sino-U.S trade tensions, while Brent prices have gained some support from OPEC’s+ supply cuts.

Spot Brent crude futures are firmer at +$68.82 per barrel, up +13c, or +0.2%, above Friday’s close. While front-month U.S West Texas Intermediate (WTI) crude futures are at +$58.43 per barrel, down -20c, or -0.3%, from Friday.

Note: Last week, both crude contracts registered their biggest price declines this year amid concerns that the U.S-China trade dispute could accelerate into a global economic slowdown.

Price action remains a ‘push-pull’ trade with the crude ‘bear’ getting a helping hand from slowing demand growth due to the negative impact on the global economy of the Sino-U.S trade war, while the crude ‘bull’ has been relying on escalating political tensions between the U.S and Iran, as well as ongoing supply cuts led by OPEC+.

Elsewhere, gold prices have touched a one-week high earlier this morning as fears of a long-drawn-out U.S-China trade war is hurting risk sentiment, while ‘poorer’ economic data from the U.S is supporting fresh bets of a Fed rate cut. Spot gold has edged +0.1% higher to +$1,286.21 per ounce, while U.S gold futures have gained +0.2%, to +$1,285.60 an ounce.

3. Spain, France and Portugal yields trade atop record lows

Spanish, French and Portuguese bond yields are trading atop their record lows after the EU parliamentary election results showed pro-EU parties retained a strong majority, reinforcing investor sentiment. Despite nationalist and far-right parties significant gains, they are not as large as had been feared by risk-averse investors. Spanish 10-year bond yields are just above +0.82% while the Portuguese equivalent is at +0.976%. While in France, the 10-year OAT yield has dipped less than -1 bps to +0.278%, the lowest in more than two-years.

Elsewhere, the gap between Italian and German bond yields narrowed to its lowest in over two weeks. The spread has tightened to +264 bps in early European trade, the lowest since May 9. Despite the far-right and nationalist parties making strong gains in the vote, German 10-year Bund yields remains anchored at -0.118%, close to three-year low print in mid-May.

4. Turkeys central bank ups FX reserve requirements

The Central Bank of the Republic of Turkey (CBRT) has tweaked its reserve requirements, a form of “backdoor tightening” aimed at helping the TRY. It has increased reserve-requirement ratios for foreign currency deposits/participation funds by +200 bps for all maturity brackets, in order to support financial stability. Effectively, this takes liquidity out of the market.

Note: Policymakers have been reluctant to raise interest rates, with the rerun of the Istanbul election looming and the economy hindered by a recession. TRY is trading +0.5% higher at $6.0053.

EUR/USD (€1.1194) is steady but holding below the €1.12 level as markets assess the results of the EU parliament election. European parliamentary elections were much less anti-EU than feared but the pro-European camp was becoming more fragmented.

GBP/USD (£1.2704) is also steady with UK markets out for a bank holiday. More contenders have appeared to join the race for the upcoming Tory leadership challenge.

The USD/CNH has fallen for a third consecutive day after one of China’s senior-most economic officials said that “speculators who intended to go short the yuan will inevitably suffer from a huge loss.” The comments came as US/CNH hit the highest level this year last week, nearing the key ¥7.0 level. The FX pair is now at ¥6.9063, down -0.62% from last week’s high.

5. Swiss employment rose solidly in Q1

Data this morning showed that Switzerland’s employment rose in Q1, which suggests that consumer confidence should stay supported.

According to the statistics office, total employment rose +1.3% on-year and job vacancies climbed more than +9%.

Swiss unemployment is already “super-low,” and the key question is whether consumers will actually spend. Switzerland’s economy is heavily dependent on foreign trade, and according to analysts, if Swiss consumers boost spending, GDP should expand solidly.

Daily Pivots: (S1) 138.47; (P) 138.99; (R1) 139.46; More...

There is no clear sign of bottoming in GBP/JPY yet and further decline is expected. Sustained break of 61.8% retracement of 131.51 to 148.87 at 138.14 will pave the way to retest 131.51 low. On the upside, break of 141.73 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish incase of recovery.

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.