Sample Category Title

Pivot (invalidation): 1.3455

Our preference Long positions above 1.3455 with targets at 1.3500 & 1.3515 in extension.

Alternative scenario Below 1.3455 look for further downside with 1.3435 & 1.3415 as targets.

Comment Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Pivot (invalidation): 1.0060

Our preference Short positions below 1.0060 with targets at 1.0020 & 1.0005 in extension.

Alternative scenario Above 1.0060 look for further upside with 1.0080 & 1.0095 as targets.

Comment A break below 1.0020 would trigger a drop towards 1.0005.

Pivot (invalidation): 109.80

Our preference Short positions below 109.80 with targets at 109.40 & 109.15 in extension.

Alternative scenario Above 109.80 look for further upside with 110.00 & 110.20 as targets.

Comment As Long as the resistance at 109.80 is not surpassed, the risk of the break below 109.40 remains high.

Pivot (invalidation): 1.2645

Our preference Long positions above 1.2645 with targets at 1.2680 & 1.2700 in extension.

Alternative scenario Below 1.2645 look for further downside with 1.2625 & 1.2605 as targets.

Comment The RSI lacks downward momentum.

Pivot (invalidation): 1.1160

Our preference Long positions above 1.1160 with targets at 1.1200 & 1.1215 in extension.

Alternative scenario Below 1.1160 look for further downside with 1.1145 & 1.1130 as targets.

Comment The RSI advocates for further upside.

USDCAD was trading not too far from yesterday's one-week high of 1.3501 on Friday, having pulled back slightly. But momentum indicators suggest there is still some upside for the pair to advance again.

The near-term bias is looking neutral-to-bullish as the RSI is flatlining above the 50-neutral level, while the stochastics are pointing north and the %K and %D lines remain positively aligned.

The neutral-to-bullish picture also holds true for the medium-term outlook as the pair has been consolidating following the sharp downside correction in January. Price action at the moment is above the Ichimoku cloud so the risks are to the upside.

Should USDCAD make another run higher, it's likely to meet resistance at 1.3510 as this level has strongly capped prices since late April. A successful break above this key resistance area would open the way for the 19-month high of 1.3664 reached on December 31. But before then, USCAD might need to overcome another hurdle at 1.3565 – a previous support level.

If the soft positive momentum fails to hold and prices turn lower, the red Tenkan-sen line at 1.3435 is the nearest support that could halt steeper declines. A potentially more important support, though, is the 50-day moving average just above the 1.34 handle. If breached, it would shift the focus to the downside and prices would slip inside the Ichimoku cloud, erasing any remaining positive bias.

In the bigger picture, USDCAD would need to make a sustained climb above 1.3510 in order for the outlook to become convincingly bullish.

Markets

Global core bonds gained ground yesterday with US Treasuries outperforming German Bunds. The ongoing trade dispute between the two largest economies continued to weigh on investor sentiment, diverting money flows into safe havens. Core bonds maintained their upward bias of late and got further supported by disappointing eco data. Poor EMU PMI's and a weaker-than-expected German Ifo survey suggest that growth for the eurozone will most likely remain sluggish in the second quarter of the year. The German yield curve fell with losses up to -3.4 bps (10-yr). At the US opening, US PMI's missed expectations by a landslide and pushed US Treasuries even higher. The US yield curve bull flattened with changes in the range of -5.3 bps (30-yr) to -7.6 bps (2-yr). All US yield are now trading at 2019 lows. Risk sentiment is mixed across Asia overnight. The White House proposed tariffs on goods from countries found to have undervalued currencies, targeting i.a. China, Japan and South Korea. Core bonds stabilize overnight with a slight downward tendency. However, as the past few weeks, we err on the side of cautiousness. Today's eco calendar will not steer traders today, but remains interesting. The US will print durable goods orders for April, while the UK publishes retail sales for April. US markets are closed on Monday (Memorial Day).

The dollar rallied yesterday, profiting from a further risk-off repositioning as the US-China trade war intensified. EMU confidence data were mixed and suggested mediocre growth in Q2. EUR/USD was in the defensive and tested the 1.1112 year low early in US dealings. The trade-weighted dollar (DXY) also touched the highest level in 2 years. At that time, the US Markit PMI's printed sharply lower, raising fears that the US will also feel ever more fall-out from the trade war. The decline in US yields accelerated and blocked the upside test of the dollar. The dollar reversed the intraday gain. EUR/USD closed at 1.1181 (from 1.1150). USD/JPY extended its decline to close at 109.60. This morning, Asian equities are trading mixed. US president Trump said that Huawei could be part of a US-China trade deal. At the same time, the US administration is proposing tariffs on countries the US considers to have undervalued currencies. If implemented, it would be an important step in the US trade policy (and a potential negative for the dollar). For now, USD/CNY stabilizes in the 6.91 area. USD/JPY hovers in the 109.50 area. EUR/USD maintains yesterday's rebound , trading near 1.1180. Later today, there are no important EMU data. In the US the April durable goods orders are expected to decline after a strong march reading. The series is volatile, but in the wake of yesterday's data, the US currency might be more vulnerable to negative news. Yesterday's rejected test of the 1.1110 confirms that it provides solid support and that it won't be that easy for the dollar to succeed a next up-leg. Maybe there is room for EUR/USD to regain some further ground in the 1.110/1.1260 consolidation pattern.

The sterling decline took a breather yesterday. EUR/GBP failed to break the 0.8840 resistance. The initial decline of EUR/USD also weighed on EUR/GBP. However, the EUR/USD dip was reversed later and the political developments in the UK didn't warrant much sterling optimism. EUR/GBP closed the day at 0.8834. Today, the UK retail data will be published. April sales are expected to ease after a strong March report. We remain cautious/negative on sterling. A break above 0.8840 resistance remains possible, especially if EUR/USD would rebound further.

News Headlines

The US proposed tariffs on goods from countries that are engaging in competitive devaluation of their currencies, a sweeping trade policy tool that could target both China and US allies. Moreover, Trump remained positive that negotiations with China could get back on track, while he called Huawei "very dangerous", but hinted that the Chinese tech giant could be included in a possible trade deal.

Consumer inflation in Japan rose to 0.9% (YoY) in April, as expected, up from 0.5% a month before. Core inflation, stripping out energy and food prices, rose 0.6% (YoY), up from 0.4% in March, the fastest rate since 2016. While the April figures represents a slight uptick, Japan's inflation remains well below the BoJ 2% target..

The EUR/AUD wave pattern is suggesting that price will most likely make a bearish bounce at the resistance (red) and Fibonacci targets, which would complete a wave C (purple) of wave B (pink). The confirmation of a bearish reversal occurs when price breaks below the support trend line (blue) of the bullish channel.

The EUR/AUD is building impulsive price action on the 4 hour chart where price seems to be completing a 5 wave (green/blue) pattern. Price is completing a potential wave C (purple) once these 5 wave patterns are ready. At the moment price seems to breaking above a smaller resistance trend line (dotted red), which could spark a new 5 wave (green) pattern in the 5th wave (blue).

General Trend:

• US Commerce Dept: Proposing rule to impose countervailing duties on countries that undervalue their currency relative to the US dollar
• China Commerce Min (MOFCOM): More efforts should be made to stabilize and improve China's trade
• Samsung shares decline as Huawei concerns move to South Korea
• Australia ASX 200 index weighed down by Energy sector
• Westpac’s RBA call sends Aussie yields lower
• Oil prices rise over 1% in Asia after sell-off on Thursday
• US/Japan expected to hold trade talks later today

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• (AU) Westpac now forecasts 3 RBA rate cuts in 2019 (previously said it saw rate cuts in June and Aug 2019); Now expects the RBA to cut the cash rate to 0.75% by Nov 2019 (current target rate is 1.50%)
• (NZ) New Zealand PM Ardern: Economic growth set to be slower than recent years
• (NZ) New Zealand Apr Trade Balance (NZ$): 433M v 450Me

China/Hong Kong

• Shanghai Composite opened -0.2%, Hang Seng +0.4%
• (CN) China Commerce Min (MOFCOM): Domestic Economy faces downward pressure; some structural issues remain to be resolved; trade environment growing more uncertain - Report on China's Foreign Trade Condition
• (CN) China said to issue policy to boost development of small tech companies - press
• (CN) Pres Trump: there's a good possibility of a China trade deal; Huawei could be included in a China trade deal
• (CN) Pres Trump: remains hopeful at some point US will get together with China; will see China's Pres Xi at G20 meeting
• Hikvision [002415.CN]: Fitch affirms Hkvision at A-; Outlook stable; US Tariffs won't have material effect on rating
• (CN) China PBoC Deputy Governor: FX market condition is stable, has ample policy tools to cope with exchange rate fluctuations
• (CN) China PBoC Open Market Operation (OMO): Skips for 2nd straight session; Net: CNY0B v CNY0B prior
• (CN) China PBoC sets yuan reference rate: 6.8993 v 6.8994 prior

Japan

• Nikkei 225 opened -0.8%
• (JP) JAPAN APR NATIONAL CPI Y/Y 0.9% V 0.9%E; CPI EX FRESH FOOD (CORE) Y/Y: 0.9% V 0.9%E
• (JP) Japan PM Abe: Will do all to manage economy amid overseas uncertainties; reiterates no change on sales tax [increase plan] unless Lehman Brothers scale shock occurs
• (JP) Japan PM Abe considering visit to Iran in June - Financial Press
• (JP) Japan said to delay the release of monthly labor survey for March amid data probe, notes data related to regular employment figures for July 2018 need to be examined - US financial press

Korea

• Kospi opened -0.6%
• (KR) South Korea Official Yoon: Q2 GDP expected to 'significantly' improve; housing prices remain stable

North America

• Global Payments [GPN]: Said to be in early stage talks with Total System - US Financial Press
• Tallgrass Energy LP [TGE]: Issues notice of temporary embargo for all movements into destinations located near Cushing (Oklahoma); notes temporary embargo of deliveries due to extensive flooding on the Cimarron River in Payne County

Levels as of 1:20 ET

• Nikkei 225, -0.4%, ASX 200 -0.7%, Hang Seng +0.5%; Shanghai Composite -0.1%; Kospi -0.7%
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.4%, Dax +0.6%; FTSE100 +0.3%
• EUR 1.1187-1.1173 ; JPY 109.74-109.47 ; AUD 0.6906-0.6880 ;NZD 0.6526-0.6512
• Gold -0.2% at $1,283/oz; Crude Oil +1% at $58.61/brl; Copper +0.2% at $2/688/lb

Market movers today

After 'Super Thursday' yesterday brought another set of subdued PMI data on both sides of the Atlantic, markets are in for a more quiet day on the data front today.

EU parliament elections continue to take place today in Ireland and Czech Republic. Results will however only be announced when voting in all EU countries has closed on Sunday evening. For more on our expectations regarding the EU election outcome, see 2019 EU Parliament elections: Setting the scene for the 'European Game of Thrones' .

In the UK, Theresa May is today expected to announce timetable for her resignation as U.K. Conservative Party leader and prime minister after the backlash over her Brexit plans, for more details on the situation, please see Brexit Monitor - End of May .

In the US, preliminary core capex for April is due out. Core capex has softened recently but remains at a high level and we expect investments to continue to increase over this year.

Selected market news

Yesterday, PMI releases in advanced economies cast doubt about the outlook for the global economy. Most severe was the slump in the US, where both the manufacturing and service PMIs dropped sharply. While it is not a big surprise that US manufacturing is not immune to the weakening global economic environment (global value chains), the service sector slowdown is more surprising given the strength of the US labour market. The Japanese and German PMIs also surprised on the downside while the French PMI was a rare light of hope. The weakening of the PMIs comes amid the significant uncertainty about trade relations between China and US triggered by the renewed trade dispute between the two countries over the past month.

The weak signs from the leading global economies led to a sizeable sell-off in global equity markets. The European and US equity markets finished sharply lower while US yields plummeted fuelled partly by further expectations of rate cuts by the Federal Reserve. Asian equity markets this morning, however, are paring losses after indications from US President Trump following the close on Wall Street that Huawei Technologies Co., which was put on a U.S. blacklist earlier this month, could be part of a trade pact with the country.

In the UK, Prime Minister Theresa May is expected to set a timetable for her resignation as U.K. Conservative Party leader and prime minister following the backlash over her latest Brexit proposal (see Brexit Monitor - End of May ). According to Bloomberg news, May intends to quit as Tory leader on June 10 so an election to choose her replacement can begin after President Donald Trump's state visit to Britain. The timetable is expected to be set today. The current favourite to replace her is pro-Leave campaigner Boris Johnson, who is in favour of a cleaner exit from the EU. The GBP saw further decline yesterday.