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The British pound has staged a minor technical recovery against the US dollar after the pair quickly fell towards the 1.2623 level over reports that British PM Theresa May could soon quit. Further medium-term weakness is still expected while the GBPUSD pair trades below the 1.2660 level, with the 1.2550 level is still the overall bearish target. Bulls will need to move price above the 1.2756 resistance level to shift the extreme negative sentiment surrounding the pair.

The GBPUSD pair is heavily bearish while trading below the 1.2660 level, key support is located at the 1.2623 and 1.2550 levels.

If the GBPUSD pair trades above the 1.2660 level, key intraday resistance is found at the 1.2710 and 1.2756 levels.

Bitcoin is trading towards the worst levels of the week in early Thursday trade as BTCUSD bears attempt to attack towards downside support once again. The four-hour time frame is showing that an inverted head and shoulders pattern is building. The bullish pattern has an upside target that would take the BTCUSD pair above the psychological $10,000 resistance level.

The BTCUSD pair is bullish while trading above the $8,000 level, key resistance is found at the $8,500 and $10,000 levels.

If the BTCUSD pair trades under the $8,000 level, sellers may test towards the $7,400 and $7,100 support levels.

The USD was relatively unmoved after the Fed released minutes for the past meeting. The minutes showed that officials were committed to a ‘patient’ monetary policy, saying that rates will remain unchanged for a long period. They also showed that members were optimistic about the economy. Most of them said that earlier concerns about growth had abated. Their decision to leave rates unchanged was because of the low rate of inflation. The minutes said:

Members observed that a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time, especially in an environment of moderate economic growth and muted inflation pressures, even if global economic and financial conditions continued to improve

The Japanese yen weakened slightly earlier today after the country released the manufacturing PMI data. Data showed that the PMI declined to 49.6 this month, which is lower than the expected 50.5. In the previous month, the PMI was 50.2. This decline was attributed to declining export orders. The flash PMI data is published a week before the official PMI data. It came a day after the country released its trade data that showed a 6.4% drop in exports in April.

Today, traders will focus on the euro as Germany is expected to release its second reading of the Q1 GDP data. This is expected to show that the economy expanded by a YoY rate of 0.6% and a QoQ rate of 0.4%. The country will also release the PMI and other survey data. The manufacturing PMI for May is expected to increase to 44.8 from the previous 44.4. The services PMI is expected to decline to 55.5 from the previous 55.7. The ifo business climate index is expected to remain unchanged at 99.2. The EU will also release the minutes of the recent monetary policy meeting.

EUR/USD

The EUR/USD pair declined to a low of 1.1150 in overnight trading. This is close to the weekly low of 1.1140. On the chart below, this price is between the middle and lower lines of the Bollinger Bands. The signal line of the MACD has continued to move lower while the price is below the 50 and 25-day moving averages. The pair will likely retest the previous low of 1.1140, where it will form a double bottom.

GBP/USD

The GBP/USD pair continued to decline after reports that Theresa May could be gone ‘within days’. On the eight-hour chart, the price is at the lowest level since early January. The price is below the 50-day and 25-day moving averages. The RSI has remained below the oversold level of 30 while the Parabolic SAR remains above the current price. At the same time, the accumulation/distribution indicator has continued to drop. The pair will likely continue to drop to test the important support of 1.2550.

USD/JPY

The USD/JPY pair rose slightly after weak data from Japan. It is now trading at 110.32, which is 20 pips higher than yesterday’s low. On the hourly chart, the pair has been moving higher for the past two weeks. This price is along the 50-day moving averages and between the Envelopes indicator. The pair is also above the important support shown below. It looks likely that the pair will continue moving higher to re-test the important resistance of 110.67.

General Trend:

• Chinese video surveillance firm Hikvision extends declines on US blacklisting concerns
• China-listed Iflytek also declines on concerns regarding possible US restrictions
• Chinese rare earth companies rise; President Xi said rare earths are important ‘strategic resources’
• Japanese companies start to address concerns related to Huawei and China.
• Panasonic confirmed it halted certain component supplies to Huawei due to US ban
• Japan Display denied that the China Harvest Fund is considering delaying its investment decision
• Softbank Group declines over 5% amid concerns related to the regulatory approval of the Sprint/T-Mobile merger
• Japan’s Manufacturing PMI moves back into contractionary territory in May
• Aussie bond yields hit record lows amid focus on June 4th RBA policy meeting
• Market initially ignores improvement in Australia’s May PMI data
• New Zealand milk producer Fonterra cuts FY18/19 milk price forecast, noted slightly weaker than expected pricing for whole milk powder and skim milk powder

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• (AU) Australia May Preliminary PMI Manufacturing 51.1 v 50.9 prior
• FCG.NZ Reports 9M (NZ$) EBIT 522M, -9% y/y; Rev 15.0B v 14.8B y/y; Reviewing some operations for possible disposal
• KDR.AU Agrees to be acquired by Wesfarmers for A$1.90/shr cash (premium of 47.3% to May 1st closing price) for A$776M
• TRS.AU CEO Ross Sudano resigns, names Dani Aquilina acting CEO; Cuts FY19 guidance
• (NZ) New Zealand Fin Min Robertson: Govt plans to shift to a net debt target range, for 2021-2022 debt targeting 15-25% of GDP

Japan

• Nikkei 225 opened -0.5%
• (JP) Japan Fin Min Aso: Short sale of JGBs will not necessarily cause volatility, will continue to closely watch JGB market
• 6752.JP Confirms halting supplying certain components to with Huawei subject to US ban
• (JP) Bank of Japan (BOJ) Dep Gov Amamiya: Need to continue easing persistently, takes time to hit 2% inflation target, BOJ will communicate exit appropriately at the right time
• (JP) Trade talks between US and Japan said to have stalled related to auto tariffs – Nikkei
• (JP) Japan May Prelim PMI Manufacturing: 49.6 v 50.2 prior
• (JP) White House official notes that Trump's visit to Japan will not focus on trade – Nikkei
• (JP) Japan Fin Min Aso: Reiterates on schedule to raise sales tax in Oct, needed to secure stable funds
• (JP) Bank of Japan (BOJ) Dep Gov Wakatabe: Agree FRB's interest rate earnings are stable; Japan long and short term rate differential is limited
• (JP) Japan Cabinet Secretary Suga: It up up to PM Abe to decide whether to dissolve parliament

Korea

• Kospi opened -0.1%
• (KR) US State Dept spokesperson: US talks with North Korea are ongoing
• (KR) Bank of Korea (BOK) emergency meeting on KRW decline: Won's recent decline is excessive, officials to hold a meeting soon to discuss trading that has distorted the currency market
• (KR) Bank of Korea (BOK) Official: No reason Won to track yuan movement

China/Hong Kong

• Hang Seng opened -0.7%; Shanghai Composite opened -0.4%
• (CN) China Daily: 'Large' foreign fund outflow 'not possible'
• (CN) China Finance Ministry (MOF) announced it would offer preferential income tax treatment for integrated circuit design and software companies - financial press
• 002415.CN Exec: Take cyber security seriously, follows applicable laws where it operates, have retained human rights expert and former US ambassador Pierre-Richard Prosper to advise regarding rights compliance
• (CN) China PBoC Open Market Operation (OMO): Skips v injects CNY20B in 7-day reverse repos prior: Net: CNY0B v CNY20B prior
• (CN) China PBoC sets yuan reference rate: 6.8994 v 6.8992 prior
• (CN) Think Tank sees China 2019 Avg home price +7.6% y/y - Chinese Press
• Lenovo [992.HK] Reports Q4 Net $118M v $33M y/y, Rev $11.7B v $10.6B y/y; FY18 PCSD Rev +14% y/y a record high

Other Asia

• 2330.TW CEO: Affirms 2019 CAPEX $10-11B, Q2 Rev $7.55-7.65B; shipments to Huawei not impacted by US ban
• (PH) Philippines President Duterte ordered govt to hire a private shipping company to send 69 containers of garbage back to Canada and leave them within its territorial waters if Canada refuses to accept the rubbish which was sent from 2013-2014 - local press
• (IN) India Election results: Early count shows PM Modi's Bharatiya Janata Party (BJP) is in the lead
• (SG) Singapore Apr CPI M/M: -0.3% v -0.1% prior; Y/Y: 0.8% v 0.8%e

North America

• CTRP Reports Q1 $0.44 adj v $0.23e, Rev $1.20B v $1.18Be
• NTAP Reports Q4 $1.22 v $1.25e, Rev $1.59B v $1.65Be; Raises Quarterly dividend 20% to $0.48 from $0.40 (indicated yield 2.86%)
• (IR) Pentagon officials to brief the White House national security team tomorrow on plan that could send thousands of additional US troops to Middle East amid Iran tensions – CNN
• (US) Fed's Kaplan (dove, non-voter): US is flirting with yield curve inversion, which points to expectations for sluggish growth in the future

Europe

• (UK) 1922 Exec calling on PM May to announce she will step down June 10th at upcoming Friday meeting – Telegraph

Levels as of 1:20 ET

• Nikkei 225, -0.7%, ASX 200 -0.2%, Hang Seng -1.4%; Shanghai Composite -0.9%; Kospi -0.1%
• Equity Futures: S&P500 -0.4%; Nasdaq100 -0.6%, Dax -0.3%; FTSE100 -0.5%
• EUR 1.1159-1.1147; JPY 110.36-110.12 ; AUD 0.6884-0.6865 ;NZD 0.6499-0.6483
• Gold -0.1% at $1,272/oz; Crude Oil -0.6% at $61.08/brl; Copper -0.5% at $2.664 /lb

Market movers today

In the UK, key focus is on the Conservative Party's response to the results of the European parliamentary elections today. The Conservative Party is likely to suffer a heavy defeat and Nigel Farage's new Brexit Party may be the biggest party of all. It is highly likely that the defeat would cause Prime Minister Theresa May to resign (see our Brexit Monitor - End of May ).

In the euro area, we will get both the flash PMIs and German ifo for May, as well as the ECB minutes form the April meeting. We see scope for a very limited rebound in the manufacturing PMI to 48.3 on the back of the improving order situation in the April survey. However, the latest negative developments in the trade negotiations between the US and China will weigh on the PMIs going forward and a dent in business expectations might already be visible in today's German ifo print.

The ECB minutes from the April meeting may prove uneventful for the market. While we are interested in the discussions on inflation and the growth outlook, we doubt there will be any new colour on this, or on the potential 'tiering system' and the upcoming TLTRO3 modalities.

In the US, we also get the Markit preliminary PMIs for May, which should give us a clue to how growth has performed in Q2. Recently, manufacturing PMIs have added to the signs that the economy is set to slow and that the manufacturing sector is not immune to what happens in the rest of the world.

In the Scandi countries, labour market data is in focus in Sweden, Norway and Denmark (see next page).

Selected market news

Yesterday, pressure mounted on Theresa May to step down on the back of her renewed bid to find a majority for her Withdrawal Agreement. A senior Cabinet member, Andrea Leadsom, resigned, saying she no longer believed the government's approach will honour the result of the 2016 referendum. Later in the day, the powerful, so-called 1922 Committee of rank-and-file Conservatives, which oversees leadership elections, decided not to change the rules, but Committee chairman Graham Brady said after the meeting that he will meet with Theresa May tomorrow after the European elections. If Theresa May decides to step down, it opens the opportunity for a more pro-Brexit conservative leader, although such a process may only be completed in autumn. Hence an extension of the 31 October deadline with the EU may be needed, although uncertainty remains high about the potential different scenarios at the moment.

The Asian markets declined on hardening rhetoric from the Chinese side, with the state media sharply criticising the US's decision to curb Chinese companies. Meanwhile, Fed Minutes released yesterday showed little support for the market view that the Fed will cut rates later in the year.

Daily Pivots: (S1) 139.12; (P) 139.91; (R1) 140.51; More...

Intraday bias in GBP/JPY remains on the downside for the moment. Current fall from 148.87 should target 61.8% retracement of 131.51 to 148.87 at 138.14 next. Sustained break there will pave the way to retest 131.51 low. On the upside, above 141.73 resistance would indicate short term bottoming, possibly on bullish convergence condition in 4 hour MACD. Stronger rebound would then be seen.

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) 122.85; (P) 123.18; (R1) 123.38; More....

EUR/JPY is staying in consolidation from 122.08 and intraday bias remains neutral first. Upside of recovery should be limited by 124.09 support turned resistance to bring fall resumption. On the downside, break of 122.08 will target a test on 118.62 low. Nevertheless, firm break of 124.09 will at least bring stronger rebound back to 125.23 resistance and above.

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.

For the 24 hours to 23:00 GMT, the EUR declined 0.07% against the USD and closed at 1.1156.

In the US, data showed that the MBA mortgage applications rose 2.4% on a weekly basis in the week ended 17 May 2019, following a drop of 0.6% in the previous week.

The FOMC May meeting minutes showed that policymakers are in no rush for a near-term move in monetary policy as inflation is likely to remain subdued. Additionally, the minutes indicated that the Fed’s patient approach to rate-change would be appropriate “for some time.”

In the Asian session, at GMT0300, the pair is trading at 1.1152, with the EUR trading marginally lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1140, and a fall through could take it to the next support level of 1.1128. The pair is expected to find its first resistance at 1.1172, and a rise through could take it to the next resistance level of 1.1192.

Moving ahead, traders would await the European Central Bank’s April meeting minutes and

Germany’s IFO survey indices for May, scheduled to release in a few hours. Also, the Markit manufacturing and services PMI for May, set to release across the euro bloc, will garner significant amount of investors attention. Later in the day, the US Markit manufacturing and services PMI’s for May, new home sales for April followed by the initial jobless claims, will keep traders on their toes.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 0.8772; (P) 0.8807; (R1) 0.8842; More...

Intraday bias in EUR/GBP remains on the upside at this point. Current rise should target 0.8840 resistance first. Decisive break there will target 0.9101 key resistance next. On the downside, break of 0.8681 resistance turned support is needed to indicate completion of rise from 0.8489. Otherwise, near term outlook will remain cautiously bullish in case of retreat.

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.

For the 24 hours to 23:00 GMT, the GBP declined 0.31% against the USD and closed at 1.2664, amid speculation that Prime Minister Theresa May's leadership could come to an end, after her new Brexit plan was rejected.

On the data front, UK's consumer price index (CPI) advanced 2.1% on a yearly basis in April, less than market forecast for a rise of 2.2% and compared to a gain of 1.9% in the prior month. Additionally, Britain's public sector net borrowing posted a deficit of £5.0 billion in April, following a revised surplus of £1.0 billion in the previous month. Markets had anticipated public sector net borrowing to record a deficit of £5.1 billion. Meanwhile, the nation's retail price index rose 3.0% on an annual basis in April, surpassing market expectations for an increase of 2.8%. The index had registered a rise of 2.4% in the prior month. Also, the house price index climbed 1.4% on an annual basis in April, compared to a revised gain of 1.0% in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2649, with the GBP trading 0.12% lower against the USD from yesterday's close.

The pair is expected to find support at 1.2609, and a fall through could take it to the next support level of 1.2569. The pair is expected to find its first resistance at 1.2704, and a rise through could take it to the next resistance level of 1.2759.

Amid lack of macroeconomic releases in UK today, traders would focus on the global macroeconomic releases for further cues.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.