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The British pound is attempting to move higher against the US dollar, with the pair trading closer to the pivotal 1.2772 resistance level. If bulls fail to break above the 1.2772 level, swing-traders are likely to use the technical correction as an opportunity to sell the GBPUSD pair. The MACD indicator on the daily time frame is bearish and is highlighting growing downside pressure.

The GBPUSD pair is heavily bearish while trading below the 1.2772 level, key support is found at the 1.2700 and 1.2662 levels.

If the GBPUSD pair trades above the 1.2772 level, key intraday resistance is found at the 1.2810 and 1.2830 levels.

The sharp swings continue for the DAX index, as the volatility continues in the global equity markets. Currently, the DAX is at 12,091, down 1.20%. There are no major German or European events on the schedule. German PPI gained 0.5%, following two successive declines. Later in the day, eurozone trade balance is expected to show a surplus of EUR 24.2 billion, down from EUR 26.8 billion a month earlier. On Tuesday, the eurozone releases consumer confidence.

The DAX index posted strong gains last week, climbing 1.49%. However, the index has reversed directions on Monday and posted sharp losses. Risk appetite soured on Friday, after President Trump issued an executive order to blacklist Huawei, a Chinese telecom company. Last week, Trump issued a moratorium on tariffs against European automakers, but investors remain wary. German automaker listings have posted sharp losses on Monday – BMW is down 2.03%, Daimler has fallen 1.60% and Volkswagen has declined 1.22%. With U.S.-China talks on hold, traders should be prepared for more swings this week.

Recovery from new 3 ½ month low at 109.02 (13 May) faced strong headwinds from key barriers at 110.31 (daily cloud base / Fibo 38.2% of 112.40/109.02 descend) and showing initial signs of stall.

Daily RSI turned sideways and stochastic is hitting the overbought zone border line, signaling that corrective phase might be over.

Failure to clear 110.31 pivot would add to negative signal, with extension and close below broken falling 10SMA (109.83) needed to signal reversal.

Return below cracked key Fibo support at 109.41 (Fibo 38.2% of 104.57/112.40) would bring bears fully back to play for extension of downtrend from 112.40.

Conversely, lift and close above 110.31 would generate fresh signal for extension of recovery from 109.02.

Res: 110.31, 110.48, 110.66, 110.95
Sup: 109.91, 109.83, 109.49, 109.15

Cable consolidates above multi-month low at 1.2714 on Monday after suffering heavy losses last week. The pair was down 2.1% for the week, as bears were additionally boosted by collapse of Brexit talks between Tory and Labor party.

Deeply oversold stochastic is turning north and RSI reversed from oversold zone, suggesting adjustment, as traders are looking to book some profits from last week’s fall, which marks the biggest weekly loss since Feb 2018.

With overall negative sentiment and bearish daily / weekly studies, limited correction is seen as likely scenario.

Broken Fibo support at 1.2773 mark initial resistance, followed by falling 5SMA at 1.2801, with extended upticks expected to stall under key barriers at 1.2865 (25 Apr former low) and 1.2892 (Fibo 38.2% of 1.3179/1.2714) before bears regain control.

Res: 1.2773, 1.2801, 1.2865, 1.2892
Sup: 1.2724, 1.2714, 1.2668, 1.2629

In a survey the European Union Chamber of Commerce in China, EU companies are generally sceptical on whether China will release open up market assess. European businesses continued to witness "sustained support for state-owned enterprises, higher incidences of unfair technology transfers and the strengthening of the Communist Party's role in business." It's also noted that "one of the more significant shortcomings of China's reform agenda is that certain high-level promises to improve its business environment for international companies have failed to translate into concrete action."

More importantly, European Chamber Vice President Charlotte Roule complained that "our members have reported that compelled technology transfers not only persist, but that they happen at double the rate of two years ago." And,  "it is unacceptable that this practice continues in a market as mature and innovative as China,"

Here are some highlights of the survey results:

• Optimism on growth over the next two years dropped from 62% in 2018 to 45% in 2019.
• 47% of respondents expect the number of regulatory obstacles to increase in the next five years, and 25% expect the number will stay the same.
• About half of respondents expect it will take five years to see competitive neutrality realized, while a third never expect it to be realized.
• 20% of respondents felt compelled to transfer technology as a condition for market access, nearly two thirds of which occurred over the last two years, and a quarter of which were taking place at the time the survey was being conducted.

Full release here.

Notes/Observations

Asia:

• Various US Tech names including Google, Intel and Xilinx are said to halt supply to China's Huawei with certain critical software and components following recently announced executive order by Trump
• China to wait and see to decide on counter measures; reports indicate actions could include suspending business with all suppliers who halt dealings with Huawei and a temporary tariff hike on Apple.

All US-China trade talks are said to be halted

• Japan Q1 GDP beats forecasts, Imports see the biggest fall since 2009
• Australia Election Results: PM Morrison and center right coalition retain power (not expected); Labor Party leader Bill Shorten is expected to step down after the loss, and his deputy Tanya Plibersek is likely to take over party leadership

Europe/Mideast:

• Italy's Dep PM Salvini reiterates push for lower Taxes; Lower taxes is the only way to spur growth and reduce debt
• Infineon reportedly has also stopped shipments to Huawei, various other European tech names evaluating options
• (IR) US President Trump: If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again! – tweet; Tweet in response to reports that a rocket was fired into Baghdad’s Green Zone less than a mile away from the US Embassy.

Energy

• (SA) Saudi Energy Minister al-Falih said there was consensus among OPEC and allied oil producers to lower crude inventories 'gently, possible rollover in H2 2019 of previously agreed output curbs was discussed at Sunday's ministerial panel - financial press

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.66% at 379.00, FTSE -0.62% at 7,303.34, DAX -0.75% at 12,147.31, CAC-40 -0.85% at 5,392.19, IBEX-35 -0.23% at 9,259.07, FTSE MIB -2.03% at 20,677.50, SMI -0.74% at 9,587.20, S&P 500 Futures -0.15%]

Market Focal Points/Key Themes:

Equities

• European Indices trade negative across the board erasing earlier gains amid trade tensions again weighs after Google suspended business with Huawei that requires the transfer of hardware and software products and China promises to retaliate. U.S. futures trade broadly slightly negative also erasing initial gains on press report that China may temporarily hike tariffs on Apple.
• On the corporate front, various European chipmakers such as Infineon, STMicro and AMS trade sharply lower following Google story over the weekend and as Infineon said to suspend shipments to Huawei and others declining to comment at the moment.
• On the earnings front, Ryanair trades approximately 6% lower after reporting weakest full-year profit in 4 years and remaining cautions regarding coming year guidance. Low & Bonar in the U.K. trades down almost 30% after providing trading update and CEO stepping down.
• In other news, Deutsche Bank fell 2% on comments regarding New York Times report over the weekend. Thomas Cook fell another 17% on company's liquidity concerns.
• Looking ahead, notable earners SpartanNash Company, AZZ Inc. and Tata Motors.
• Consumer discretionary: Thomas Cook [TCG.UK] -17% (liquidity discussions), Ryanair [RYA.UK] -6% (earnings), Low & Bonar [LWB.UK] -26% (trading update; CEO steps down), Eniro [ENRO.SE] +18% (divestment)
• Industrials: Bacanora Lithium [BCN.UK] +14% (investment), Braemar Shipping Services [BMS.UK] +8.5% (earnings)
• Financials: Deutsche Bank [DBK.DE] -1% (comments on NYT report), Commerzbank [CBK.DE] -2% (analyst action), Foxtons Group [FOXT.UK] -5% (trading update)
• Technology: Infineon [IFX.DE] -3.5%, ASML [ASML.NL] -2%, AMS [AMS.CH] -3%, STMicroelectronics [STM.FR] -4% (Infineon reportedly among companies to suspend shipments to Huawei)

Speakers

• (CN) China Foreign Min Spokesman Lu Kang: Wait and see for China's countermeasures on Huawei
• (IT) Italy's Deputy PM Salvini says cabinet meeting due Monday; EU limits must be changed for 15% flat tax
• Sensitive data cannot be controlled by China which is nor a democracy and has "certain spirit of imperialism and control", National security is the key
• (CZ) Czech PM Babiis: Although public finance seen in slight Gap in the coming years, we don't see substantial problems
• -(UK) UK Financial Services Min Glen: City has made Modest Brexit contingency plans, investors want more clarity on Brexit
• (JP) Japan LDP Secretary General Nikai: no especially urgent need for fiscal stimulus
• (ES) Spain's Economy Min: plan to reduce fical deficit to 2% this year, expect to keep reducing debt issuance

Currencies/ Fixed Income

• The USD seen weaker against most major FX pairs, following comments over the weekend where Trump tweeted that if Iran wants a fight that will be the end of Iran.as well as the Huawei fall out and China threatening to increase tariffs on Apple products.
• GBP/USD With Brexit talks stalling and inflation report out tomorrow we could get a bit of volatility in the cable. A new low reached on Friday as the cable trades between 1.27 and 1.28
• AUD/USD The Australian elections over the weekend has sent the Aussie trading higher back up above the 0.69 handle.
• EUR/USD The euro making a new weekly low on Friday coming up to a level of support around the 1.1170 area, with ECB Knot saying that Euro zone inflation is not where the ECB want it yet.

Economic Data

• (DE) Germany Apr PPI M/M: 0.5% v 0.3%e; Y/Y: 2.5% v 2.4%e
• (CZ) Czech Apr PPI Industrial M/M: 0.7% v 0.3%e; Y/Y: 4.3% v 3.9%e
• (NG) Nigeria Q1 GDP Y/Y: 2.0% v 2.6%e
• (EU) Euro Zone Mar Current Account (Seasonally Adj): €24.7B v €27.9B prior
• (CH) Swiss Weekly Total Sight Deposits (CHF): 578.3B v 578.1B prior
• (IT) Italy Mar Current Account: €4.0B v €3.3B prior

Fixed Income Issuance

• None seen

Looking Ahead

• 06:00 (PT) Portugal Apr PPI M/M: No est v 0.0% prior; Y/Y: No est v 1.5% prior
• 07:00 (BR) Brazil May IGP-M Inflation (2nd Preview): No est v 0.8% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (PL) Poland Central Bank (NBP) Jun Minutes
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Apr Chicago Fed National Activity Index: No est v -0.15 prior
• 08:30 (CL) Chile Q1 GDP Q/Q: No est v 1.3% prior; Y/Y: No est v 3.6% prior; Current Account Balance: No est v -$3.6B prior
• 09:00 (BE) Belgium May Consumer Confidence Index: No est v -7 prior
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.25%
• 09:00 (BR) Brazil May CNI Industrial Confidence: No est v 58.4 prior
• 16:00 (US) Weekly USDA Crop Report

China hit back on Trump's claim that there was "very strong deal", a "good deal" that the formed changed, leading to higher tariffs on Chinese imports. Foreign Ministry spokesman Lu Kang said: "We don't know what this agreement is the United States is talking about. Perhaps the United States has an agreement they all along had extravagant expectations for, but it's certainly not a so-called agreement that China agreed to."

Lu also criticized that the US tried to "achieve unreasonable interests through extreme pressure". And, "from the start this wouldn't work."He also reiterated "China-U.S. economic and trade consultation can only follow the correct track of mutual respect, equality and mutual benefit for there to be hope of success."

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.11724
Open: 1.11602
% chg. over the last day: -0.14
Day's range: 1.11507 – 1.11676
52 wk range: 1.1111 – 1.2009

EUR/USD keeps showing a negative trend. Right now the instrument is consolidating around the monthly minimums. The key support and resistance are at 1.11500 and 1.11700. The demand for the USD remains high. The financial market participants are waiting for additional drivers. The EU parliament elections will happen this week. You should open positions from the key levels.

Today the investors will evaluate the statements by the FOMC representatives.

The price fixed below 50 MA and 200 MA which points to the power of the sellers.

The MACD histogram is in the negative zone but above the signal line which gives a weak signal to sell EUR/USD.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line which points to the bullish mood.

Trading recommendations

Support levels: 1.11500, 1.11200, 1.11000
Resistance levels: 1.11700, 1.11850, 1.12000

If the price fixed below 1.11500, expect further descend toward 1.11200-1.11000.

Alternatively, the quotes can recover toward 1.11850-1.12000.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.27919
Open: 1.27303
% chg. over the last day: -0.60
Day's range: 1.27242 – 1.27573
52 wk range: 1.2438 – 1.3631

GBP/USD remains in a bearish mood. GBP reached the 5-month minimums relative to the USD. Right now the quotes are consolidating around 1.27150-1.27700. The financial market participants are waiting for new info regarding Brexit. A technical correction is possible soon. You should open positions from the key leves.

The Economic News Feed for 20.05.2019 is calm.

The price fixed below 50 MA and 200 MA which points to 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 GBP/USD.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line which points towards a bullish mood.

Trading recommendations

Support levels: 1.27150, 1.26500
Resistance levels: 1.27700, 1.28250, 1.28800

If the price fixes below 1.27150, expect further descend toward 1.26800-1.26600.

Alternatively, the quotes can recover toward 1.28250-1.28500.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.34598
Open: 1.34399
% chg. over the last day: -0.05
Day's range: 1.34239 – 1.34561
52 wk range: 1.2727 – 1.3664

USD/CAD started to descend. The trading instrument updated the local minimums. The CAD is supported by the positive oil quotes. Right now the local key levels are at 1.34200 and 1.34450. The trading instrument has a tendency to descend further. The financial market participants are waiting for important reports from Canada later this week. You should open positions from the key levels.

The Economic News Feed for 20.05.2019 is calm.

The price fixes below 200 MA, which points towards the power of the sellers.

The MACD histogram is in the negative zone and below the signal line which points toward a strong signal to sell USD/CAD.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no signals.

Trading recommendations

Support levels: 1.34200, 1.34000, 1.33800
Resistance levels: 1.34450, 1.34650, 1.34850

If the price fixes below 1.34200, expect further descend toward 1.34000-1.33800.

Alternatively, the quotes can grow toward 1.34700-1.34850.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 109.834
Open: 110.103
% chg. over the last day: +0.20
Day's range: 110.015 – 110.319
52 wk range: 104.97 – 114.56

USD/JPY started to recover after a long fall. The trading instrument have set the new local maximums. The quotes are consolidating around 110.000-110.300. Today, during the asian trading session, Japan has published an optimistic GDP report. However, USD/JPY has prospects for further correction. Keep an eye on the US Treasury Bonds' yield. You should open positions from the key levels.

Keep an eye on the statements by the FOMC representatives.

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 USD/JPY.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line which provides no signals.

Trading recommendations

Support levels: 110.000, 109.750, 109.500
Resistance levels: 110.300, 110.700

If the price fixes above the resistance level of 130.300 which points towards a further correction toward 110.600-110.800

Alternatively, the quotes can fall toward 109.750-109.500.

Last week, the greenback strengthened against a basket of world currencies. The dollar index (#DX) reached two-year highs and closed in the positive zone. Positive economic releases, as well as the growth of the US government bonds yield supported the US currency. The British pound is still under pressure. Financial market participants are concerned that Prime Minister Theresa May will not be able to approve her Brexit deal and may soon face a leadership problem. Investors expect up-to-date information regarding trade negotiations between Washington and Beijing.

Today, during the Asian trading session, positive data on Japan's GDP have been published. In the first quarter, the economy grew by 0.5%. Experts expected a decline by 0.1%. EU citizens will elect their candidates to the European Parliament from May 23. Investors will assess the last Fed meeting minutes, as well as important economic releases from the US, UK, Canada and the Eurozone.

Oil quotes show positive dynamics. At the moment, futures for the WTI crude oil are testing $63.75 per barrel.

Market Indicators

• On Friday, the bearish sentiment prevailed in the US stock market: #SPY (-0.65%), #DIA (-0.66%), #QQQ (-1.02%).
• The 10-year US government bonds yield is recovering. Currently, the indicator is at the level of 2.40-2.41%.

The news feed on 2019.05.20:

• Today we recommend paying attention to the speeches by the FOMC representatives.

USDCHF rebounded on the 1.0050 support level in the preceding week, jumping above the 23.6% Fibonacci retracement level of the upward movement from 0.9540 to 1.0235, around 1.0070. The RSI has come off from negative levels and the stochastic oscillator posted a bullish cross within its %K and %D lines in the oversold zone, pointing to some upside risks. However, the red Tenkan-sen line of the Ichimoku cloud is still sloping down despite the latest upside moves.

If the pair gains some more positive momentum and surpasses the 1.0125 resistance and the 20-day moving average, the next target for the bulls would be the 27-month high of 1.0235 before aiming for the 1.0340 barrier, taken from the peaks on January 2017.

On the other side, in case of a drift downwards, immediate support is likely to come from the 23.6% Fibonacci of 1.0070 and the 1.0050 low around the uptrend line. Falling below the diagonal line, the risk would shift from the current bullish outlook in the medium-term to a neutral one, challenging the 38.2% Fibonacci of 0.9970.

In brief, USDCHF has been developing in an upside tendency over the last year and traders should continue positive orders until a significant violation of the ascending trend line near 1.0030.