Sample Category Title

The Australian dollar extends steep fall of this week to new four and a half month low on Friday, weighed by increasing odds for rate cut as early as June and rising fears of escalation of US/China trade conflict.

The pair is on track for the biggest weekly fall since early Feb that adds to negative sentiment after bearish signal was generated on repeated close below strong technical support at 0.6391 (Fibo 61.8% of 0.6706/0.7295).

Daily techs are in full bearish configuration, however, oversold conditions suggest corrective action in coming session.

Res: 0.6897, 0.6915, 0.6931, 0.6955
Sup: 0.6872, 0.6845, 0.6800, 0.6750

Downside risk increases as Euro extends weakness below trendline support (1.1180) and key Fibo point at 1.1169 (61.8% of 1.1111/1.1263), after double upside rejection at 30SMA (Wed / Thu).

Weaker pound on fresh negative news regarding Brexit, drags the single currency, with stronger dollar adding pressure.

Eurozone's Apr CPI came in line with expectations, but below previous month's figure, that additionally weighs.

Fresh bearish momentum is building up and daily MA's are in full bearish configuration, setting scope for further weakness, which looks for bearish signal on weekly close below cracked Fibo support at 1.1169.

Oversold daily stochastic warns that bears might be briefly paused.

Broken bull-trendline now marks solid resistance, with extended upticks expected to remain below a cluster of daily MA's (5;10;20 SMA) and 4-hr cloud base at 1.1200 zone.

Res: 1.1180, 1.1200, 1.1224, 1.1246
Sup: 1.1158, 1.1147, 1.1134, 1.1111

Notes/Observations

Asia:

• China stocks plummet as China State Media reported China may have no interest in continuing trade talks with the US for now; sees little "sincerity" in Pres Trump's approach
• China NDRC: Reiterates trade friction's impact on the Chinese economy is 'under control', domestic CPI and PPI growth to stay stable in future; Pork prices stabilized and declined m/m in April

Europe/Mideast:

• Brexit talks between Labour and the Conservatives are said to close without an agreement; will now move to a second phase aimed at agreeing on a process for parliamentary votes designed to find a consensus
• Reportedly Labour Party sees no point in Brexit deal with a Government which is about to collapse
• White House issues notice on Turkey metal tariffs: Confirms US is terminating Turkey preferential treatment under GSP, effective on Friday (as expected); US to impose 25% ad valorem tariff on Turkey steel imports, down from 50% prior -German Business Association DIHK estimates that further U.S. tariffs of 25% on cars, car parts would cost German economy €6B per year

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.60% at 380.58, FTSE -0.38% at 7,325.83, DAX -0.85% at 12,206.31, CAC-40 -0.56% at 5,417.52, IBEX-35 -0.39% at 9,268.00, FTSE MIB -0.49% at 21,047.50, SMI -0.48% at 9,614.00, S&P 500 Futures -0.53%]
• Market Focal Points/Key Themes: Equities European Indices trade lower across the board after weak Asian session as trade tensions weighs after China State media commentary on weakening interest in trade talks and . U.S. futures also trade lower about half a percent. On the earnings front, Swiss-based Richemont trades 1.5% lower after missing on margins. Industrial companies Porsche and Duerr trade lower as well following worse than expected earnings releases. In the U.K. EasyJet airlines stock trades higher about 3% on increase in revenue figures. On the corporate front, stock of major European food delivery firms trade sharply lower after Amazon confirms investment in their privately-held rival Deliveroo. ThyssenKrupp falls another 3% after interest indicated in one of its units. In other news, Thomas Cook fell over 30% following edgy analyst price cut action. Looking ahead, notable earners include Cae and Dr. Reddy's Laboratories .
• Consumer discretionary: Richemont [CFR.CH] -1.5% (earnings; raises dividend), Delivery Hero [DHER.DE] -5%, Takeaway.com [TKWY.NL] -2.5%, Just Eat {JE.UK] -8% (Amazon confirms leading round in rival Deliveroo financing), EasyJet [EZJ.UK] +3% (earnings; outlook cut), Staffline Group [STAF.UK] -52% (trading update), Thomas Cook [TCG.UK] -30% (analyst action), Zalando [ZAL.DE] -5% (analyst action)
• Healthcare: Morphosys [MOR.DE] +1% (study data)
• Financials: Metro Bank [MTRO.UK] +21% (placement)
• Industrials: Porsche [PAH3.DE] -1.5% (earnings), Vallourec [VK.FR] +8% (earnings), Fiskars [FSKRS.FI] -3.5% (profit warning citing tariffs), Sage Group [SGE.UK] -2% (earnings), ThyssenKrupp [TKA.DE] -3% (unit interest), Duerr [DUE.DE] -4% (earnings)

Speakers

• (CN) China Foreign Min Spokesman Lu Kang: No information on Trump-Xi meeting at G-20; China has always wanted to resolve all disputes via talks
• (JP) Japan Cabinet Secretary Suga: Japan's economic fundamentals are strong
• (JP) Japan Chief Government Spokesperson: Possible for PM Abe to dissolve lower house if opposition submits a motion of no confidence
• (CN) China Global Times Editor-in-chief Hu Xijin: More The US Commerce Department put Huawei on its Entity List, making trade war more like a real 'war'. Trade talks have been stuck in deep shock. The Chinese are more convinced concessions won't bring peace. The only way for China is to strengthen independent research & development.

Currencies/Fixed Income

• Trade frictions continue to be the main topic of discussion today with additional media outlets saying China may have no interest in continuing trade talks with the US for now, whereas Trump is saying that they need to make a deal now as it will not receive a better deal in the future. The PBOC also said that they would support their currency by not letting the CNY weaken against the dollar abve the 7.00 handle. This saw a slight sell off in the CNY.
• EUR/USD Traded lower yesterday while comments from the Italian dep PM say that Italy needs a Trump-like shock. The euro then sold off 50 pips breaking and closing below the 1.12 handle. These comments also saw the BTP future sell off hard for 40 tics, only to turn around and make a new high on the day pushing yields higher
• GBP/USD Traded lower breaking the 1.28 handle with little support being seen in the currency. Comments continue to go nowhere as it looks like the UK may have to be involved in the EU elections unless they manage to put together a deal. The cable is currently trading near its 1.2770 level a low set back in February this year.

Economic Data

• (EU) EURO ZONE APR CPI Y/Y: 1.7% V 1.7%E ; CPI CORE Y/Y: 1.3% V 1.2%E; CPI M/M: 0.7% V 0.7%E
• (EU) Euro Zone Mar Construction Output M/M: -0.3% v 3.0% prior; Y/Y: 6.3% v 7.6% prior
• (HK) Hong Kong Q1 Final GDP Q/Q: 1.3% v 1.2% prelim; Y/Y: 0.6% v 0.5% prelim
• (EU) Euro Zone Apr EU27 New Car Registrations: -1.0% v -3.9% prior
• (AT) Austria Apr CPI M/M: 0.1% v 0.9% prior; Y/Y: 1.7% v 1.8% prior
• (RU) Russia Narrow Money Supply Narrow w/e May 10th (RUB): 10.35T v 10.28T prior
• (HK) Hong Kong Q1 Final GDP Q/Q: 1.3% v 1.2% prelim; Y/Y: 0.6% v 0.5% prelim

Fixed Income Issuance

• Trade frictions continue to be the main topic of discussion today with additional media outlets saying China may have no interest in continuing trade talks with the US for now, whereas Trump is saying that they need to make a deal now as it will not receive a better deal in the future. The PBOC also said that they would support their currency by not letting the CNY weaken against the dollar abve the 7.00 handle. This saw a slight sell off in the CNY.
• EUR/USD Traded lower yesterday while comments from the Italian dep PM say that Italy needs a Trump-like shock. The euro then sold off 50 pips breaking and closing below the 1.12 handle.
• GBP/USD Traded lower breaking the 1.28 handle with little support being seen in the currency. Comments continue to go nowhere as it looks like the UK may have to be involved in the EU elections unless they manage to put together a deal. The cable is currently trading near its 1.2770 level a low set back in February this year.

Looking Ahead

• 07:30 (IN) India Weekly Forex Reserves w/e May 10th: No est v $418.7B prior
• 08:10 (UK) Baltic Dry Bulk Index
• 09:00 (RU) Russia Mar Trade Balance: $16.0Be v $15.7B prior; Exports: $37.8Be v $34.0B prior; Imports: $21.8Be v $34.0B prior
• 10:00 (US) Apr Leading Index: 0.2%e v 0.4% prior
• 10:00 (US) University of Michigan Confidence: 97.5e v 97.2 prior
• 13:00 (US) Weekly Baker Hughes Rig Count data

Sterling extends recent decline after UK opposition leader Jeremy Corbyn formally announced collapse of Brexit negotiation with the government. In a letter to Prime Minister Theresa May, Corbyn said the talks had "gone as far as they can".

And, "it has become clear that, while there are some areas where compromise has been possible, we have been unable to bridge important policy gaps between us.... Even more crucially, the increasing weakness and instability of your government means there cannot be confidence in securing whatever might be agreed between us."

May would now bring the Brexit Withdrawal Agreement back to the Commons in the first week of June. But there is practically no chance of getting it approved. Most importantly, regardless of the outcome of the vote, May agreed hammer out her the time line to step down with 1922 Committee chairman Graham Brady.

Eurozone CPI was finalized at 1.7% yoy in April, up from 1.4% in March. Core CPI was finalized at 1.3% yoy. The highest contribution to the annual Eurozone inflation rate came from services (0.86%), followed by energy (0.51%), food, alcohol & tobacco (0.29%) and non-energy industrial goods (0.06%).

For EU28, CPI was finalized at 1.9% yoy, up from 1.6% in March. The lowest annual rates were registered in Croatia (0.8%), Denmark and Portugal (both 0.9%). The highest annual rates were recorded in Romania (4.4%) and Hungary (3.9%). Compared with March 2019, annual inflation fell in six Member States, remained stable in two and rose in nineteen.

Full release here.

Barring a strong turnaround, the EUR/USD is headed for a losing week. The pair has ticked lower on Friday, continuing the downward trend. Currently, the pair is trading at 1.1159, down 0.13% on the day. On the release front, Eurozone consumer spending indicators impressed, with sharp gains in April. Final CPI climbed 1.7%, matching the forecast. This was up sharply from 0.8% in March. Final Core CPI rose 1.3%, edging above the estimate of 1.2%. This marked the strongest gain since March 2013. In the U.S., today’s highlight is UoM Consumer Sentiment, which is expected to rise to 97.8.

The U.S. posted strong data on Thursday, sending the euro lower. Unemployment claims dropped sharply to 212 thousand, down from 228 thousand. This was its lowest level in four weeks. On the manufacturing front, the Philly Fed Manufacturing Index jumped to 16.6 in May, a 4-month high. This was up sharply from 8.5 in April. Building permits and housing starts both improved in April. If U.S. numbers continue to point upwards and beat the forecasts, the Federal Reserve may have to reconsider its neutral stance towards rate moves. Currently, the markets have priced in no rate moves before 2020, but that could change, based on the strength of the U.S. economy.

The U.S. economy continues to perform well, despite the ongoing trade war with China which has seen both sides slap heavy tariffs on each other’s products. It’s a very different story, however, across the Atlantic. The eurozone economy has been struggling, and even the German locomotive has shown signs of weakness. The manufacturing sectors have been hit particularly hard, as the global trade war has dampened the appetite for German and European exports. The U.S. and China have been holding talks to diffuse trade tensions, but President Trump slapped new tariffs on Chinese products and China quickly responded with counter-tariffs. Investors are worried if the trade war escalates, Trump could target European cars made in China, which would hurt the massive German auto sector. This has led to sharp losses for German automaker listings on the DAX, which include BMW, Daimler and Volkswagen. On Wednesday, the U.S. announced a 6-month moratorium on tariffs on European and Japanese vehicles, but investors will likely remain nervous that the U.S. could impose further trade sanctions against China.

Markets in the red as trade concerns remain

It's been a bizarre week in the markets, one that looks set to end on a negative note in a potential sign that investors are not particularly comfortable despite a three day winning streak.

The week got off to a woeful start after China announced counter-tariffs against the US as trade talks broke down. Markets had been surprisingly resilient at the end of last week when the US announced its tariff increase on $200 billion worth of goods but once China followed, all hope quickly disappeared as investors prepared for more friction and further tariffs.

Trump then succeeded in calming investor fears, claiming the fallout was just a mere “little squabble” between the world's two largest economies before then offering further hope to investors as reports claimed auto-tariffs may be delayed by six months. Clearly the prospect of fighting a trade war on multiple fronts isn't too desirable, particularly heading into an election year.

That proved enough to settle investors and markets have recovered since Monday but I wonder whether futures trading in the red heading into the weekend is a sign they're not entirely convinced. A lot can happen while the markets are closed and we clearly live in uncertain and uneasy times. If this is to last, we'll need to see more evidence that the situation can lead to a positive conclusion but for now, talking a good game looks to be doing the job.

Sterling on the decline again as hard Brexit fears rise

The pound is on the decline again as reports continue to suggest that Brexit talks between the Conservatives and Labour are about to reach an unsuccessful conclusion. Once again precious weeks have been lost and it appears we're no closer to agreeing on the country's exit from the European Union. This uncertainty combined with the prospect of a more hardline Brexiteer – one of which has already thrown his hat into the ring – is unsettling sterling traders.

We've gone from a situation in which a deal late in the day looked likely to one in which all options, up to and including no deal, may be back on the table. That doesn't bode well for the economic prospects and the currency may continue to suffer as these options become more plausible. The break below 1.28 against the dollar is a clear sign of the unease being felt, with 1.27 now being the key level below.

Gold technically bearish as long as risk appetite remains positive

The rebound in equity markets has taken the shine off gold which had been benefiting from its role as a traditional safe haven. Gold ran into resistance around $1,300 earlier in the week and has since fallen back below $1,290 where it had previously struggled to push above. Ultimately, it seems that the direction of travel is highly dependent on whether risk appetite holds up.

The trend over the last few months has been bearish and that hasn't changed during the recent spike. In fact, we've just rotated off a lower high, the peak of which was around 50% of the move from this year's high to low. From a technical perspective, this is a perfect bearish signal but unfortunately, I don't yet have the confidence in the markets not to become risk averse again which would be supportive for the yellow metal. The next week could be very interesting.

The common European currency traded above a support cluster formed by the combination of the weekly and the monthly pivot points at 122.59 during yesterday's trading session.

The exchange rate broke the significant support level at 122.59 during the morning hours of today's trading session.

Given that a breakout had occurred, it is likely that the EUR/JPY currency exchange rate will continue to edge lower today. The potential targets for bearish traders will be near a swing low of 122.20.

However, the pair could make a brief retracement towards the 100-hour SMA at 122.84 within this session.

The 50-hour simple moving average has continued to guide the Australian Dollar lower against the US Dollar. The currency pair depreciated about 48 base points during yesterday's trading session.

As for the near future, the Aussie could aim for a swing high of 0.6932 during the following trading session.

However, a resistance cluster formed by the combination of the 50-hour SMA and the weekly S2 at 0.6918 might hinder the currency exchange rate from edging higher in the short-term.

The US Dollar appreciated about 68 base points against the Canadian Dollar on Thursday. The currency pair bounced off from the bottom border of an ascending channel pattern at the end of yesterday's trading session.

Currently, the 200-hour simple moving average is providing support for the exchange rate at 1.3459.

If the support line holds, a breakout through a significant resistance level at 1.3497 could be expected.

However, if the currency exchange rate passes the 200-hour SMA, a decline towards a swing low of 1.3400 might occur.