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• Rates: Investors willing to buy into yesterday's risk rally?
  President Trump granted the EU and Japan respite as he delayed the decision to impose auto tariffs. Core bonds temporarily lost ground, but maintain the upward bias of late. Given the outstanding bill with China, we err on the side of cautiousness too. The economic calendar offers some guidance today but is not expected to impact trading much.
• Currencies: Euro profits only modestly as US considers to delay auto tariffs
  EUR/USD (& EUR/JPY) initially declined yesterday as sentiment was risk off. The tide turned on headlines that the US would delay hiking tariffs on European cars. EUR/USD rebounded back above 1.12, but the move isn't really convincing. Today, sentiment on risk might remain fragile. More room for EUR/USD to drift back lower in the 1.1110/1.1265 range?

The Sunrise Headlines

• US stock markets followed the European intraday swing higher and closed with 0.45% (Dow) to 1.13% (Nasdaq) gains. Asian bourses are less convinced this morning with only China and India posting modest gains
• US President Trump will give the EU and Japan 180 days to agree to a deal that would limit or restrict imports into the US of automobiles and their parts, in return for delaying new auto tariffs, according to Bloomberg.
• April Australian labour market data were mixed. Net job growth increased by 28.4k, more than forecast, but details show a decline in full time jobs. The unemployment rate rose to 5.2%, but was joined by a higher participation rate.
• The US took dual actions that will effectively ban Chinese technology giant Huawei from selling to the US market and preventing it from buying semiconductors in the US that are crucial for the production process.
• Chinese US Treasury holdings slipped by $10.4bn in March to $1.12tn. It was the first decline since November and the total stock has now hit the lowest level since March 2017.
• The UK 1922 Committee, all backbench Conservative MP's, will urge PM May to quit as soon as possible (before June 15). If she refuses, they would contemplate changing the rules to allow for another no-confidence vote.
• Today's economic calendar contains US housing starts & building permits, weekly jobless claims and Philly Fed Business outlook. ECB Praet, Weidmann, de Guindos, Coeuré and Fed Quarles, Kashkari and Brainard speak.

Currencies: EUR/USD Rally Slows As USD Doesn't Lose Interest Rate Support, For Now

Currencies: Euro profits only modestly as US considers to delay auto tariffs

Global trading (including FX) showed two faces. In Europe and early in US dealings, markets traded in risk-off modus. The euro suffered more than the dollar. Poor Chinese data and uncertainty on Italy caused modest EUR/USD (& EUR/JPY) selling. US retail sales and production missed expectations, but had limited impact on the dollar. Later, equities and the euro rebounded on headlines that President Trump would delay raising tariffs on European cars. EUR/USD rebounded north of 1.12, but gains were modest (close at 1.1201). USD/JPY reversed most of its earlier losses on the equity rebound and closed at 109.60.

This morning, Asian equities don't join the rebound of Europe and the US yesterday. The US taking action against telecom companies on security issues reminds markets that the trade war is far from over. The yuan shows signs of stabilisation. China substantially reduced holdings of US Treasuries in March but for now it doesn't hurt the dollar. EUR/USD hovers near 1.12. USD/JPY is losing a few ticks. Australia labour data were mixed, with solid job growth but at the same time, the unemployment rate rose to 5.2%. This keeps speculation on RBA rate cuts alive and weighs on the AUD (AUD/USD 69.15 area).

Later today, there are few data in Europe. In the US, housing starts and building permits, the Philly Fed business outlook and jobless claims will be published. Data will probably be of second tier importance. Downside surprises will fuel Fed rate cut speculation. In theory, this asymmetric bias should be USD negative. However, over the previous days, the dollar, in a risk-off context, proved again more resilient than was the case last week. So, the jury is still out. We don't see a strong case for a sustained USD rebound, but in a day-to-day perspective, EUR/USD is losing momentum. The pair might cede some further ground in the 1.1110/1.1265 ST range. Further (risk-off inspired) losses of EUR/JPY might also weigh on the EUR/USD headline pair.

Yesterday, sterling declined further against the euro and the dollar. The lack of process in the Brexit process and growing uncertainty on UK PM May's fate weighed on the UK currency. EUR/GBP rebounded above 0.87 and is testing the 0.8723 resistance. Yesterday's story will still be at work today. UK PM May's position as leader of the conservative party might again be in question at a party meeting. Further sterling losses might be on the cards. Next resistance beyond 0.8723 is see at 0.8840.

EUR/USD: euro profits only modestly from US delay on auto tariffs

Bitcoin has started to stabilize around the $8,000 level after the number one cryptocurrency found strong weekly technical resistance from just above the $8,300 level. The strong bullish sentiment surrounding the BTCUSD pair remains in place while price trades above the $7,600 level. If bulls break above the $8,300 level the $8,500 level offers strong resistance prior to the $8,800 level.

The BTCUSD pair is bullish while trading above the $7,600 level, key intraday resistance is found at the $8,300 and $8,500 levels.

If the BTCUSD pair trades under the $7,600 level, sellers may test towards the $7,300 and $7,000 support levels.

The euro is struggling to move above the 1.1216 resistance level against the US dollar despite bullish new that the Trump administration will delay its decision on potential EU trade tariffs. A clear range break from the 1.1164 to 1.1265 price levels is now needed before the EURUSD pair picks its next strong directional bias. Due to the upcoming European elections, the euro currency may stay relatively contained until after the event.

The EURUSD pair is only bullish while trading above the 1.1264 level, key technical resistance is found at the 1.1290 and 1.1330 levels.

If the EURUSD pair moves below the 1.1165 level, key technical support is found at the 1.1130 and 1.1100 levels.

The British pound is under increasing downside pressure against the US dollar in early Thursday trade, with the pair now trading at its weakest since February this year. The GBPUSD pair is heavily bearish while trading below the 1.2866 level and could move to test the 1.2772 level. The four-hour time frame is also showing that a large head and shoulders pattern has formed.

The GBPUSD pair is heavily bearish while trading below the 1.2866 level, key support is located at the 1.2810 and 1.2772 levels.

If the GBPUSD pair trades above the 1.2866 level, key intraday resistance is found at the 1.2890 and 1.2920 levels.

The Australian dollar declined after the country released its employment data for April. Over the month, the unemployment rate increased to 5.2% from the previous 5.1%. Investors were expecting it to drop to 5.0%. On a positive note, the participation rate increased to 65.8% from the previous 65.7% while the employment change increased to 28.4K. The Aussie has been under pressure after data from China showed that the economy was easing.

The price of crude oil rose after the Trump administration announced that it would suspend all commercial and cargo flights between the US and Venezuela. This announcement came after it was determined that political instability and tensions had increased in the South American country. This order will have a limited impact because many carriers had already withdrawn services. Venezuela has the world’s biggest oil reserves. Yesterday, the EIA data showed that crude inventories rose by more than 5.43 million barrels, which was higher than the expected slowdown of more than 800K barrels.

Today, focus will be on the USD as investors receive the building permits data. In April, the building permits are expected to climb to 1.290 million, which is higher than the previous 1.288 million. The housing starts are expected to rise to 1.205 million from the previous 1.139 million. The Philadelphia Fed manufacturing index is expected to rise to 10 from the previous 8.5. Meanwhile, the initial jobless claims are expected to decrease by 220K while the continuing jobless claims are expected to decrease to 1,680K.

EUR/USD

The EUR/USD pair rose to a high of 1.1208, which was higher than the intraday low of 1.1173. On the hourly chart below, this price is slightly above the middle line of the Bollinger Bands and along the 50-day moving average. The Relative Vigor Index (RVI) has moved down towards the neutral line. The pair could move in either direction today based on US data.

AUD/USD

The AUD/USD pair declined to an intraday low of 0.6892. On the hourly chart, the pair is below the 50-day and 100-day moving averages. The RSI has moved to the oversold level while the signal line of the MACD remained below the neutral level. The pair will likely remain under pressure as investors keep an eye on the US-China trade conflict.

XBR/USD

The price of Brent crude oil rose to a high of $71.65 as the crisis in Venezuela continued. This price is along the upper line of the Bollinger Bands on the four-hour chart. It is also above the 50-day moving averages and above the important support shown below. The pair could break the important resistance level of 72 and move to the YTD high of almost $75.

General Trend:

• Automakers trade mixed in Asia, reportedly Trump plans to delay auto import tariffs by up to 6 months (in line with speculation from May 8th)
• Japanese mega banks trade lower after issuing guidance, weigh on Nikkei index
• Softbank Group declines, WeWork reported Q1 results
• Tencent declines on quarterly revenue miss
• Australian iron ore producers rise, China Iron Ore Futures rise over 4% to fresh record high amid ongoing supply concerns
• Australian Dollar (AUD) and bond yields decline, June rate cut bets rise after disappointing April unemployment data
• China new home prices continued to accelerate in April
• China holdings of US Treasuries hit lowest since 2017 in March (US TIC Flows report)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) AUSTRALIA APR EMPLOYMENT CHANGE +28.4K V +15.0KE; UNEMPLOYMENT RATE: 5.2% V 5.0%E
• OSH.AU PRL 3 JV signed binding letter of intent with Santos, under the agreement Santos to acquire a 14.32% equity interest in PRL 3
• SML.NZ The U.S. Food and Drug Administration (FDA) registration process required to launch Munchkin’s Grass Fed infant formula in the U.S. has been put on hold

Japan

• Nikkei 225 opened -0.2%
• (JP) JAPAN APR PPI (CGPI) M/M: 0.3% V 0.2%E; Y/Y: 1.2% V 1.1%E
• (JP) Japan LDP lawmaker Hagiuda: Japan should assess range of data including Tankan, before deciding to raise sales tax in October
• (JP) Bank of Japan (BOJ) Dep Gov Wakatabe: project yield curve to steepen when end of deflation is in sight, exit from easy policy on balance sheet will depend on various factors such as means and order in which it exits - Diet
• 8411.JP Reports FY18/19 Net ¥96.6B v ¥576.6B y/y; Pretax ¥614.1B v ¥782.5B y/y; Rev ¥3.93T v ¥3.56T y/y
• 7201.JP Said to consider putting Renault CEO Bollore on the board - Japan press
• (JP) Japan Investors Weekly Net Buying of Foreign Bonds: ¥20.8B v -¥257B prior; Foreign Buying of Japan Stocks: ¥282.5B v ¥0B prior
• (JP) Japan Mar Loans and Discounts Corp y/y: 3.6% v 3.3% prior
• (JP) Japan MoF sells ¥2.0T v ¥2.0T prior in % coupon 5-year JGB: avg yield: -0.170% v -0.157% prior, bid to cover: 4.94x v 4.71x prior

Korea

• Kospi opened +0.1%
• (KR) US President Trump to visit South Korea President Moon for summit in June, expected to focus on North Korea and bilateral alliance – Yonhap
• 003490.KR Reports Q1 (KRW) Net -62.5B v -66.4B, Op 141B v 164B y/y, Rev 3.14T v 3.15Te
• 005930.KR Prosecutors searching some offices related to accounting fraud probe

China/Hong Kong

• Hang Seng opened -0.5%; Shanghai Composite opened -0.2%
• (CN) CHINA APR NEW HOME PRICES M/M: 0.6% V 0.6% PRIOR; Y/Y: 10.7% V 10.6% PRIOR
• (CN) Reportedly US trade delegation could head to China as early as next week, but more likely shortly after that - press
• (CN) China Foreign Ministry spokesperson Geng Shuang: China has full confidence in its economy, which has continued to expand despite US putting protectionist measures; US president had no authority to speak on China’s economic performance and was using spurious data to make his point
• BABA Reports Q1 $1.28 v $1.05e, Rev $13.9B v $13.5Be
• 700.HK Reports Q1 (CNY) Net 27.2B v 19.4Be, Op 36.7B v 30.7B y/y, Rev 85.5B v 88.7Be
• (CN) China Press Front-Page Commentary: Reiterates yuan will maintain basic stability due to fundamentals
• (CN) China PBoC Open Market Operation (OMO): Skips for 5th consecutive session: Net injection: CNY0B v drain CNY10B prior
• (CN) China PBoC sets yuan reference rate: 6.8688 v 6.8649 prior

Other

• (MY) Malaysia Q1 GDP Q/Q: 1.1% v 0.9%e; Y/Y: 4.5% v 4.3%e

North America

• (US) MAR NET LONG-TERM TIC FLOWS -$28.4B V $51.9B PRIOR; TOTAL NET TIC FLOWS: -$8.1B V -$21.6B PRIOR; China Total holding of US Treasuries: $1.12T v $1.130T prior (lowest Level of China holdings of US treasuries since 2017)
• (US) Pres Trump signed executive order banning the purchase or use of communications technology that poses a national security risk (as expected)

Europe

• (IR) Iran Foreign Minister Zarif: Reiterates remains committed to Iran nuclear deal; Iran exercises 'maximum restraint' despite US withdrawal from nuclear deal - comments from Tokyo
• (IR) US Pres Trump looking for diplomatic way to resolve tensions with Iran - US Press

Levels as of 1:20 ET

• Nikkei 225, -0.8%, ASX 200 +0.4%, Hang Seng +0.1%; Shanghai Composite +0.3%; Kospi -1%
• Equity Futures: S&P500 -0.4%; Nasdaq100 -0.5%, Dax -0.5%; FTSE100 -0.1%
• EUR 1.1211-1.1201 ; JPY 109.60-109.33 ; AUD 0.6933-0.6892 ;NZD 0.6574-0.6548
• Gold -0.1% at $1,296/oz; Crude Oil +0.7% at $62.44/brl; Copper -0.3% at $2.739/lb

Daily Pivots: (S1) 140.07; (P) 140.86; (R1) 141.51; More...

Intraday bias in GBP/JPY remains on the downside at this point. Current decline from 148.87 is in progress for 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 141.64 minor resistance will turn intraday bias again and bring consolidations, before staging another decline.

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) 122.19; (P) 122.64; (R1) 123.21; More....

Intraday bias in EUR/JPY remains on the downside for the moment. Current fall from 127.50 is in progress and should extend to retest 118.62 low. On the upside, break of 123.61 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

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.

Daily Pivots: (S1) 0.8683; (P) 0.8709; (R1) 0.8750; More...

Intraday bias in EUR/GBP remains on the upside at this point. Consolidation pattern from 0.8472 is extending with another rising leg. Further rise could be seen to 0.8840 resistance. On the downside, break of 0.8648 minor support will turn bias back to the downside for 0.8472 low instead.

In the bigger picture, medium term decline from 0.9306 (2017 high) is seen as a corrective move. Current development suggests that it's extending through 0.8312 support towards 50% retracement of 0.6935 (2015 low) to 0.9306 at 0.8121. We'll look for strong support around there to contain downside to complete the correction. But for now, break of 0.8681 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 1.6125; (P) 1.6165; (R1) 1.6206; More...

EUR/AUD surges to as high as 1.6252 so far and intraday bias remains on the upside. Corrective fall from 1.6765 has completed at 1.5683 already. Further rise should now be seen to retest 1.6765 high. On the downside, below 1.6127 minor support will turn intraday bias neutral and bring consolidation first, before staging another rally.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Up trend from 1.1602 (2012 low) is expected to resume sooner or later. Break of 1.6765 will target 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488 next. However, firm break of 1.5346 key support will indicate trend reversal, with bearish divergence condition in weekly MACD, and turn outlook bearish.