Sample Category Title

Daily Pivots: (S1) 108.93; (P) 109.39; (R1) 109.78; More...

With 110.04 resistance intact, further decline is still expected in USD/JPY. Fall should 112.40 would target to retest 104.69 low. Nevertheless, break of 110.04 minor resistance will indicate short term bottom. Lengthier consolidation could be seen before another decline.

In the bigger picture, USD/JPY is staying inside falling channel from 118.65. Currently development suggests that rebound from 104.69 is only a corrective move. And fall from 118.65 is not completed yet. Decisive break of 104.69 will extend the down trend towards 98.97 support (2016 low). For now, we'd expect strong support above there to bring rebound.

Daily Pivots: (S1) 1.0035; (P) 1.0077; (R1) 1.0105; More...

Intraday bias in USD/CHF is turned neutral for consolidation above 1.0050 temporary low. But upside of recovery would be limited by 1.0126 support turned resistance to bring another decline. ON the downside, break of 1.0050 will resume the fall from 1.0237 to retest 0.9879 key support.

In the bigger picture, as long as 0.9879 support holds, medium term up trend form 0.9186 is still in progress. Break of 1.0237 will target 1.0342 resistance next. For now, we'd be cautious on strong resistance from there to limit upside, until we see medium term upside acceleration. However, decisive break of 0.9879 will be a strong sign of medium term reversal. Focus will be turned back to 0.9716 support for confirmation.

Daily Pivots: (S1) 1.2920; (P) 1.2981; (R1) 1.3020; More....

Intraday bias in GBP/USD remains on the downside for 1.2865 support. Decisive break there will revive the bearish case that rebound from 1.2391 has completed at 1.3381. Near term outlook will turn be turned bearish and deeper decline should be seen through 1.2773 support to retest 1.2391 low. On the upside, above 1.3040 minor resistance will turn bias back to the upside for 1.3176 resistance instead.

In the bigger picture, medium term decline from 1.4376 (2018 high) halted and made a medium term bottom after hitting 1.2391. Rebound from 1.2391 is seen as a corrective move for now. In case of another rise, strong resistance could be seen around 61.8% retracement of 1.4376 to 1.2391 at 1.3618 to limit upside. On the downside, break of 1.2773 support will suggests that such corrective rise is completed and bring retest of 1.2391 low first.

Daily Pivots: (S1) 1.1211; (P) 1.1237; (R1) 1.1251; More.....

EUR/USD weakens notably after rejection by 1.1264 resistance, but stays in consolidation from 1.1111. Intraday bias remains neutral and outlook is unchanged. In case of another rise, upside should be limited well below 1.1324 resistance to bring fall resumption. On the downside, below 1.1173 minor support will turn bias to the downside for 1.1111 low. Break will extend down trend to 100% projection of 1.1448 to 1.1183 from 1.1324 at 1.1059. Break will target 161.8% projection at 1.0895.

In the bigger picture, down trend from 1.2555 (2018 high) has just resumed. 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186 was also taken out. Current fall should now target 78.6% retracement at 1.0813. Sustained break there will pave the way to retest 1.0339. On the downside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Markets sentiments generally stabilized today as it seems that US and China are still will to continue trade negotiations. Nevertheless, otherwise some pleasing words, there is nothing concrete, not even a scheduled meeting. Further decline in German 10-year yield, deeper into negative territory, is a sign of nervousness among investors. Gold is also holding firm around 1300 handle, as another sign of underlying risk aversion.

Some important economic data are released today but they're largely ignored. UK unemployment dropped to fresh 44-year low of 3.8% in March. Eurozone industrial production contracted -0.3% in March. German ZEW economic sentiment deteriorated to -2.1 in May. But these data triggered little movements in the markets.

As for today, Sterling is so far the weakest one, followed by Yen and then Swiss Franc. New Zealand Dollar is the strongest, followed by Canadian and than Dollar. For the week, Swiss Franc and Yen remain overwhelmingly the strongest one. Dollar is catching up as third strongest for the moment. Aussie, Sterling and Canadian are the weakest.

Technically, recovery in Yen crosses are rather weak. Focus will be on temporary lows of 109.02, and 122.48 in USD/JPY and EUR/JPY respectively. We'd expect Yen crosses to resume decline, probably rather soon. AUD/USD continues to gyrate lower to 0.6913 fibonacci projection level. Firm break there could trigger downside acceleration. With today's weakness, GBP/USD might be heading to 1.2865 key support. Firm break will confirm near term bearish reversal.

In Europe, currently, FTSE is up 0.87%. DAX is up 0.36%. CAC is up 1.00%. German 10-year yield is down -0.0079 at -0.075. Earlier in Asia,Nikkei dropped -0.59%. Hong Kong HSI dropped -1.50%. China Shanghai SSE dropped -0.69%. Singapore Strait Times dropped -0.33%. Japan 10-year JGB yield dropped -0.0061 to -0.052.

China agreed to continue trade negotiation with US, but warned of underestimating its determination

China indicated that it has agreed to continue negotiation with the US even though both sides have raised tariffs on either other imports. Chinese Foreign Ministry spokesman Geng Shuang said in a regular press briefing "my understanding is that China and the United States have agreed to continue pursuing relevant discussions." But no detail was given on the way forward. Geng just said "as for how they are pursued, I think that hinges upon further consultations between the two sides."

Additionally, Geng warned "we hope that the U.S. side does not misjudge the situation and not underestimate China's determination and will to safeguard its interests." China also typically denied any accusation of their wrong doings. Geng said "you absolutely can't put the hat on China of reversing positions and going back on one's promises."

Trump: Have to make up the tremendous ground since ridiculous one sided formation of the WTO

Trump fired a series of tweets boasting his own tariff policies again. He noted there is now a "big a growing" steel industry after the 25% tariffs. He also blamed that there were "tremendous ground"  lost to China  since the "ridiculous one sided formation of the WTO". He also claimed that it's time for the farmers as "one of the biggest beneficiaries of what is happening now." The country will make up for the differences if China doesn't continue to buy from them.

Fed Williams: Decline decline in r* means limited policy space in future downturns

In prepared remarks, New York Fed President John Williams said the global shifts in demographics and productivity have two important implications for the economy and monetary policy. Firstly, "slower population and productivity growth translate directly into slower trend economic growth". Secondly, "these trends have contributed to dramatic declines in the longer-term normal or 'neutral' real rate of interest, or r-star."

And, the global decline in r-star will continue to pose "significant challenges" for monetary policy. There will be "limited policy space" for rate cuts in future downturns. Hence, "recoveries will be slow and inflation below target". Also, the limitation in the ability of central banks to offset downturns results in an "adverse feedback loop". That is "expectations of low future inflation drag down current inflation and further reduce available policy space".

Separately, Williams told Bloomberg TV that "as tariffs get larger, assuming that happens, the effects will be bigger, boosting inflation in the next year and probably having negative effects on growth." "We could probably get a couple tenths or two tenths on the inflation rate over the next year based on what has already been announced. If there (is) further escalation in terms of tariffs, those effects would get even larger", he added.

UK unemployment rate dropped to 44-year low, but wage growth slowed

UK unemployment rate dropped to 3.8% in March, down from 3.9% and beat expectations. That's a 44-year low since 1974. Overall employment rate was 76.1%, joint highest on record since 1971.

However, wage growth slowed with average weekly earnings including bonus rose 3.2% 3moy, down from 3.5% 3moy and missed expectation of 3.4% 3moy. Weekly earnings excluding bonus also slowed to 3.3% 3moy, down from 3.4% 3moy, matched expectations.

German ZEW dropped to -2.1, restrained economic growth for the next six months

German ZEW economic sentiment dropped to -2.1 in May, down from 3.1 and missed expectation of 5.0. It's also well below long term average of 22.1. Current situation index, though, rose to 8.2, up from 5.5 and beat expectation of 6.0. Eurozone ZEW economic sentiment dropped to -1.6, down from 4.5 and missed expectation of 5.0. Current situation gauge rose 6.2 pts to 7.0.

ZEW noted that "The development of production and exports in Germany as well as Eurostat's most recent flash estimate of GDP growth in the euro area in the first quarter of 2019 give rise to the hope that the German economy, too, has grown more strongly than expected in the first quarter. "

ZEW President Achim Wambach said: "The decline in the ZEW Indicator of Economic Sentiment shows that the financial market experts continue to expect restrained economic growth in Germany for the next six months. The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports – a key factor for the growth of the gross domestic product".

Eurozone industrial production dropped -03% mom, -0.6% yoy

Eurozone industrial production dropped -0.3% mom in March, matched expectations. Over the year, industrial production dropped -0.6% yoy, above expectation of -0.8% yoy. EU28 industrial production dropped -0.1% mom, rose 0.4% yoy.

Over the month, among Member States for which data are available, the largest decreases in industrial production were registered in Malta (-3.7%), Greece (-2.7%) and Sweden (-2.3%). The highest increases were observed in Lithuania (3.5%), Denmark (1.8%) and Slovakia (1.2%).

Also released in European session, German CPI was finalized at 1.0% mom, 2.0% yoy in April. Swiss PPI rose 0.0% mom, dropped -0.6% yoy in April.

Australia NAB business conditions unwound March rebound, employment dived

In April, Australia NAB Business Conditions deteriorated further to 3, down from 7 and missed expectation of 4. The surprised jumped in Conditions from 4 to 7 was more than unwound. Business Confidence, though, improved slightly to 0, up from -1, but still missed expectation of 1.

Looking at the details, business conditions, confidence and forwards orders are all below average. More worryingly, there was sharp decline in employment index from 6 to -1, first below average reading since late 2016. By industry, largest fall in employment occurred in retail, manufacturing an wholesale. But overall deterioration was rather broad-based.

Alan Oster, NAB Group Chief Economist noted: "We will continue to watch the employment index as well as the other forward looking variables over coming months for further slowing. In particular, the readings of labour market related variables will remain important as, for now, the interest rate outlook appears to hinge on continuing strength in the labour market".

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1211; (P) 1.1237; (R1) 1.1251; More.....

EUR/USD weakens notably after rejection by 1.1264 resistance, but stays in consolidation from 1.1111. Intraday bias remains neutral and outlook is unchanged. In case of another rise, upside should be limited well below 1.1324 resistance to bring fall resumption. On the downside, below 1.1173 minor support will turn bias to the downside for 1.1111 low. Break will extend down trend to 100% projection of 1.1448 to 1.1183 from 1.1324 at 1.1059. Break will target 161.8% projection at 1.0895.

In the bigger picture, down trend from 1.2555 (2018 high) has just resumed. 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186 was also taken out. Current fall should now target 78.6% retracement at 1.0813. Sustained break there will pave the way to retest 1.0339. On the downside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

GBP/USD continues to lose ground this week. In the North American session, the pair is trading at 1.2917, down 0.32% on the day. On the release front, the U.K. released key employment numbers. Wage growth slowed to 3.2% in March, down from 3.5% a month earlier. This missed the estimate of 3.4% and was the lowest gain since September. The unemployment rate sparkled in March, dropping to 3.8%. This beat the estimate of 3.9%. Unemployment claims fell to 24.7 thousand in April, down from 28.3 thousand in March. Still, this was above the forecast of 24.2 thousand. There are no major U.S. events on the schedule. The U.S. will post retail sales and the Empire State manufacturing index.

The pound continues to stumble, as nervous investors are snapping up the safe-haven greenback due to rising trade tensions between the U.S. and China. On Friday, the U.S. raised tariffs on $200 billion in Chinese goods, from 10% to 25%. The move was announced a week ago, triggering sharp declines in the equity markets. The Chinese response was vigorous, with Bejing announcing on Monday that it would slap tariffs on $60 billion of U.S products. Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

Brexit may have been pushed off until October, but confusion and uncertainty over Britain’s departure from the EU remain. Prime Minister May, stymied by parliament in three attempts to pass a Brexit withdrawal bill, is now trying to reach an agreement with Labor leader Jeremy Corbyn in order to win approval for a withdrawal bill. However, this could prove to be a dead end for the embattled May. Corbyn is insisting on a customs union with the EU, which is anathema to many Conservative lawmakers, who fear such an arrangement will tie the U.K. to the EU for an indefinite period.

Entering into US session, market sentiments are generally stabilized today. While Asian stocks ended lower, major European indices are trading higher while DOW futures point to mild recovery. China confirmed that they're still in negotiation with the US on trade. Trump also said again that a deal is close. Investors are temporarily holding their nerve, awaiting new developments. Nevertheless, further decline in German 10-year yield today is a sign of cautiousness. Gold is also holding firm at around 1300.

Reactions to economic data are rather muted today. UK unemployment dropped to fresh 44-year low of 3.8% in March. Eurozone industrial production contracted -0.3% in March. German ZEW economic sentiment deteriorated to -2.1 in May. But these data triggered little movements in the markets. Euro is relatively firm while Sterling is weak.

In the currency markets, currently, Yen is the softest one for today, followed by Sterling and the Swiss Franc. Though, the retreat in Yen is rather shallow today and more upside is in favor. Rally could resume very soon. New Zealand Dollar is the strongest one, followed by Canadian and then Dollar.

In Europe, currently:

• FTSE is up 0.97%.
• DAX is up 0.54%.
• CAC is up 1.17%.
• German 10-year yield is down -0.0079 at -0.075.

Earlier in Asia:

• Nikkei dropped -0.59%.
• Hong Kong HSI dropped -1.50%.
• China Shanghai SSE dropped -0.69%.
• Singapore Strait Times dropped -0.33%.
• Japan 10-year JGB yield dropped -0.0061 to -0.052.

Trump fired a series of tweets boasting his own tariff policies again. He noted there is now a "big a growing" steel industry after the 25% tariffs. He also blamed that there were "tremendous ground"  lost to China  since the "ridiculous one sided formation of the WTO". He also claimed that it's time for the farmers as "one of the biggest beneficiaries of what is happening now." The country will make up for the differences if China doesn't continue to buy from them.

Kind of boring and hardly constructive.

https://twitter.com/realDonaldTrump/status/1128242506771128320

https://twitter.com/realDonaldTrump/status/1128246370471694336

https://twitter.com/realDonaldTrump/status/1128257892514246657

https://twitter.com/realDonaldTrump/status/1128261067422019584

In prepared remarks, New York Fed President John Williams said the global shifts in demographics and productivity have two important implications for the economy and monetary policy. Firstly, "slower population and productivity growth translate directly into slower trend economic growth". Secondly, "these trends have contributed to dramatic declines in the longer-term normal or 'neutral' real rate of interest, or r-star."

And, the global decline in r-star will continue to pose "significant challenges" for monetary policy. There will be "limited policy space" for rate cuts in future downturns. Hence, "recoveries will be slow and inflation below target". Also, the limitation in the ability of central banks to offset downturns results in an "adverse feedback loop". That is "expectations of low future inflation drag down current inflation and further reduce available policy space".

Separately, Williams told Bloomberg TV that "as tariffs get larger, assuming that happens, the effects will be bigger, boosting inflation in the next year and probably having negative effects on growth." "We could probably get a couple tenths or two tenths on the inflation rate over the next year based on what has already been announced. If there (is) further escalation in terms of tariffs, those effects would get even larger", he added.

China indicated that it has agreed to continue negotiation with the US even though both sides have raised tariffs on either other imports. Chinese Foreign Ministry spokesman Geng Shuang said in a regular press briefing "my understanding is that China and the United States have agreed to continue pursuing relevant discussions." But no detail was given on the way forward. Geng just said "as for how they are pursued, I think that hinges upon further consultations between the two sides."

Additionally, Geng warned "we hope that the U.S. side does not misjudge the situation and not underestimate China's determination and will to safeguard its interests." China also typically denied any accusation of their backtracking. Geng said "you absolutely can't put the hat on China of reversing positions and going back on one's promises."