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Depending on the reaction of the German index DAX 30 at the support zone, price will either be in a bullish wave 4-5 (purple) pattern or in a bearish trend after completing a bullish ABC (red) zigzag.

The DAX 30 is now also testing a key 50% Fibonacci retracement level of wave 4 vs 3. Price could be completing a bearish ABC (blue) pattern but a bullish bounce will still need to break above the resistance trend line (red) before an uptrend continuation is confirmed. A bearish breakout however would invalidate the current bullish wave pattern and make a bearish 123 pattern more likely.

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

GBP/USD's fall from 1.3176 resumes by taking out 1.2967 minor support and intraday bias is back on the downside for 1.2865 key 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. On upside, above 1.3176 will retain the bullish case and target a retest on 1.3381 high next.

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.

General Trend:

• Trump comments during Asian session: Reiterates we'll know in 3-4 weeks if talks with China are successful, feels they will be [Reminder: The US is said to have told China that it had 3-4 weeks more to get a deal before the Trump administration would enact additional tariffs on $325B of Chinese imports that are not right now covered by tariffs (according to a press article from May 10th)]
• Chinese financials outperform amid PBOC MLF operation, cautious broker comments weigh on airlines
• Aluminum producer Rusal trades lower by over 6% in Hong Kong post earnings
• Softbank Group continues to track declines in shares of Uber
• National Australia Bank (NAB) declines over 5% as the company is trading ex-dividend
• In March, Japanese investors purchased a record amount of French bonds (current account data)
• BoJ Gov Kuroda comments on exposures of Japanese banks to CLOs
• Nissan Motor is expected to report results after the equity close in Japan

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.3%
• (AU) AUSTRALIA APR NAB CONFIDENCE: 0 V 0 PRIOR; BUSINESS CONDITIONS: 3 V 7 PRIOR
• IFT.NZ To acquire Vodafone NZ for enterprise value of NZ$3.4B, announces NZ$400M equity raise
• (NZ) New Zealand Fin Min Robertson: Budget will re-allocate NZ$1.0B of spending over forecast period, IMF sees NZ 2019 GDP at 2.5% and 2020 at 2.9% - Pre-Budget Speech
• (AU) Australia sells A$150M v A$150M indicated in 3.00% Sept 2025 bonds, avg yield 0.0924%, bid to cover 4.30x

Japan

• Nikkei 225 opened -1.5%
• (JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates BoJ needs to continue easing for a while; Japanese banks making 'reasonable' management of CLOs
• (JP) JAPAN MAR PRELIMINARY ADJUSTED CURRENT ACCOUNT: ¥1.27T V ¥1.72TE; CURRENT ACCOUNT BALANCE: ¥2.85T V ¥3.0TE
• (JP) JAPAN MAR PRELIMINARY TRADE BALANCE (BOP BASIS): +¥700.1B V -¥839.5BE
• (JP) Japan Fin Min Aso: China, US trade moves don't benefit anyone, unclear how it will impact Japan; affirms raising sales tax
• (JP) Japan MoF sells ¥700B v ¥700B indicated in 0.50% (prior 0.50%) 30-yr JGBs, avg yield: 0.5290% v 0.540% prior, bid to cover 4.65x v 4.55x prior

Korea

• Kospi opened -0.9%
• (KR) South Korea Defense Ministry: South Korea will continue to strengthen its missile defense capabilities to better counter all kinds of threats, including North Korea's short-range missiles – Yonhap
• (KR) North Korea: US seizure of ships directly violates June 12th summit agreement
• (KR) South Korea Apr Export Price Index M/M: 0.5% v 0.2% prior; Y/Y: -0.4% v -0.9% prior; Import Price Index M/M 1.5% v 1.3% prior; Y/Y: 4.8% v 4.3% prior
• (KR) South Korea Vice Fin Min: Will hold policy meeting this week and next on currency and trade risks; policy efforts are on monitoring and containing risks from FX volatility, US-Trade dispute

China/Hong Kong

• Hang Seng opened -2.1%; Shanghai Composite opened -1.1%
• (US) President Trump: Reiterates we’ll know in 3-4 weeks if talks with China are successful, feels they will be
• (CN) China to raise tariffs on part of $60B of US goods from June 1st to 25% from 10%, including many agricultural products
• (CN) US Trade Rep's office posts details of potential tariffs on additional $300B of Chinese goods; to hold public hearings on June 17
• (US) Pres Trump: will meet with China Pres Xi at G20 (June 28-29), believes US-China meeting at G20 could be fruitful
• (US) Treasury Sec Mnuchin: confirms we're still in negotiations with China; no further rounds are planned and confirmed at this point - CNBC's Tausche
• 486.HK Reports Q1 adj Net -$103M v +$317M y/y; adj EBITDA $226M v $572M y/y; Rev $2.17B v $2.7B y/y
• (CN) China Apr passenger auto sales y/y: -14.6% v -5.2% prior - CAAM (10th consecutive decline)
• (CN) China PBoC sets yuan reference rate: 6.8365 v 6.7954 prior (weakest sine Jan 2019)
• (CN) CHINA PBOC ANNOUNCES CNY200B 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) V CNY200B PRIOR AT 3.30% V 3.30% PRIOR; Confirms skip of regular OMO
• (CN) China Customs Tariff Commission of the State Council expected to announce list of tariff exemptions for US imports, after examining the applications of relevant interest parties on a trial basis - Xinhua

Other Asia

• Olam International [OLAM.SG] Reports Q1 (S$) Net 168.9M v 158M y/y, Rev 7.35B v 6.30B y/y

North America

• (US) Fed’s Rosengren (moderate, voter): trade tariffs may have a lasting impact on inflation - press interview
• S T-Mobile and Sprint reportedly mulling concessions in bid to salvage merger; considering sale of prepaid units – press
• BAYN.DE Loses in trial over allegations that Roundup weed killer causes cancer; Jury awards $2B in punitive damages to married couple that claims Roundup caused their cancer ($1B each in punitive damages) - press
• (US) US defense official presented an updated military plan to Trump administration that shows deploying 120K troops to Middle East if Iran attacks American forces - US press

Europe

• (UK) Prime Min May reportedly considering 'definitive votes' on a selection of Brexit options if talks with the Labour Party falters - The Telegraph
• (UK) Cross-party Brexit talks are said to have broken up without any significant progress - press
• (UK) UK govt spokesperson: talks with Labour took stock of a range of issues and we continue to seek to agree to a way forward in order to secure an orderly Brexit

Levels as of 1:20 ET

• Nikkei 225, -0.9%, ASX 200 -0.9%, Hang Seng -1.3%; Shanghai Composite +0.1%; Kospi +0.2%
• Equity Futures: S&P500 +0.6%; Nasdaq100 +0.8%, Dax +0.4%; FTSE100 +0.2%
• EUR 1.1223-1.1242 ; JPY 109.64-109.14 ; AUD 0.6960-0.6939 ;NZD 0.6592-0.6564
• Gold -0.1% at $1,300/oz; Crude Oil +0.3% at $61.23/brl; Copper +0.5% at $2.732/lb

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

Intraday bias in USD/CHF remains on the downside for the moment. Current fall from 1.0237 would extend to retest 0.9879 key support. On the upside, break of 1.0126 support turned resistance is needed to indicate completion of the fall from 1.0237. Otherwise, risk will now stay on the downside in case of recovery.

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.

Market movers today

The US-China trade war will continue to be the key theme in markets, see more below.

On the data front we expect Swedish CPIF inflation for April to be 2.1% y/y (consensus 2.0% y/y), see more next page.

In Germany, the ZEW survey is due to be released. It has ticked higher in recent months, pointing to higher expectations. The NFIB small business optimism index in the US is expected to show a small increase for April from 101.8 to 102.0.

Overnight (to Wednesday), we get, among others, Chinese industrial production.

Selected market news

It was a terrible day for risk sentiment globally yesterday with major US equity indices down 2.4%. European equity indices recorded only around 1.2% losses. The government bond markets reacted with a strong rally (lower yields), where the US recorded the biggest decline of 6.6bp to 2.40%. European government bond yields declined 2.6bp to -0.07%, just a whisker higher than the multi-year lows reached in late March. Noteworthy, the Fed fund futures took a took 6bp out of the Fed pricing until the end of the year, which means the markets are now fully pricing a rate cut by the end of the year.

The catalyst for the dreadful day for risk is attributed to the US-China trade war escalation as Trump continued to lash out at China in a string of tweets and China came with a retaliation response, see US-China Trade: Back in the tit-for-tat spiral . We are increasingly concerned that the two sides are too far from each other to reach a deal in Q2. The trust between the two sides has been damaged and they both seem to dig in on issues that are important for both countries. For example, on the issue of the need to change Chinese laws. On Friday, China's chief negotiator Liu He said China will not back down on matters of principle. The next key thing to look for is whether Xi and Trump talk on the phone at some point and try to get talks back on track. However, our concern is that it will require financial stress to create the necessary pressure to get the deal done.

Overnight, the sour risk sentiment continued in Asia, despite Trump saying that he will meet Xi at the G20 summit in June.

In Norway, mainland GDP was at first sight slightly weaker than expected, growing 0.3% q/q in Q1 (Danske: 0.4 %, consensus: 0.4 %).The figures were partly affected by negative supply-side effects in power production and fisheries. Importantly, Norges Bank will probably consider the weakness as temporarily (as stated after last week's rate meeting). The monetary policy report from March assumed +0.6 %, However, the details revealed a better result than the headline would suggest due to a revision of Q4 18 DP (to 1.1% from 0.9%) and strong employment growth of 0.48% q/q, which is noteworthily higher than Norges bank's projections. We see Norges Bank on track to hike rates in June.

For the 24 hours to 23:00 GMT, the EUR marginally declined against the USD and closed at 1.1231.

In the Asian session, at GMT0300, the pair is trading at 1.1233, with the EUR trading slightly higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1214, and a fall through could take it to the next support level of 1.1196. The pair is expected to find its first resistance at 1.1257, and a rise through could take it to the next resistance level of 1.1282.

Going forward, traders would await Euro-zone’s industrial production for March and the ZEW economic sentiment index for May along with Germany’s consumer price index for April and ZEW survey indices for May, slated to release in a few hours. Later in the day the US NFIB small business optimism for April, will garner significant amount of investors’ attention.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP declined 0.45% against the USD and closed at 1.2952.

In the Asian session, at GMT0300, the pair is trading at 1.2962, with the GBP trading 0.08% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2922, and a fall through could take it to the next support level of 1.2881. The pair is expected to find its first resistance at 1.3022, and a rise through could take it to the next resistance level of 1.3081.

Moving ahead, traders would closely monitor UK’s ILO unemployment rate and average weekly earnings, both for March, set to release in a few hours.

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

For the 24 hours to 23:00 GMT, the USD declined 0.46% against the JPY and closed at 109.26.

On the data front, Japan's preliminary leading economic index fell to a level of 96.30 in March, falling to its lowest level since mid-2016 and in line with market expectations. In the previous month, the index had registered a level of 97.1. Moreover, the nation's flash coincident index declined to a level of 99.6 in March, amid signs that the economy might be in recession due to the effects of escalating US-China trade wars. In the prior month, the index has recorded a level of 100.4, while market participants had envisaged the index to record a drop to a level of 99.6.

In the Asian session, at GMT0300, the pair is trading at 109.59, with the USD trading 0.30% higher against the JPY from yesterday's close.

Overnight data indicated that Japan's trade surplus (BOP basis) widened to ¥700.1 billion in March, compared to a surplus of ¥489.2 billion in the previous month. Markets had anticipated the nation to record a surplus of ¥838.9 billion.

The pair is expected to find support at 109.14, and a fall through could take it to the next support level of 108.68. The pair is expected to find its first resistance at 109.93, and a rise through could take it to the next resistance level of 110.26.

The currency pair is trading above its 20 Hr and moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.54% against the CHF and closed at 1.0053.

In economic news, Switzerland’s total sight deposits rose to a level of CHF578.1 billion in the week ended 10 May 2019, from CHF577.7 billion in the previous week.

In the Asian session, at GMT0300, the pair is trading at 1.0068, with the USD trading 0.15% higher against the CHF from yesterday’s close.

The pair is expected to find support at 1.0041, and a fall through could take it to the next support level of 1.0013. The pair is expected to find its first resistance at 1.0105, and a rise through could take it to the next resistance level of 1.0141.

Trading trend in the Swiss Franc today is expected to be determined by Switzerland’s producer & import prices for April, scheduled to release in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.36% against the CAD and closed at 1.3484.

In the Asian session, at GMT0300, the pair is trading at 1.3472, with the USD trading 0.09% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3433, and a fall through could take it to the next support level of 1.3393. The pair is expected to find its first resistance at 1.3500, and a rise through could take it to the next resistance level of 1.3527.

Amid lack of economic releases in Canada today, traders would focus on global macroeconomic events for further direction.

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