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The US dollar is holding towards the worst levels of the week against the Japanese yen currency as the pair struggles with the 110.00 resistance level. If sellers move price below the 109.80 level the USDJPY pair could weaken further towards the 109.30 support level. The 110.25 level now offers strong technical resistance if the USDJPY pair start to trade back above the 110.00 level.

The USDJPY pair is heavily bearish while trading below the 110.00, key intraday support is found at the 109.80 and 109.30 levels.

If the USDJPY pair trades above the 110.00 level, key intraday resistance is found at the 110.25 and 110.60 levels.

US stocks were mixed yesterday as traders continued to focus on ongoing trade issues. This week, Donald Trump announced that fresh tariffs on Chinese goods would come into effect on Friday, upended more than four months of talks that have been happening between United States and China. According to reports, Trump has been frustrated that the deal currently proposed will not go far enough. He has also been frustrated by China’s changing statements as the talks have gone on. He has been emboldened by the Q1 GDP numbers in which the US economy rose by 3.2%. Today, in response to trade issues and Chinese inflation data, Chinese stocks declined sharply, with the A50 index declining by 347 points.

The price of crude oil remained relatively unchanged after the energy department released the crude oil inventory numbers. In the past week, inventories declined by 3.93 million barrels. This was a surprise because investors were expecting the inventories to rise by more than 1 million barrels. In the previous week, inventories rose by more than 9 million barrels. On Tuesday, data from API showed that inventories rose by 2.8 million barrels.

Today, traders will focus on trade data from the United States and a statement by Fed Chair, Jerome Powell. The data will be important because it will show whether Trump’s trade war is working. In April, numbers showed that exports rose to $209.7 billion while imports rose to $259 billion. If the trade deficit narrows, Trump will see it as a win. The initial jobless claims are expected to improve by 215K while the continuing jobless claims are expected to decline to 1,670K. The PPI is expected to increase by an annualized rate of 2.3%, which will be higher than the previous 2.2%.

EUR/USD

The EUR/USD pair was little moved in the Asian session. It is trading at the 1.1190 level, which is along the 50% Fibonacci Retracement level on the hourly chart. This price is slightly below the 25-day and 50-day moving averages. The accumulation/distribution indicator too has moved higher. The pair will likely remain in this consolidation mode as traders wait for the CPI data from the US.

GBP/USD

This week, the GBP/USD pair has fallen sharply from a high of 1.3177 to a low of 1.2985. The decline has happened as investors continue to worry about Brexit. On the hourly chart, this price is slightly below the 50% Fibonacci Retracement level and along the middle line of the Bollinger Bands. The RSI has emerged slightly from the oversold level of 30 to the current 36. From here, the pair could decline to test the 23.6% Fibonacci level at 1.2940.

XBR/USD

This month, the XBR/USD pair has been declining. It has declined from a high of 74.73 to a low of 68.50. On the four-hour chart, the price is currently below the 50-day and 25-day moving average. The Average Directional Index has declined from a high of 45 to the current 19. The money flow index too has declined sharply. It’s likely that the pair could drop for a while before resuming the upward trend.

JPY strengthened against most of its counterparts yesterday, as trade tensions between the US and China continue strengthening safe haven assets. The US President stated yesterday that China broke the deal which was negotiated, also stating that he would be comfortable to hike tariffs. At the same time the White House stated that China has signaled that it hopes to make a deal in the coming visit of Chinese officials in Washington. On the other hand, China threatens to retaliate if the US actually imposes a higher tariff. We see the case for the two sides to reach a deal, yet the road ahead may still have some bumps. Should the two sides find common ground again, we could see optimism returning and the Yen retreating. USD/JPY retreated yesterday, nearing the 109.75 (S1) support line. As the downward trendline remains intact, we maintain a bearish outlook for the pair. Should the bears maintain control over the pair’s direction, we could see it breaking the 109.75 (S1) support line and aim for the 109.15 (S2) support level. Should the bulls take over, we could see the pair rising, breaking the prementioned upward trendline, as well as the 110.30 (R1) resistance line, aiming if not breaking the 110.90 (R2) resistance level.

Oil prices under pressure despite surprise drawdown of inventories

Oil prices maintained a sideways movement yesterday, remaining under pressure, as the trade dispute between the US and China continues. It was indicative that oil prices didn’t rise, despite the EIA crude oil inventories showing a surprise -3.963m barrels drawdown yesterday and thus implying a tightness of the US oil market. Analysts point out that the demand from Asia remains robust, yet fears of a possible slowdown of China and globally, in case the US and China do not find a deal, could be undermining oil prices. On the other hand, the supply side seems to remain tight, on the back of production cuts by OPEC and Russia and could provide some support for black gold’s price action. We expect oil prices to continue to be under pressure as the current escalation in the US-Sino relationships continues. WTI prices maintained a tight range movement yesterday, constantly testing the 62.00 (R1) resistance line. We maintain the view of a sideways movement for the commodity’s prices as the market seems to be in a wait and see position for the outcome or further developments in the US-Sino negotiations. Technically speaking, WTI’s price action since Monday, seems to be forming a symmetrical triangle, which still could let the next leg open in any direction (up or down), yet may also be indicative of some support for oil prices. Should the commodity’s prices be supported by the market, we could see them breaking the 62.00 (R1) resistance line and aim if not break the 63.25 (R2) resistance level. Should on the other hand, WTI be under the selling interest of the market, we could see its price action, breaking the 60.50 (S1) support line.

Other economic highlights, today and early tomorrow

In the European morning, we get from Norway, Norgesbank’s interest rate decision. In the American session, the US trade balance for March the US PPI rates for April and Canada’s trade balance for April are due out. During tomorrow’s Asian session, Japan’s household spending growth rate for March is to be released. Also please note that Fed Chair J. Powell, Atlanta Fed President R. Bostic and Chicago Fed President C. Evans speak and during tomorrow’s Asian session, BoJ April meeting minutes and RBA’s monetary statement are to be released.

WTI H4

Support: 60.50 (S1), 59.10 (S2), 57.75 (S3)
Resistance: 62.00 (R1), 63.25 (R2), 64.65 (R3)

USD/JPY H4

Support: 109.75 (S1), 109.15 (S2), 108.50 (S3)
Resistance: 110.30 (R1), 110.90 (R2), 111.40 (R3)

GBPJPY had a strong bounce off on the upper boundary of the descending channel around 146.50 in the previous week, dropping towards a fresh almost two-month low of 142.86 today. The price also plunged beneath the Ichimoku cloud and the 23.6% Fibonacci retracement level of the upleg from 132.50 to 148.86 around 142.60. From the technical point of view, the price could lose some more momentum in the short-term as the stochastic oscillator is holding in the oversold area.

If the 38.2% Fibonacci of 142.60 proves easy to get through, the spotlight will turn to the return line of the channel around 141.80 ahead of the 141.00 handle and the 50.0% Fibonacci of 140.65.

On the other hand, a rebound on the 38.2% Fibonacci could send prices towards the 143.70 resistance barrier before challenging the critical level of the lower surface of the Ichimoku cloud, which coincides with the 23.6% Fibonacci of 145.00 and the 20-day simple moving average. A successful jump above this obstacle could open the way towards the 146.50 resistance, near the downtrend line.

In the short-term picture, GBPJPY has been trading within a downward sloping channel over the last month, shifting the bullish bias to bearish. The market still has some room to fall before returning higher.

• Markets remain in risk-off mode ahead of tariff decision tonight
• Risks seem tilted towards escalation, but it’s a close call
• Dollar eyes remarks by Fed Chair Powell and PPI data

Yen extends gains as nervous markets await tariff decision

Market sentiment remains fragile on Thursday as the prospect of further escalation in the US-China trade conflict continues to dampen the appeal of riskier assets, leading investors to seek shelter in safe havens. Indeed, the Japanese yen outperformed all its major peers yesterday and remains in the driver’s seat today. Meanwhile, US stocks staged a comeback to close only modestly lower, with a little help from President Trump, who said the Chinese VP is coming to the US ‘to make a deal’. That said, futures are pointing to another negative open today.

The moment of truth is near, as the Chinese delegation has arrived in Washington and the talks resume today. As things stand, the US will raise its existing tariffs at midnight US time (04:00 GMT on Friday), unless China offers enough concessions to appease the American negotiators. It’s a close call, but risks seem tilted towards escalation. China could make compromises, but those are unlikely to be enough to satisfy hawks like chief negotiator Lighthizer, not least because Beijing doesn’t want to lose face by completely yielding to US demands.

If that call proves correct, stocks will likely plunge alongside commodity currencies such as the aussie and kiwi, as uncertainty skyrockets and investors brace for China’s retaliation. The main beneficiary will probably be the yen. On the contrary, if the two sides find common ground and avoid raising tariffs, the opposite reactions will likely ensue. One way or another, markets are in for a ride tonight.

Dollar eyes Powell’s remarks and PPI data

The dollar has gone nowhere this week, trading practically flat against a basket of six major currencies. What’s striking is that market expectations for a Fed rate cut have grown once again, with the implied probability for a cut by December rising back to ~75%, yet the US currency has remained resilient. While not obvious, it seems the greenback is attracting safe-haven flows amid mounting trade tensions, helping it to stay afloat even despite an increasingly clouded monetary policy outlook.

Hence, the world’s reserve currency could also be impacted by the tariff decision overnight, but before then, traders will tune in to hear from Fed Chairman Jay Powell at 12:30 GMT. Regional Fed presidents Bostic (14:45 GMT) and Evans (18:15 GMT) will also deliver remarks. On the data front, US producer prices for April are due, ahead of the all-important consumer price figures tomorrow.

Daily Pivots: (S1) 142.76; (P) 143.49; (R1) 143.95; More...

GBP/JPY's decline extends to as low as 142.22 so far. Intraday bias remains on the downside for further decline. As noted before, whole rebound from 131.51 has completed at 148.87, ahead of 149.98 key resistance. Sustained break of 38.2% retracement of 131.51 to 148.87 at 142.23 will target 61.8% retracement at 138.14. On the upside, above 143.76 minor resistance will turn bias neutral and bring consolidation, before staging another fall.

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) 123.05; (P) 123.29; (R1) 123.46; More...

EUR/JPY's decline extends to as low as 122.48 so far far. Intraday bias remains on the downside for the moment. As noted before, rebound form 118.62 has completed at 127.50 already. Further fall should be seen to retest this low. On the upside, above 123.52 minor resistance will turn intraday bias neutral first. But recovery should be limited by 124.09/125.29 resistance zone to bring fall resumption.

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.

The Aussie fell to 0.6967 in Asia as comments from President Trump, who said that China broke the deal in trade talks with the US and may face high tariffs if no agreement is reached, further soured risk sentiment.

Strong upside rejection on Tuesday and Wednesday's bearish outside day weigh, as bearish momentum started to rise and daily MA's in full bearish setup maintain pressure.

Bears eye Monday's low at 0.6962 (new 2019 low, the lowest since early Jan) and more significant Fibo support at 0.6931 (61.8% of 0.6706/0.7295) violation of which would generate strong bearish signal.

Falling 5SMA (0.6996) caps today's action and marks initial resistance, with pivotal barriers at 0.7013/15 (daily Tenkan-sen/10SMA) expected to limit upticks an keep bears in play.

Res: 0.6996, 0.7015, 0.7026, 0.7048
Sup: 0.6962, 0.6931, 0.6900, 0.6877

The precious metal was looking bullish on Wednesday, fueled by the uncertainty due to the US and China trade wars. However, after gold prices rose to touch a three-week high, prices retreated sharply into Wednesday's close. The pullback came after President Trump's recent tweets on China.

Gold Settles Back into the Range

XAUUSD tested the highs of 1290, a resistance level that was well within sight. However, the pullback from this level has sent gold prices back to trade within the range of 1285 and 1273. A bearish follow-through is required from here in order for gold prices to extend declines lower. In the near term, any rallies to the 1285 level could likely be met by more selling. Watch for a break below 1273 for gold to continue its descent.

Crude oil prices posted modest gains on the day on Wednesday, rising 0.89%. The weekly crude oil inventory report from the Energy Information Administration (EIA) was released. US stockpiles fell by 3.9 million barrels to 446.6 million last week. Oil prices also got a boost after China's oil imports touched 10.64 million barrels for April.

WTI Likely to Correct Higher in the Short Term

Crude oil prices have settled into a range within 62.85 resistance and 60.33 support. However, the short term charts indicate that oil prices could breakout higher to test the 62.85 region. This could mark a modest correction to the upside amid the medium term bearish outlook. A reversal near 62.85 would set oil prices on the path to test the lower support near 57.50.