Sample Category Title

Pivot (invalidation): 110.20

Our preference Short positions below 110.20 with targets at 109.70 & 109.35 in extension.

Alternative scenario Above 110.20 look for further upside with 110.40 & 110.55 as targets.

Comment The RSI calls for a slump.

Pivot (invalidation): 1.3030

Our preference Short positions below 1.3030 with targets at 1.2985 & 1.2970 in extension.

Alternative scenario Above 1.3030 look for further upside with 1.3060 & 1.3080 as targets.

Comment As Long as the resistance at 1.3030 is not surpassed, the risk of the break below 1.2985 remains high.

Pivot (invalidation): 1.1200

Our preference Short positions below 1.1200 with targets at 1.1180 & 1.1170 in extension.

Alternative scenario Above 1.1200 look for further upside with 1.1215 & 1.1225 as targets.

Comment The RSI calls for a drop.

Rates: Risk aversion and 30-yr US Bond auction
Hawkish trade rhetoric and disappointing Chinese lending data pull main Asian stock markets up to 2% lower this morning. Technical pictures of main European and US bourses suggests that the correction lower has further to go. Core bonds remain underpinned. Yesterday's flopped US 10-yr Note auction suggests difficulties for tonight's 30-yr sale as well.

Currencies: Dollar still shows no clear directional bias as trade uncertainty intensifies
Major dollar cross rates remain an area of relative calm even as tensions between the US and China are building. US eco data today are second tier. Is the dollar losing some of its safe haven appeal with the US-China trade dispute is at risk of running out of control?

The Sunrise Headlines

• US equity markets closed with modest losses yesterday after giving up intraday gains with DJI outperforming (+0.01%). Asian shares are retreating this morning as the US-Sino trade dispute escalates again. South Korean shares underperform.
• China will 'have to adopt necessary countermeasures' to higher imposed duties by the US, said China's Ministry of Commerce. US President Trump blamed China for 'breaking up the deal' when speaking at a campaign rally.
• The US will impose sanctions on Iran's metal sectors and vowed further actions unless Tehran 'fundamentally alters its conduct'. The announcement followed after Iran threated to revive its nuclear activity.
• Lawmakers from the UK Conservative party kept the rules on leadership challenges unchanged, granting PM May a temporary stay of execution. She'll meet with the so-called 1922 Committee next week to discuss her future.
• Edgar Zambrano, VP of Venezuelan opposition leader Juan Guaido's National Assembly, has been arrested by the national intelligence agency, led by president Maduro. The US warned of consequences if he's not released.
• China's April credit data disappoints. Monthly expansion in aggregate social financing was 1.36 trillion yuan in April, down from 2.86 trillion in March. New loans dipped to 1.02 trillion yuan, down from 1.69 trillion a month before.
• Today's US economic calendar contains weekly jobless claims and producer inflation results (Apr). The Norges bank meets, while EU leaders are gathering to discuss future leadership positions. Fed's Powell and Bostic speak.

Currencies: Dollar Still Shows No Clear Directional Bias As Trade Uncertainty Intensifies

USD 'paralysed' as uncertainty on trade persists

EUR/USD hovered near 1.12 yesterday. German March production data printed stronger than expected but EUR/USD gains were blocked ahead of the 1.1215/20 short-term resistance area. EUR/USD lost some ground later as US yields trended back higher. However, the move still wasn't significant from a technical point of view. Global (FX) markets still awaited the next developments in the US-China trade dispute. EUR/USD closed little changed at 1.1192. The yen made some further small gains. USD/JPY closed at 110.10.

This morning, sentiment in Asia remains risk-off as there looks to be no evident fix for the Sino-US trade dispute. Poor China April lending data were a (secondary) source of uncertainty. The yuan (USD/CNY 6.81 area) weakened further, testing the Jan 22 low. Other regional/EM currencies are also under pressure with the won at the lowest level since end Jan 2017. Yen gains remain modest given the risk-off with USD/JPY still near 110. EUR/USD is still going nowhere in the high 1.11 area.

There are no eco data in EMU. In the US, PPI, jobless claims and the March trade balance will be published. We assume the data to be of second tier importance for FX trading, at best. Soft PPI data might weigh on the dollar, but the reference of the consensus is rather modest. Global (FX) trading will again focus on the US-China trade talks. A failure to reach a deal (or at least to continue the truce) might cause additional global volatility. Of late, the dollar hardly profited from this risk-off. FX (and other) markets maybe ponder the chances for further Fed rate cuts if the global context deteriorates. US president Trump also doesn't want a stronger dollar. This maybe caps further USD gains, too. We maintain the view that the EUR/USD 1.1110 support area won't be that easy to break. Anyway, it will be interesting the see the USD reaction in case trade tensions were to intensify.

EUR/GBP rebounded higher in the 0.85/0.87 ST consolidation band yesterday. Sterling eased as investors saw chances on a Brexit deal between the conservatives and labour declining. EUR/GBP returned to the 0.86 area. Overnight, RICS house price data suggest an ongoing loss of momentum in the UK property market. Headlines overnight suggested that UK PM May bought some more time for her conservative party to reach a deal with labour. However, chances on a deal are still difficult to assess. A test of the EUR/GBP 0.8473/0.85 range bottom is rejected. More trading in the EUR/GBP 0.85/0.87 range might be on the cards

EUR/USD: USD going nowhere as uncertainty on trade persists

USDJPY has been underperforming in the past two days, breaking back below the 23.6% Fibonacci retracement level of the upleg from 104.64 to 112.40, around 110.60, creating a bearish correction in the near term. When looking at the bigger picture the pair lacks a clear trend and has been consolidating within 104.60 and 114.55 since March 2017.

The short-term technical indicators are bearish and point to more weakness in the market. The RSI indicator is flattening in the oversold territory, while the MACD oscillator is extending its negative momentum below the trigger and zero lines in the daily timeframe.

Downside moves are likely to find support at the 109.70 barrier, before challenging the 109.45 level, which is the 38.2% Fibonacci. There is an important support zone between the 50.0% Fibonacci of 108.55 and the 108.40 obstacle, reached on January 31.

On the flipside, if the price returns higher and pares some of the losses, immediate resistance is coming from the 23.6% Fibonacci of 110.60 and the 110.85 hurdle. Rising above this area could see a re-test of the 40- and then the 20-simple moving averages (SMAs) currently at 111.22 and 111.45 correspondingly. Breaking this level also, could send prices towards the 112.10 – 112.40 key zone.

In the very short-term, the bearish phase remains in play especially if prices continue to trade below the 23.6% Fibonacci (110.60).

Daily Pivots: (S1) 0.8566; (P) 0.8595; (R1) 0.8635; More...

No change in EUR/GBP's outlook. Consolidation pattern from 0.8472 is possibly extending with another rising leg for now. While further recovery cannot be ruled out, upside should be limited below 0.8681 resistance. On the downside, decisive break of 0.8472 will confirm resumption of down trend from 0.9101 and target 61.8% projection of 0.9101 to 0.8472 from 0.8681 at 0.8292 next.

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) 1.5961; (P) 1.5993; (R1) 1.6046; More...

EUR/AUD rebounded strongly after drawing support from 4 hour 55 EMA, but stays below 1.6064 temporary top. Intraday bias remains neutral first. Further rise is still expected as long as 1.5806 minor support holds. We'd continue to favor the bullish case that correction from 1.6765 has completed with three waves down to 1.5683. On the upside, above 1.6064 will turn bias back to the upside for 1.6122. Decisive break of 1.6122 will confirm this bullish view and target retesting 1.6765 high. However, break of 1.5806 support will argue that fall from 1.6765 is resuming and turn bias back to the downside for 1.5683 low for confirmation.

In the bigger picture, as long as 1.5346 support holds, outlook will still remain bullish. Uptrend 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.

Daily Pivots: (S1) 1.1392; (P) 1.1411; (R1) 1.1440; More...

Outlook in EUR/CHF remains unchanged as consolidation from 1.1476 is extending. Intraday bias remains remains neutral first. On the upside, sustained break of 38.2% retracement of 1.2004 to 1.1162 at 1.1484 will confirm completion of corrective fall from 1.2004. Further rally should then be seen to 61.8% retracement at 1.1682 and above. On the downside, sustained break of 55 day EMA (now at 1.1347) will pave the way back to retest 1.1162 low.

In the bigger picture, at this point, we're slight favoring the case that corrective fall from 1.2004 has completed after being supported by 61.8% retracement of 1.0629 to 1.2004 at 1.1154. Decisive break of 1.1501 resistance should confirm and target 1.1713 resistance next. And, firm break of 1.1154 is needed to confirm down trend resumption. Otherwise, medium term outlook will be neutral at worst.

Poor sentiment across equity markets

With one eye on tomorrow's tariff deadline, Asian investors continued to scale back risk and seek safe haven assets. US indices extended the recent decline with losses of about 0.5%, with both the NAS100 and SPX500 indices facing a fourth consecutive down day. China shares fell 1.2% while Australian shares bucked the trend with gains of 0.26% for the Australia200 index.

The wariness was also reflected in currency markets, with the yen's safe haven status very much in evidence. USD/JPY fell as much as 0.15% to 109.82, the lowest since March 25.

USD/JPY Daily Chart

Trump says don't fret

Soothing words from US President Trump failed to halt the decline in risk appetite this morning. Speaking at a rally, he said that China “broke the deal” in earlier trade talks and hence the tariff threat. However, he added that China's Vice Premier was coming to the US for trade talks and that “it will all work out”. The markets remain skeptical, and expectations are growing that some additional tariffs will be introduced on Friday, no doubt closely followed by retaliatory moves by China, as they have promised

Fed speakers dominate the calendar

The data calendar is a little busier today, but not in Europe where there are no major economic releases scheduled. Speeches from Fed members Powell, Bostic and Evans accompany the release of the March trade balance. That's expected to show a widening of the deficit to $50.2 billion from $49.4 billion, according to the latest poll of economists. Canada's trade data for the same month is also due, and expected to show a slight narrowing of the deficit to C$2.45 billion from C$2.90 billion.

Daily Pivots: (S1) 1.1179; (P) 1.1196 (R1) 1.1210; More.....

Outlook in EUR/USD remains unchanged at consolidation from 1.1111 is extended. Intraday bias remains neutral and outlook stays bearish with 1.1324 resistance intact. Further decline is expected. On the downside, break of 1.1111 low will target 100% projection of 1.1569 to 1.1176 from 1.1448 at 1.1105 next.

In the bigger picture, down trend from 1.2555 (2018 high) is still in progress. Current fall should now target 78.6% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) 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.