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Daily Pivots: (S1) 1.2970; (P) 1.3025; (R1) 1.3064; More...

Focus in GBP/USD remains on 1.2987 minor support. Decisive break there will confirm that rebound from 1.2865 has completed at 1.3176 already. More importantly, this will revive that bearish case that rebound from 1.2391 has completed at 1.3381. And intraday bias will be turned to the downside for 1.2865 support for confirming bearishness. Nevertheless, on upside, above 1.3176 will 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.

The EUR/USD bearish breakout below the support zone (blue lines) would confirm the potential wave 5 (green) pattern within the larger downtrend (waves 3 blue and purple) whereas a bullish break above the resistance trend lines (red) could indicate a reversal and a bullish ABC pattern (red letters). Both breakouts could be aiming for the Fibonacci levels.

The EUR/USD could be building a sideways WXY (dark red) correction. If this wave pattern indeed unfolds as expected, then price could go sideways by bouncing at the trend lines. The bearish breakout could confirm the current wave 1-2 (orange) pattern whereas a bullish breakout above the 100% Fibonacci level of wave 2 vs 1 invalidates it and makes a bullish ABC wave likely.

Our Elliott Wave view on Nikkei suggests the rally to May 4, 2019 high (22505) ended wave w. This ended cycle from December 26, 2018 low and the Index is in the process of at least doing a larger 3 waves pullback. Short Term, decline in Nikkei from May 4, 2019 high is unfolding as an Elliott Wave impulse structure. Down from 22505, wave 1 ended at 21935 and wave 2 ended at 22245. The Index resumes lower and has reached 161.8% extension at 21320. Wave 3 may end there although there’s not enough separation from the low and a marginal low is still possible.

Expect wave 4 bounce to fail in 3, 7, or 11 swing as far as wave 2 pivot at 22245 stays intact. Possible target for wave 4 is 23.6 – 38.2 retracement of wave 3 at 21539 – 21672. Alternatively, Index can end the entire 5 waves from May 4, 2019 high already. In this case, it should do a larger 3 waves bounce to correct the cycle from May 4 high before the decline resumes. We don’t like buying the Index and expect further downside in the Index to complete a 5 waves down.

Nikkei (NKD_F) 1 Hour Elliott Wave Chart

Daily Pivots: (S1) 1.0178; (P) 1.0194; (R1) 1.0219; More.....

Outlook in USD/CHF remains unchanged as consolidation from 1.0237 is extending. Intraday bias remains neutral first. On the upside, break of 1.0237 will resume larger rise from 0.9186 to 1.0342 key resistance. However, break of 1.0126 will turn bias to the downside for deeper decline to 55 day EMA (now at 1.0080).

In the bigger picture, medium term up trend from 0.9186 is extending. Current rise should 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. On the downside, break of 0.9879 support is needed to indicate reversal. Otherwise, outlook will stay bullish in case of deep pull back.

Daily Pivots: (S1) 109.90; (P) 110.10; (R1) 110.32; More...

Outlook in USD/JPY remains unchanged for the moment. Intraday bias stays on the downside for 109.71 support. As noted before, rebound from 104.69 has completed at 112.40 on bearish divergence condition in daily MACD. Decisive break of 109.71 will confirm this bearish case and target retesting 104.69 low. On the upside, break of 110.95 resistance is needed to confirm completion of the fall. Otherwise, outlook will now remain cautiously bearish in case of recovery.

In the bigger picture, medium term outlook in USD/JPY remains a bit mixed as it's staying inside falling channel from 118.65, but there are signs of bullish reversal. On the upside, break of 114.54 resistance will revive the case the corrective fall from 118.65 has completed with three waves down to 104.69. And whole rise from 98.97 (2016 low) is resuming for 118.65 and above. However, sustained break of 109.71 will raise the chance that fall from 118.65 is still in progress for another low below 104.62.

Daily Pivots: (S1) 1.3452; (P) 1.3470; (R1) 1.3495; More...

USD/CAD is staying in consolidation from 1.3521 temporary top and intraday bias remains neutral first. For now, further rise is still expected as long as 1.3274 support holds. On the upside, firm break of 1.3521 will resume the whole rise from 1.3068 to retest 1.3664 high. On the downside, below 1.3376 will turn bias to the downside for 1.3274 support. Break will indicate that choppy rebound from 1.3068 has completed at 1.3521. Near term outlook will be turned bearish for retesting 1.3068 support.

In the bigger picture, USD/CAD is staying well inside medium term rising channel (support at 1.3272). Thus, the up trend from 1.2061 (2017 low) should be in progress. On the upside, decisive break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 will pave the way to 78.6% retracement at 1.4127 next. This will remain the favored case as long as 1.3068 support holds. However, sustained break the channel support will be the first sign of medium term reversal. Firm break of 1.3068 would confirm.

General Trend:

• Chinese markets drop in early trading, financials decline amid weaker bank lending data; Shanghai Property index drops over 2%
• Trade-sensitive Marine Transportation index drops over 3% in Japan; Honda lower after results and guidance, while financials also decline
• Yahoo Japan rises over 8% on transaction with Softbank Corp
• Takeda to sell eye-care related assets to Novartis, to receive upfront payment of $3.4B
• Australia’s Qantas Airways rises after reporting sales growth in Q3
• China Vice Premier Liu He is expected to visit the US May 9-10th (Thursday-Friday)
• US govt issued formal notice that 25% tariffs on $200B worth of Chinese goods will take effect Friday (May 10th)
• China Commerce Ministry indicated it may take countermeasures against new US tariffs (press)
• China April CPI data was inline; pork prices +14% y/y
• Philippines Q1 GDP misses ests, some expect Philippines central bank to cut rates later today
• Japanese companies expected to report earnings after the Nikkei close include Softbank Group and Panasonic
• Reserve Bank of Australia is expected to issue its Quarterly Statement on Monetary Policy (SOMP) on Friday (May 10th)
• Earlier this week, the RBA issued updated GDP and inflation forecasts ahead of the SOMP release

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened flat
• (NZ) New Zealand Central Bank (RBNZ) Gov Orr: it's too early to tell if another rate cut is needed, was ahead of the curve - radio interview
• (NZ) Reserve Bank of New Zealand (RBNZ) Gov Orr: Assume export prices will hod up; if had not cut rate, employment would have slowed down - speaking to parliament
• GNC.AU Reports H1 (A$) Net -59M v 36M y/y; Rev 2.49B v 1.99B y/y
• KDR.AU Have been significant talks with Wesfarmers, to complete due diligence by May 29th
• TPG.AU Australia competition regulator (ACCC) said to note it would oppose deal with Vodafone Australia

Japan

• Nikkei 225 opened -0.5%
• 4502.JP Novartis to acquire Xiidra®, expanding front-of-eye portfolio and strengthening leadership in eye care for $3.4B upfront with potential for milestones of up to $1.9B
• 7267.JP Reports FY18/19 Net ¥610.3B v ¥1.06T y/y; Op ¥726.4B v ¥833.6B y/y; Rev ¥15.89T v ¥15.36T y/y; Guides initial FY19/20 Net ¥665B; Op ¥770B; Rev ¥15.7T
• (JP) Bank of Japan (BOJ) Gov Kuroda: Japan's economy is expanding moderately as a trend, risks are on the downside for economy, price momentum is being maintained; do not set limit on how much monetary base can be expanded, not near limit currently. Watching for any impact FX is having on economy, but MoF is responsible for FX policy or intervention - parliament
• TM Confirms to create 50/50 JV with Panasonic related to town development

Korea

• Kospi opened -0.4%
• (KR) North Korea state news: recent rocket drill was routine and self defensive
• 005930.KR South Korean prosecutors seek arrest of 2 Samsung Electronics directors for allegedly destroying evidence of accounting fraud at Samsung Biologics – Nikkei
• (KR) South Korea Mar Money Supply M2 m/m: 6.2% v 0.6% prior; Money Supply L m/m: 6.7% v 0.2% prior

China/Hong Kong

• Hang Seng opened -0.6%; Shanghai Composite opened -0.8%
• (CN) CHINA APR CPI M/M: +0.1% V -0.1%E; Y/Y: 2.5% V 2.5%E; PPI Y/Y: 0.9% v 0.6%e (matches highest level since Dec 2018); Food price CPI +6.1% y/y; Non-Food CPI +1.7% y/y
• (CN) CHINA APR NEW YUAN LOANS (CNY): 1.02T V 1.690T PRIOR; Outstanding Loan Growth y/y: 13.5% v 13.7% prior
• (CN) CHINA APR M2 MONEY SUPPLY Y/Y: 8.5% V 8.6% PRIOR; M1 Money Supply Y/Y: 2.9% v 4.6% prior; M0 Money Supply Y/Y: 3.5% v 3.1% prior
• (CN) CHINA APR AGGREGATE FINANCING (CNY): 1.36T V 1.65TE
• (CN) US Trade official: Higher tariffs on $200B of China goods will apply to products exported from Friday (not goods that are already in transit) – FT
• (CN) China execution of targeted RRR cut must be checked for accuracy - Chinese Press
• (CN) US President Trump: China "broke the deal" in trade talks; confirms China Vice Premier is coming to US for trade talks - speaking from rally
• (CN) US govt issues formal notice that 25% tariffs on $200B worth of Chinese goods will take effect Friday
• (CN) China Commerce Ministry indicates it may take countermeasures against new US tariffs - press
• (CN) China PBoC Open Market Operation (OMO): Skips Reverse Repo operations v injects CNY10B prior; Net injects CNY0B v CNY10B prior
• (CN) China PBoC sets yuan reference rate: 6.7665 v 6.7596 prior

North America

• (US) Certain auto executives believe President Trump may delay decision on auto tariffs by an additional 180 days; the decision could be delayed as talks continue with the EU and Japan - financial press
• (BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC TARGET RATE UNCHANGED AT 6.50%; AS EXPECTED
• FOXA Reports Q3 $0.76 v $0.74 y/y, Rev $2.75B v $2.67Be (first report as a standalone co.)
• INTC Guides 3-yr Rev growth in low-single digits to ~$76-78B - investor day
• Europe
• (UK) Cabinet Office Minister Lidington (de facto Dep PM): Brexit talks with Labour has been difficult
• (UK) Govt spokesperson: PM May will stay on until Brexit delivered; to see out 1st phase of Brexit

Levels as of 1:20 ET

• Nikkei 225, -0.9%, ASX 200 +0.4%, Hang Seng -1.5%; Shanghai Composite -0.5%; Kospi -1.8%
• Equity Futures: S&P500 -0.5%; Nasdaq100 %, Dax -0.3%; FTSE100 -0.2%
• EUR 1.1202-1.1185 ; JPY 110.13-109.83 ; AUD 0.6997-0.6967 ;NZD 0.6589-0.6569
• Gold +0.1% at $1,282/oz; Crude Oil -0.8% at $61.64/brl; Copper -0.3% at $2.762/lb

Market movers today

We expect Norges Bank to stay on hold at today's meeting (in line with consensus), as it is one of the interim meetings without a monetary policy report or press conference, just a press release, see page 2 for more details.

In Sweden, Statistics Sweden is publishing average house prices for March at 09:30 CET. Note that Maklarstatistik published housing price data for April earlier this morning.

US-China trade talks continue today, as China's top trade negotiators are in Washington today and tomorrow. While we previously thought there was a high likelihood of concluding the negotiations this week, uncertainty has risen. The two sides are blaming each other for the current deadlock and it is a real risk Trump is going to raise tariff rates tomorrow, as officially notified by the Trump administration. For more see our preview .

In the US , we have a few Fed speeches today including Powell's opening remarks at Fed Community Development Conference. We do not think the Fed is going to change policy signals, as it is firmly on hold for now.

Selected market news

The uncertainty regarding a trade deal between the US and China continues to dominate the global financial markets. Trump declared during the night that China's leaders broke the deal that they are negotiating and stated that there was nothing wrong in taking in USD 100bn in duties.

The Asian equity markets are down this morning, Italy continues to be under pressure with widening spreads to core-EU etc. However, we did see a lower demand at the 10Y US Treasury auction yesterday, as the decline in US Treasury yields has dampened demand at the auction yesterday.

In UK, the talks between the Conservatives and Labour continue and both parties say that progress is being done. However, the markets are not convinced as GBP remains weak. See more below in the FX section.

Daily Pivots: (S1) 0.6973; (P) 0.7000; (R1) 0.7015; More...

AUD/USD's recovery was limited below 0.7069 resistance and reversed. But downside is contained above 0.6962 temporary low. Intraday bias remains neural and outlook stays bearish. On the downside, break of 0.6962 will resume the fall from 0.7295 to 100% projection of 0.7295 to 0.7003 from 0.7205 at 0.6913. Decisive break there will indicate further downside acceleration and pave the way to retest 0.6722 low. However, considering bullish convergence condition in 4 hour MACD, firm break of 0.7069 will indicate near term bottoming and turn bias back to the upside for 0.7205 resistance and above.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1197.

The European Central Bank (ECB) President, Mario Draghi, stated that the central bank would continue to maintain its inflation target as the ECB's extraordinary stimulus is successful in creating more than 10 million employment opportunities leading to higher wages.

On the data front, Germany's seasonally adjusted industrial production unexpectedly climbed 0.5% on a monthly basis in March, rising for the second straight month and defying market consensus for a fall of 0.5%. In the previous month, industrial production had recorded a revised gain of 0.4%.

The US dollar declined against Euro, amid possibilities that trade tensions between the US and China could escalate.

In the US, data indicated that the MBA mortgage applications advanced 2.7% on a weekly basis in the week ended 03 May 2019, following a decline of 4.3% in the previous week.

In the Asian session, at GMT0300, the pair is trading at 1.1191, with the EUR trading 0.05% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1178, and a fall through could take it to the next support level of 1.1165. The pair is expected to find its first resistance at 1.1209, and a rise through could take it to the next resistance level of 1.1227.

Amid lack of macroeconomic releases in the Euro-zone today, the US trade balance data for March and the producer price index for April along with initial jobless claims, will garner significant amount of investor attention.

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