Sample Category Title

Pivot (invalidation): 1.3105

Our preference Long positions above 1.3105 with targets at 1.3175 & 1.3195 in extension.

Alternative scenario Below 1.3105 look for further downside with 1.3080 & 1.3045 as targets.

Comment Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Pivot (invalidation): 1.1175

Our preference Long positions above 1.1175 with targets at 1.1200 & 1.1215 in extension.

Alternative scenario Below 1.1175 look for further downside with 1.1160 & 1.1145 as targets.

Comment The RSI is mixed to bullish.

Daily Pivots: (S1) 124.29; (P) 124.47; (R1) 124.67; More...

EUR/JPY drops sharply to as low as 123.36 so far today. Intraday bias is now on the downside with focus on 123.39 key support. Sustained break will indicate larger reversal. That is rise from 118.62 has completed at 127.50 already. In such case, deeper fall should be seen to retest 118.62 low. On the upside, rebound from the current level, followed by break of 125.23 minor resistance, will turn bias back to the upside for 126.79 resistance instead.

In the bigger picture, there is no confirmation of completion of the down trend from 137.49 (2018 high) yet. Break of 123.39 support will favor of down trend extension and target 118.62 low. However, break of 127.50 will solidify the case of medium term bullish reversal. Further decisive break medium term channel resistance will affirm reversal and target 133.12 key resistance and above. On the downside, sustained break of 123.39 will add to the case that down trend from 137.49 is still in progress for another low below 118.62.

The GBP/USD could still be in the wave 1-2 (blue) pattern but this outlook has become less probable after the large spike up. The alternative is a bullish wave 1-2 (red) pattern after price completed a bearish ABC (red) pattern. The correct wave pattern will depend on the breakout of the trend channel. A bullish break above the resistance (red) indicates an uptrend whereas a break below the support (blue) indicates a downtrend.

The GBP/USD could have completed a potential bullish ABC (green) pattern if price manages to make a wave 1-2 (green) pattern and bearish reversal in this zone. However, a break above the 1.3186 indicates that price probably made 5 waves up (rather than an ABC) and also means that price is undergoing a trend change and invalidating both waves 1-2 (blue/green). For the moment, the GBP/USD remains in a difficult spot and needs to move substantially lower or higher to confirm/invalidate one of the wave patterns.

Daily Pivots: (S1) 145.28; (P) 145.89; (R1) 146.98; More...

Despite today's sharp retreat, further rise remains mildly in favor in GBP/JPY with 144.80 minor support intact. Break of 147.01 will solidify that case that consolidation from 148.87 has completed. Further rise should be seen to retest 148.87/149.48 resistance zone next. On the downside, though, break of 144.80 minor support will turn focus back to 143.72 key support.

In the bigger picture, focus is staying on 149.98 key resistance. Decisive break there should confirm that medium term fall from 156.59 (2018 high) has completed at 131.51 already. Rise from 131.51 is then seen as the third leg of the corrective pattern from 122.36 (2016 low). GBP/JPY should then target 156.59 and above. However, rejection by 149.98 will retain medium term bearishness and could extend the fall from 156.59 through 131.51 to 122.36.

The period of historic calm across global financial markets is staring at the prospect of a rude awakening after US President Donald Trump unexpectedly raised the stakes in trade talks with China by threatening to increase tariffs even further as early as the end of the coming week.

Risk-off sentiment has been the response to this swerve from Trump, with risk-off mood sweeping across Asian and emerging markets in early Monday trading, following the US President's tweets about raising existing US tariffs on $200 billion worth of Chinese imports this Friday, while hinting at new tariffs "shortly" on a separate $325 billion worth of Chinese goods.

At the time of writing, the Chinese Yuan has fallen at a pace not seen in over two years, by nearly one percent against the US Dollar while the Australian Dollar has weakened by some 0.6 percent against the Greenback, falling below the psychologically-important 0.70 level.

Stocks in China have dropped by more than five percent after returning from a holiday, while Dow futures point to a drop exceeding 450 points. Commodities are reacting to the news as well, with Brent futures falling by more than two percent as demand for Oil drops, while safe haven assets such as Gold and the Japanese Yen are edging higher by about 0.3 and 0.4 percent respectively as of writing.

While it remains to be seen whether the Trump administration will press ahead with the added tariffs, it's already evident that markets are taking some risk off the table, undermining the base case that investors had been pricing in: a formalized US-China trade deal in the near future.

With Chinese Vice Premier Liu He scheduled to lead a delegation to Washington this week, the timing of the tweets also suggests that President Trump is attempting to push through an immediate resolution to the drawn-out talks. This latest development once again demonstrates how Trump's tweets can be a wild card for any attempt to formulate a lasting outlook on global growth, as trade tensions remain a key overhang for markets.

What remains to be seen is whether Trump's wielding of the tariff hammer at a stage of negotiations where the majority thought a new trade agreement with China was close, could be a ploy to jawbone an immediate resolution to the drawn-out trade talks that have dictated market sentiment for close to a year. This development has also served as a reminder of the threat investors still carry when it comes to being blindsided from a set of completely unexpected tweets.

Should the White House indeed proceed with the added layer of tariffs, this is something investors cannot afford to underestimate as it carries global ramifications. Optimism had only just been picking up on hopes that China's economy was finding stability and this threat from Trump risks derailing that train in a hurry. Another shot in the arm for global trade tensions also risks crippling global trade even further, which has already encouraged some very strange trade figures from a list of economies in recent months. Ailing demand would prove another thorn in the side for Germany's ailing manufacturing sector, while the addition of further tariffs would also raise the bar of alarm for shipments from trade- dependent economies. Several economies across Southeast Asia have posted declines for exports since Q4.

It remains to be seen whether the Trump administration will press ahead with the added tariffs, or if China will actually walk away from the negotiating table. What is clear is that investors are already taking risk off the table, as the latest trade developments cloud the global growth outlook for the year. as the end of the coming week.

• Rates: US President Trump jeopardizes US-Sino trade talks
  US President Trump unexpectedly upped the ante in US-Sino trade talks by threatening to raise existing tariffs and introduce new levies on Chinese imports. China considers to walk away from this week's scheduled talks. A risk-off wave sends core bonds higher this morning. Trade will dominate today's second tier agenda. Volumes will be lower with UK markets closed.
• Currencies: Dollar doesn't profit from strong US payrolls nor from rising trade tensions
  The dollar didn't profit from strong US payrolls on Friday. Modest wage growth and a poor non-manufacturing ISM capped any potential USD progress. This morning, sentiment turns outright risk-off as president Trump warned on new tariffs on Chinese goods. The dollar again doesn't profit. The US currency might lose interest rate support if tensions escalate further

The Sunrise Headlines

• US equity markets matched record highs on Friday with tech shares outperforming. Asian shares are trading in red as US-Sino trade talks are struggling. Chinese indices underperform heavily (-6%). UK markets are closed.
• US President Trump increased pressure on China by threatening amongst others to raise existing tariffs from 10% to 25% because trade negotiations are going too slowly. China considers to cancel this week's discussions.
• UK PM May is drafting a new law that would create a custom union-style arrangement, guaranteeing no checks on goods crossing the UK-EU border, a key demand from opposition party Labour. Cross-party talks continue this week.
• China will cut the required reserve ratio by 3% for small commercial lenders that serve small firms. The cut will release 280 billion yuan of liquidity and seems to be aimed at lifting sentiment following Trump's new threat.
• US National Security adviser John Bolton said the US will send an aircraft carrier and bomber force to the Middle East to send “a clear message to the Iranian regime”. The US is attempting to reduce Iran's oil exports to zero.
• Portuguese Socialist PM Costa threatened to quit if a coalition of left-wing allies and centre-right opponents continued with a controversial pay deal for teachers. The coalition backed down, making it unlikely for the deal to pass.
• Today's US economic calendar is empty. The EMU prints retail sales results for March. Italy, Spain and Sweden publish Composite/Services PMI's. Fed's Harker speaks today, as does outgoing ECB chief economist Peter Praet

Currencies: Dollar Doesn't Profit From Strong US Payrolls Nor From Rising Trade Tensions

USD hardly profits from rising trade tensions

The euro outperformed on Friday, but the market reaction to the data was a bit remarkable. EUR/USD didn't profit from a jump in EMU inflation (1.7% headline, 1.2% core), which was considered temporary. Later, US payrolls showed strong job growth, but the dollar also failed to profit as wage growth disappointed again. The US currency even lost further ground as the US non-manufacturing ISM unexpectedly dropped. (FX) markets keep the view that the dollar is at risk to lose interest rate support if US inflation stays as tame as it was of late. EUR/USD closed at 1.1198. USD/JPY finished at 111.10.

This morning, the positive (goldilocks-like) sentiment in the US on Friday is abruptly overthrown as president Trump said he might raise tariffs on Chinese good as soon as Friday. The tweets are causing doubts on a positive outcome of the US-China trade talks. Asian equities and the yuan (USD/CNY 6.78) are suffering heavy losses. AUD/USD dropped below 0.70. The yen strengthened to the USD/JPY 110.30 area, but gains eased later. The euro is holding up well. EUR/USD is still changing hands in the high 1.11 area.

Today, there few important data in the US and EMU. The focus will turn to the US-China trade war. The yen will probably outperform. The impact on EUR/USD is not that evident. The EMU economy proved very sensitive to global trade tensions. So, an escalation in the trade war might be a euro negative. At the same time, a risk off correction might lead to lower US yields (less interest rate support for the dollar). If trade tension escalate further, US president Trump might also threat to use US the dollar as weapon. As always, we keep a close eye at the EUR/JPY price action in a risk-off context. However, we have the impression that the negative impact on EUR/USD might be limited for now. The price action on Friday also suggested that the bar for sustained USD gains might be quite high. We maintain the view that the EUR/USD 1.1110 support area won't be that easy to break.

On Friday, sterling gained further ground on headlines/rumours that the negotiations between UK government and labour might lead to an agreement on a rather soft Brexit (customs union). EUR/GBP dropped to the 0.85 area. However, comments during the weekend suggested there is still quite some distrust between the two parties. UK markets are closed today. For now, we don't expect sterling to get additional support from investors anticipating a political agreement on Brexit.

EUR/USD: dollar doesn't profit from strong US payrolls. Rising trade tensions this morning also provide little support fort the US currency.

Daily Pivots: (S1) 0.8472; (P) 0.8531; (R1) 0.8564; More...

EUR/GBP recovers mildly today but with 0.8568 minor resistance intact, intraday bias stays on the downside. Current development suggests that consolidation from 0.8472 has completed with three waves to 0.8681, after failing to sustain above 55 day EMA. Break of 0.8472 low will resume fall from 0.9101 and target 61.8% projection of 0.9101 to 0.8472 from 0.8681 at 0.8292 next. On the upside, above 0.8568 minor resistance will delay the bullish case and turn intraday bias neutral first.

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) 1.5912; (P) 1.5954; (R1) 1.5988; More...

EUR/AUD's rally resumes today by breaking 1.5994 temporary top. Intraday bias is back on the upside for 1.6122 resistance. As note before, we'd continue to favor the bullish case that correction from 1.6765 has completed with three waves down to 1.5683. Decisive break of 1.6122 will confirm this bullish view and target retesting 1.6765 high. For now, near term outlook will stay cautiously bullish as long as 1.5920 minor support holds, in case of retreat.

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) 1.1372; (P) 1.1385; (R1) 1.1399; More...

EUR/CHF's corrective fall from 1.1476 extends lower today and intraday bias is now mildly on the downside for 55 day EMA (now at 1.1338). Sustained break there will pave the way back to retest 1.1162 low. 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.

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.