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The forex markets are rather quiet in Asia, as Japan starts an ultra-long 10-day holiday ahead of Imperial succession. New Zealand and Australian Dollar extends the corrective recovery started late last week, ignoring initial weakness in Chinese stocks. On the other hand, Yen is generally lower, followed by Canadian. The economic calendar is extremely busy this week, with a lot of heavy weight data scheduled. For today, US PCE inflation will be the major focus and would likely point to sluggishness in underlying inflation pressure.

Technically, after last week's strong rally, Dollar and Yen have turned into consolidation. Losses in both currencies are so far rather limited. The markets could be rather volatile this week. In particular, Yen crosses could further test key near term support levels. Immediate focus will be 143.72 in GBP/JPY. Meanwhile, 123.65 in EUR/JPY, 77.44 in AUD/JPY and 81.63 in CAD/JPY will all be watched to confirm Yen's bullish comeback.

In Asia, Hong Kong HSI is up 0.83%. China Shanghai SSE is down -0.14%. Singapore Strait Times is up 1.40%. Gold is gyrating around 1280. WTI crude oil is at around 63 handle after Friday's steep pull back.

US Mnuchin said trade talks with China in final laps; Verbal exchanges on IP theft continued elsewhere

US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will be in Beijing on Tuesday to start another round of trade talks with China. Ahead of that, Mnuchin was quoted saying "we're getting into the final laps." He also noted, "both sides have a desire to reach an agreement," and "we've made a lot of progress." Trump also said late week Chinese President Xi Jinping will come to the White House "soon" to seal the trade deal, without giving any details as usual.

But it's also reported that significant differences remain, including in the area of intellectual property theft. In a UTRS report published last week, it's criticized that "despite a broad government reorganization, including of intellectual-property responsibilities among government agencies, and proposed revisions to IP laws and regulations, China failed to make fundamental structural changes to strengthen IP protection and enforcement, open China's market to foreign investment, allow the market a decisive role in allocating resources, and refrain from government interference in private sector technology transfer decisions."

On Sunday, China hit back and denied the claims typically. National Intellectual Property Administration (NIPA) Director Shen Changyu said that over 5,600 people in some 3,300 cases were arrested for intellectual property rights infringement in 2018. Shen added, "Some countries' criticisms of China's IP protection lack evidence and are non-specific." And, "China has some problems and we are stepping up efforts to fix them. But meanwhile, IP infringement is a global problem that exists in every country". "Every country should try to improve their business environment and fix their problems, instead of window dressing themselves,"

According to a USTR statement, this week's meeting will cover issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases, and enforcement. Chinese Vice Premier Liu He will lead a delegation to Washington for additional discussions starting on May 8.

Canadian beef export to Japan tripled under CPTPP, Trump still discussing with Abe

Leaders of Canada and Japan hailed the success and benefits of the 11-country trade pact when they met in Ottawa on Sunday. Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Canadian Prime Minister Justin Trudeau said beef exports to Japan nearly tripled.

Trudeau added, the pact "has benefited tremendously Canadian citizens, Japanese citizens and businesses and indeed people throughout the region." And, that "stands in stark contrast with the United States withdrawal ... continuing to move forward on freer more open trade, according to the rules we can all agree on, is something we need more in the world."

Japanese Prime Minister Shinzo Abe also said the CPTPP  "should be a model going forward," describing it as a meaningful way "to disseminate a 21st century type of free and fair rules-based (trade)."

Trump pulled out of the Trans-Pacific Partnership (TPP), the former version of CPTPP, as one of the first moves after taking office more two years ago. As of the meeting between Trump and Abe last Friday, the US and Japan are still working on a trade deal.

Trump said the deal "can go fairly quickly" and negotiations are "moving along very nicely and we'll see what happens". He also said "we'll be discussing very strongly agriculture because, as the prime minister knows, Japan puts very massive tariffs on our agriculture...and we want to get rid of those tariffs."

Fed and BoE to meeting, crucial data waiting on the line too

Two central banks will meet this week. Fed is widely expected to keep interest rate unchanged at 2.25-2.50%. Fed will, without a doubt, maintain its patient stance regarding any monetary policy adjustment. Normalization is considered largely completed and sustained trend in inflation or unemployment is needed to emerge first before Fed takes another move. Dollar bears could look Fed Chair Jerome Powell's comments regarding concerns over sluggish inflation. On the other hand, Dollar bulls would like to see Powell dismissing the talks of rate cut as being premature.

BoE is also widely expected to keep interest rate unchanged at 0.75%. Asset purchase target will be held at GBP 435B. The decisions should also be made by unanimous votes. The main focus will be on the quarterly inflation report. But after all, the form of Brexit remains the single most important factor on the economic outlook. The current economic projections would be rather academic if the assumption of smooth and soft Brexit is not realized.

In addition, the economic data featured this week are very heavy weight. US PCE inflation, ISM indices and non-farm payroll could confirm the picture of solid growth with little price pressure. Eurozone GDP will finally show how bad the slowdown was, and CPI will also be featured. UK PMIs could be more market moving that BoE. Canada CPI, New Zealand employment, Australia housing data could move respective currencies. China PMIs will also be crucial to global market sentiments in general.

Here are some highlights for the week:

• Monday: Eurozone M3, confidence indicators; US personal income and spending;
• Tuesday: China official PMIs; New Zealand ANZ business confidence; France GDP; Germany Gfk consumer sentiment, import prices, CPI flash; Swiss FOK economic barometer; Eurozone GDP, unemployment rate; Canada GDP, IPPI and RMPI; US employment cost, S&P Case Shiller house price, Chicago PMI, consumer confidence, pending home sales
• Wednesday: New Zealand employment; UK PMI manufacturing, M4, mortgage approvals; US ADP employment, ISM manufacturing, FOMC rate decision;
• Thursday: New Zealand building consent; China Caixin manufacturing PMI; Swiss retail sales, manufacturing PMI; Germany retail sales; Eurozone PMI manufacturing final; UK construction PMI; BoE rate decision and inflation report; US Challenger job cuts, non-arm productivity, jobless claims, factory orders
• Friday: Australia building approvals; Swiss SECO consumer climate, CPI; Eurozone CPI, PPI; US non-farm payrolls, trade balance, wholesale inventories, ISM non-manufacturing;

GBP/JPY Daily Outlook

Daily Pivots: (S1) 143.78; (P) 144.11; (R1) 144.47; More...

Intraday bias in GBP/JPY remains neutral at this point, with focus on 143.72 key support. On the downside, decisive break of 143.72 will indicate near term reversal, after rejection by 149.48 key resistance. In that case, intraday bias will be turned to the downside for 141.00 support first. Meanwhile, rebound from current level will retain bullishness. Decisive break of 149.48 key resistance will carry larger bullish in implications and target 156.58 resistance next.

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.

Economic Indicators Update

US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will be in Beijing on Tuesday to start another round of trade talks with China. Ahead of that, Mnuchin was quoted saying "we're getting into the final laps." He also noted, "both sides have a desire to reach an agreement," and "we've made a lot of progress." Trump also said late week Chinese President Xi Jinping will come to the White House "soon" to seal the trade deal, without giving any details as usual.

But it's also reported that significant differences remain, including in the area of intellectual property theft. In a UTRS report published last week, it's criticized that "despite a broad government reorganization, including of intellectual-property responsibilities among government agencies, and proposed revisions to IP laws and regulations, China failed to make fundamental structural changes to strengthen IP protection and enforcement, open China's market to foreign investment, allow the market a decisive role in allocating resources, and refrain from government interference in private sector technology transfer decisions."

On Sunday, China hit back and denied the claims typically. National Intellectual Property Administration (NIPA) Director Shen Changyu said that over 5,600 people in some 3,300 cases were arrested for intellectual property rights infringement in 2018. Shen added, "Some countries' criticisms of China's IP protection lack evidence and are non-specific." And, "China has some problems and we are stepping up efforts to fix them. But meanwhile, IP infringement is a global problem that exists in every country". "Every country should try to improve their business environment and fix their problems, instead of window dressing themselves,"

According to a USTR statement, this week's meeting will cover issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases, and enforcement. Chinese Vice Premier Liu He will lead a delegation to Washington for additional discussions starting on May 8.

The EUR/JPY will probably test the Fibonacci levels of wave 2 vs 1, which are expected to act as potential support. A break below the 100% Fibonacci level would invalidate the current wave 1-2 (pink) outlook whereas a bullish break above the resistance trend lines could confirm the end wave 2 (pink) and start of wave 5 (purple).

The EUR/JPY has made a bullish ABC (blue) zigzag within a wave X (purple) after price broke below the multiple support trend lines (dotted green). The bearish impulse is probably a wave 3 (green) which means that the current pullback could be a wave 4 (green), which typically sees a shallow retracement towards the 23.6-50% Fibonacci levels. The next push could complete a wave 5 (green) within wave A (blue), after which a wave B/C (blue) still remains.

Market movers today

Markets will continue to digest yesterday's Spanish election result (see below).

In the euro area the economic confidence indicator for April is due out and it shall be interesting to see if it also points to a lacklustre start to Q2, in line with the latest PMIs. Loan growth data for March will also be released, which markets will keep an eye on to gauge how favourable the ECB will design its new liquidity operation (TLTRO3) when details are announced in June.

In the US, focus today reverts to the inflation front with the PCE figures for March. The Fed's communication recently has put more weight on the inflation dynamics and therefore it will be interesting to see whether the PCE core rate shows a further decline from 1.8% in February.

In Sweden, we get trade balance figures for March and in Denmark focus is on business confidence data.

Later this week, Q1 GDP data out of the euro area, Chinese PMIs as well as the Fed meeting and US job report will be in focus.

Selected market news

In the Spanish general election yesterday the Socialist Workers' Party (PSOE) emerged, as expected, as the election's winners by gaining 29 per cent of the popular vote, and thus obtaining some 123 seats (out of a total of 350). The result sees the number of PSOE seats increase by 38 on the 2016 elections and most importantly gives the PSOE options to form a government possibly without the need of Catalan separatist parties, whose place in a Spanish government would be highly problematic given the still unresolved Catalan question, and result in a higher probability of a hung parliament. Instead the PSOE's leader and sitting Prime Minister, Pedro Sánchez, could be able to form a majority government together with either left-wing party Unidas Podemos, whose election result at 14.3% (42 seats) was less bad than expected (2016 result: 21.1%, expected: 13%), the Basque nationalists and more moderate regional parties, or look across the centre towards Ciudadanos (low probability) or even govern a minority government. The far-right nationalist Vox, who is taking a hard stance against Catalan independence, gained 10% (24 seats) although mostly at the cost of the centre-right PP (16.7%, 2016 result: 33%) losing more than half its seats, leaving the Spanish right wing more fragmented than ever. Given the options of the PSOE the election outcome should be marginally positive for markets. In any case Spain has shown some resilience towards political uncertainty as of late and we remain positive on the Spanish economy.

Oil prices plunged on Friday after US president Trump was out saying he had called on OPEC to reduce crude prices. On Thursday, current waivers on Iran sanctions expire and the oil market could suffer a supply shortage if OPEC does not follow Trump's call. This comes on top of last week's increased uncertainty regarding Libyan oil exports following attacks on Tripoli by Libyan opposition, with fighting continuing this weekend.

For the 24 hours to 23:00 GMT, the EUR rose 0.10% against the USD and closed at 1.1148 on Friday.

In the US, data showed that preliminary annualised gross domestic product (GDP) advanced 3.2% in 1Q 2019, surpassing market anticipation for a gain of 2.3%. In the prior quarter, the annualised GDP had recorded a rise 2.2%.

In the Asian session, at GMT0300, the pair is trading at 1.1158, with the EUR trading 0.09% higher against the USD from Friday’s close.

The pair is expected to find support at 1.1122, and a fall through could take it to the next support level of 1.1086. The pair is expected to find its first resistance at 1.1184, and a rise through could take it to the next resistance level of 1.1210.

Moving ahead, traders would await the Euro-zone’s economic confidence, industrial confidence and services confidence, all for April. Later in the day, the US personal income and personal spending, both for March, along with the Dallas Fed manufacturing activity for April, will garner significant amount of investor attention.

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

For the 24 hours to 23:00 GMT, the GBP rose 0.16% against the USD and closed at 1.2921 on Friday.

On the data front, UK's BBA mortgage approvals rose to a nine-month high level of 39.98K in March, following a revised level of 39.21K in the preceding month.

In the Asian session, at GMT0300, the pair is trading at 1.2930, with the GBP trading 0.07% higher against the USD from Friday's close.

The pair is expected to find support at 1.2890, and a fall through could take it to the next support level of 1.2849. The pair is expected to find its first resistance at 1.2957, and a rise through could take it to the next resistance level of 1.2983.

Looking ahead, investors would keep an eye on UK's GfK consumer confidence index and Lloyds business barometer, both for April, slated to release later in the day.

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

For the 24 hours to 23:00 GMT, the USD slightly rose against the JPY and closed at 111.61 on Friday.

In economic news, Japan's housing starts surged 10.0% on an annual basis in March, surpassing market consensus for a rise of 5.2%. In the prior month, housing starts had registered an advance of 4.2%.

In the Asian session, at GMT0300, the pair is trading at 111.6, with the USD trading marginally lower against the JPY from Friday's close.

The pair is expected to find support at 111.34, and a fall through could take it to the next support level of 111.09. The pair is expected to find its first resistance at 111.94, and a rise through could take it to the next resistance level of 112.29.

In absence of key economic releases in Japan today, investor sentiment would be determined by global macroeconomic events.

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 declined 0.10% against the CHF and closed at 1.0191 on Friday.

In the Asian session, at GMT0300, the pair is trading at 1.0187, with the USD trading a tad lower against the CHF from Friday’s close.

The pair is expected to find support at 1.0168, and a fall through could take it to the next support level of 1.0150. The pair is expected to find its first resistance at 1.0221, and a rise through could take it to the next resistance level of 1.0256.

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 declined 0.14% against the CAD and closed at 1.3462 on Friday.

In the Asian session, at GMT0300, the pair is trading at 1.3454, with the USD trading 0.06% lower against the CAD from Friday’s close.

The pair is expected to find support at 1.3438, and a fall through could take it to the next support level of 1.3422. The pair is expected to find its first resistance at 1.3484, and a rise through could take it to the next resistance level of 1.3514.

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

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

For the 24 hours to 23:00 GMT, the AUD rose 0.30% against the USD and closed at 0.7040 on Friday.

LME Copper prices rose 0.3% or $17.5/MT to $6393.0/MT. Aluminium prices declined 1.1% or $20.0/MT to $1832.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7054, with the AUD trading 0.20% higher against the USD from Friday’s close.

The pair is expected to find support at 0.7026, and a fall through could take it to the next support level of 0.6999. The pair is expected to find its first resistance at 0.7071, and a rise through could take it to the next resistance level of 0.7089.

With no macroeconomic releases in Australia today, investors would look forward to global macroeconomic releases for further direction.

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