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Brussels prepares for May’s visit on Thursday

It’s unlikely to be the most exciting day of the week in financial markets but that hasn’t stopped them jumping around recently, with various political and economic stories making for a volatile environment.

From a UK perspective, the key date this week is tomorrow, as Theresa May heads back to Brussels in the hope of convincing the EU to revisit the backstop issue that has so far prevented her deal getting through Parliament. I can only hope, for her sake, that she turns up with detailed “alternative arrangements” that interest rather than frustrate her counterparts in the EU, as her vague requests have in the past.

Unfortunately, I’m not particularly confident and think it will likely be another anti-climax that results in May returning to parliament with plan C that somewhat resembles both plan B and plan A that preceded it. Depending on what exactly their alternative arrangements are, this could be a test of just how feasible Brexiteer plans are for the border, having repeatedly slammed May in the past for not pursuing other solutions.

Stronger dollar not deterring Gold bulls

Gold is continuing to hold firm despite the recent rebound in the US dollar putting it under some pressure. A stronger dollar is typically bearish for gold but at the moment, we are seeing some resilience even as the greenback makes steady gains.

The break above $1,300 was clearly a very bullish move and traders are reluctant to cave under any immediate pressure. Even $1,310 is holding firm currently, we’re yet to even properly test $1,300, or come close to it. I don’t necessarily expect that to last but if we’re seeing such a fight at these levels then I would be surprised if we didn’t see an even more fierce defence of $1,300.

Oil pares losses after inventory data

Oil is trading a little higher this morning, paring losses incurred on Tuesday as API reported a larger than expected inventory number. The number was only a little higher than analyst expectations and much of the downside in crude came prior to the release, which unless it came in anticipating of a higher headline number would suggest traders were unmoved by the increase.

What is potentially more concerning for oil bulls is that this is the third consecutive increase in stocks, which is expected to be confirmed by the EIA report later today. Still, with OPEC and its allies seeking to gradually reduce the stock and US oil rigs falling in this low price environment, this downside pressure on WTI and Brent may not last. A significant break above key resistance - $55 and $65, respectively – may still elude us but I’m not yet seeing much appetite for prices to burst in the other direction. It may simply be a case that record US output and these inventory builds are keeping a cap on prices for now.

Daily Pivots: (S1) 141.79; (P) 142.68; (R1) 143.30; More...

GBP/JPY's consolidation from 144.84 is still in progress and intraday bias remains neutral. On the upside, above 144.84 will extend the rebound from 131.51. But we'd expect strong resistance from trend line (now at 147.13) to limit upside, at least on first attempt. On the downside, firm break of 140.62 will suggest completion of the rebound and turn bias to the downside.

In the bigger picture, the strong rebound from 131.51 suggests that medium term fall from 156.59 (2018 high) has completed already. The corrective structure of such decline is turn argues that it's the second leg of the corrective pattern from 122.36 (2016 low). And this pattern is starting the third leg. On the upside, decisive break of 149.38 will pave the way to 156.59 resistance and above.

Daily Pivots: (S1) 125.17; (P) 125.52; (R1) 125.77; More....

Intraday bias in EUR/JPY remains neutral first. At this point, another rally cannot be ruled out yet. But we'd stay cautious on strong resistance from 55 day EMA (now at 126.11) to limit upside. On the downside, break of 124.36 support will argue that the rebound from 118.62 has completed and turn bias to the downside. Nevertheless, sustained trading above 55 day EMA will pave the way back to 129.25 resistance next.

In the bigger picture, medium term rebound from 109.03 (2016 low) has completed at 137.49 already, with corrective structure. Fall from 137.39 is possibly just the second leg of the corrective pattern from 109.03. Break of 133.12 resistance should start the third leg to 137.49 and above. Nevertheless, break of 118.62 will resume the decline from 137.49 for 109.03/114.84 support zone instead.

Daily Pivots: (S1) 0.8762; (P) 0.8792; (R1) 0.8837; More...

EUR/GBP's rebound from 0.8617 continues today and intraday bias remains on the upside. Firm break of 38.2% retracement of 0.9101 to 0.8617 at 0.8802 will target 61.8% retracement at 0.8916. On the downside, break of 0.8726 minor support will turn bias back to the downside for 0.8617/20 support instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). The medium term range is set between 0.8620 and 0.9101. Downside breakout of 0.8620 will pave the way back to 0.8312 support . Break of 0.9101 will bring retest of 0.9304/5 resistance.

Daily Pivots: (S1) 1.5695; (P) 1.5797; (R1) 1.5864; More....

EUR/AUD rebounds strongly today but stays below 1.6038 resistance. Intraday bias remains neutral first. Further decline is expected with 1.6038 resistance intact. On the downside, break of 1.5721 will extend the fall from 1.6765 to 1.5346 key support. But break of 1.6038 will indicate completion of the fall and turn bias back to the upside.

In the bigger picture, the failure to sustain above 1.6587 key resistance (2015 high) argues that up trend from 1.1602 (2012 low) is not ready to resume yet. But still, as long as 1.5346 support holds, outlook will remain bullish. 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) 1.1387; (P) 1.1416; (R1) 1.1433; More...

EUR/CHF lost momentum after hitting 1.1444 and intraday bias is turned neutral again. Rise from 1.1181 is still in progress and break of 1.1444 will target 1.1501 key resistance. On the downside, break of 1.1372 support is now needed to indicate completion of the rebound. Otherwise, near term outlook will stay cautiously bullish in case of retreat.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by 1.1154/98 support zone to complete it and bring rebound. Decisive break of 1.1501 (38.2% retracement of 1.2004 to 1.1173 at 1.1490) will confirm completion of the correction, on bullish convergence condition in daily MACD, with double bottom pattern (1.1173, 1.1181) Further rise should be seen to 61.8% retracement at 1.1687 and above next.

Daily Pivots: (S1) 1.1387; (P) 1.1418; (R1) 1.1435; More.....

EUR/USD's break of 1.1407 minor support argues that rebound from 1.1289 has completed at 1.1514 already. Intraday bias is turned back to the downside for 1.1289. Overall, price actions from 1.1215 are seen as a correction pattern. Break of 1.1289 will argue that such correction is completed and larger decline from 1.2555 is ready to resume. On the upside, break of 1.1514 will extend the pattern with another rise towards 1.1569 resistance.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.

Daily Pivots: (S1) 1.2899; (P) 1.2977; (R1) 1.3029; More....

Intraday bias in GBP/USD remains on the downside at this point. Current development suggests that rebound from 1.2391 has completed at 1.3217, after rejection by 1.3174 key resistance. Further fall should be seen to 1.2814 resistance turned support first. Break will bring retest on 1.2391 low. On the upside, break of 1.3217 resistance is needed to confirm resumption of the rebound. Otherwise, risk will now stay on the downside in case of recovery.

In the bigger picture, the rejection by 1.3174 key resistance revived the original view on GBP/USD. That is, decline from 1.4376 is possibly resuming long term down trend from 2.1161 (2007 high). Firm break of 1.2391 will solidify this bearish case and target 1.1946 (2016 low). However, decisive break of 1.3174 will invalidate this bearish case again and turn outlook bullish.

Daily Pivots: (S1) 0.9974; (P) 0.9998; (R1) 1.0023; More....

Intraday bias in USD/CHF remains on the upside at this point. Outlook is unchanged that corrective decline from 1.0128 should have completed at 0.9716 already, after hitting trend line support. Further rally should now be seen back to retest 1.0128. On the downside, break of 0.9908 is needed to indicate completion of the rebound. Otherwise, outlook will stay cautiously bullish in case of retreat.

In the bigger picture, USD/CHF drew strong support from medium term trend line and rebounded. That suggests rise from 0.9186 is still in progress. Further break of 1.0128 will confirm up trend resumption and target 1.0342 key resistance. Nevertheless, break of 0.9716 will dampen this bullish view and at least bring deeper fall to 0.9541 key support.

Daily Pivots: (S1) 109.82; (P) 109.93; (R1) 110.08; More...

With 4 hour MACD crossed below signal line, a temporary top is formed at 110.16 and intraday bias is turned neutral. In case of another rise, we'd expect strong resistance from 61.8% retracement of 114.54 to 104.69 at 110.77 to limit upside to bring reversal. On the downside, break of 108.49 support will now confirm completion of the rebound and bring retest of 104.69 low. However, sustained trading above 110.77 will dampen our bearish view and target a test on 114.54 resistance instead.

In the bigger picture, while the rebound from 104.69 is strong, there is no change in the view that it's a corrective move. That is, fall from 114.54, as part of the decline from 118.65 (2016 high), is not completed yet. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51, which is close to 100 psychological level. Nevertheless, sustained trading above 55 day EMA (now at 110.55) will dampen this bearish view and turn focus back to 114.54 resistance instead.