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Key Highlights

• The Euro moved higher this past week and recovered above 1.1700 against the US Dollar.
• There is a major bullish trend line formed with support at 1.1720 on the 4-hours chart of EUR/USD.
• The pair must move above the 1.1840 barrier for more gains in the near term.
• Recently in China, the CPI for May 2018 increased 1.8%, similar to the forecast (YoY).

EURUSD Technical Analysis

The Euro started a solid recovery from the 1.1520 swing low against the US Dollar. The EUR/USD pair moved above the 1.1650 and 1.1700 resistance levels to move into a bullish zone.

The pair even broke 1.1800 hurdle and traded as high as 1.1839. Later, sellers appeared and the pair corrected below the 23.5% fib retracement level of the last wave from the 1.1617 low to 1.1839 high.

However, there are many supports on the downside around the 1.1720 level. There is also a major bullish trend line formed with support at 1.1720 on the 4-hours chart of EUR/USD.

The 100 simple moving average (4-hours) is also near 1.1720. Therefore, any dips from the current levels are likely to find buyers around the 1.1730 and 1.1720 levels.

On the upside, there is a crucial barrier for buyers near 1.1820 and 1.1840. An upside break above 1.1840 could open the doors for a push towards the 1.1900 level.

Recently in China, the CPI report for May 2018 was released by the National Bureau of Statistics of China. The market was looking for a rise or around 1.8%, like the last reading.

The actual result was similar to the forecast as there was a rise of 1.8%. On the other hand, the PPI in May 2018 rose 4.1%, more than the forecast of 3.8% (YoY).

The overall market sentiment is positive for EUR/USD as long as the pair is above the 1.1720 support.

Economic Releases to Watch Today

• UK Industrial Production for April 2018 (MoM) – Forecast +0.2%, versus +0.1% previous.
• UK Manufacturing Production for April 2018 (MoM) – Forecast +0.3%, versus -0.1% previous.

German Chancellor Angela Merkel said in a TV interview that "the withdrawal, so to speak, via tweet is of course ... sobering and a bit depressing." But she maintained that EU is preparing counter-measures against US steel and aluminum tariffs and added "So we won't let ourselves be ripped off again and again. Instead, we act then too." Regarding the upcoming automobile tariffs, Merkel said "we'll try and see if we can prevent this... and then hope that the EU will respond again in the same unity."

German Foreign Minister Heiko Maas said "in a matter of seconds, you can destroy trust with 280 Twitter characters." Mass added that "we have to keep a cool head now and draw the right conclusions" and "Europe united is the answer to America First."

Trump also singled out Germany in his twitter attacks.

https://twitter.com/realDonaldTrump/status/1005985339121504256

https://twitter.com/realDonaldTrump/status/1005988633747312640

Trump continued his spat with Canada after his abrupt after-the-fact withdrawal from G7 statement. He called Canadian Prime Minister Justin Trudeau "very dishonest and weak" earlier. And he went further twitting today:

https://twitter.com/realDonaldTrump/status/1005979207544000512

https://twitter.com/realDonaldTrump/status/1005982266496094209

Canadian Foreign Minister Chrystia Freeland said yesterday that "Canada does not conduct its diplomacy through ad hominem attacks ... and we refrain particularly from ad hominem attacks when it comes to a close ally." And she reiterated that the retaliation to US steel tariffs is on the way in measured and reciprocal way.

She added that "the position of our European allies, including Japan, is the same as ours. We coordinated very closely with the European Union, with Mexico, on our list of retaliatory measures and actions."

EURUSD - The pair faces further recovery higher having closed higher the past week. On the upside, resistance comes in at 1.1800 level with a cut through here opening the door for more upside towards the 1.1850 level. Further up, resistance lies at the 1.1900 level where a break will expose the 1.1950 level. Conversely, support lies at the 1.1750 level where a violation will aim at the 1.1700 level. A break of here will aim at the 1.1650 level. Below here will open the door for more weakness towards the 1.1600. All in all, EURUSD faces further upside pressure on recovery.

Euro open the week higher as lifted by comments from Italian Economy Minister Giovanni Tria as he ruled out Euro exit.

Tria said in interview by Corriere della Sera newspaper that "the position of the government is clear and unanimous" and "there is no question of leaving the euro." And, "the government is determined to prevent in any way the market conditions that would lead to an exit materializing".

He added that "it's not just that we do not want to leave, we will act in such a way that the conditions do not get anywhere near to a position where they might challenge our presence in the euro."

Regarding economic fiscal policies, Tria said "our goal is growth and employment. But we do not plan on reviving growth through deficit spending." And he emphasized that "these will be fully coherent with the objective of continuing on the path of lowering the debt/GDP ratio."

Calm before chaos but more likely the fear of the unknown.

But one thing that we do know for sure is the president's uncontrollable need to defend his status is more apparent than any strategy when comes to bilateral trade negotiations. But, the far from harmonious Quebec summit confirmed deep-seated G6+1's expanding policy fissures on a plethora of significant concerns including climate change, the Iran nuclear deal and of course trade. While expectations were not exactly high going into the meeting but the result was a bit worse than even the markets dismal presuppositions but with bigger fish to fry, its back to Trump -Kim summit and other high-risk events including FOMC, ECB, BOJ and Brexit vote, by far the biggest week of the year.!

The Trump -Kim summit is the massive event that has a far-reaching regional implication. While the markets had low expectations going into G-7, assumptions are running high, so if the talks somehow go sideways, there could be a reasonably aggressive regional risk-off move. Unquestionably a defining moment for the Trump presidency but, we wouldn't be so far down this path if failure were an option. The summit is the perfect opportunity for President Trump to cement his Nobel Peace Prize nomination while North Korea can ride down the road to regional prosperity. What could go wrong? We're soon to find out tomorrow as the summit could be ” Gone in 60 seconds.” if President Trump doesn't ” Feel it”. But ultimately this comes down to Verifiable, Irreversible, Cooperative Dismantlement of the DPRK's Nuclear Weapons Program, end of story.

Oil markets

The market continues to trade with an offered bias since prices leaked lower Friday after the reported dip in Chinese oil imports. While OPEC possible supply increases remain the pulse of the market, slashed forecasts and the nervous nelly syndrome has traders walking the supply tightrope heading into the June 22 OPEC Vienna summit.

But as the Trump -Kim summit is to geopolitical APAC risk, so is the OPEC meeting in Vienna to oil markets, its massive!! While the market generally remains bullish, and despite traders adjusting downside hedge ratios, oil could gush significantly lower if OPEC adds significant barrels before 2019

Gold Markets

The market opened predictably quiet ahead of the abundance of risk events this week and wholly ignored President Trump going rogue at the G7.

But, with geopolitical risk moderating, although that could change in a heartbeat, this week it will be the FED and ECB that will guide golds near-term fate. The market has pretty much written off a hawkish rate from the Fed, but the problem for gold prices is the Fed hike is unlikely to be dovish hike either given the momentum in the US economy. And this could be the reason why gold prices are not moving in the usual pre-FOMC patterns of selling before and buy after. But there just enough geopolitical angst to keep prices in check

As for the ECB, the bar is high for any policy surprise this week after last week well-orchestrated forward guidance PR job last week that the ECB will discuss pulling off QE at this weeks meeting However, a hawkish shift would be detrimental for the USD and ultimately positive for Gold

Currency markets

The Big 3 central banks are out this week and will dominate trading as US dollars fate and near-term direction lie in the hands of ECB and Fed policymakers. While the Fed guidance is expected to remain on policy target, there's a bit more intrigue on ECB front after last week QE forward guidance. But with the cat out of the ECB bag, and everyone expecting some type response on QE reduction, the bar remains very higher for the ECB to surprise.

The Canadian dollar dropped at the Monday open on the G-7 ruckus but was quickly faded, and we're back trading below the pre- CAD jobs report data level. Indeed, the escalation in the US -Canada tension does not bode well for the Lonnie, but let's face, the President will likely walk the more boisterous G-7 comments after his likely success in Singapore.

Regional market struggles are numerous, and it always seems to boil down to stronger USD or equity outflows. But today the seas of red in local equity markets that contributed to broader weakness. There remains net selling by offshore bond investors although that flow has slowed post-election. But in general, the MYR is trading very sensitive to regional risk sentiment which suggests if local equity markets to well so will the Ringgit. But with so many external factors competing for attention, that riskier profiled assets like the MYR will play second fiddle to G-10. So, with the lack of inflow, I expect the current ranges to hold but with the USDMYR to gravitate to the top side of the spectrum. Exposing a possible move through USDMYR through 4.00 if 1) Trump Kim summit fails 2) either the ECB or FED is more hawkish than expected.

Week Ahead View

This week might turn out to be the busiest week in the markets in some time as events from the usual central bank policy, the critical historical summit on geopolitics, and an important calendar event for global trade will keep traders hoping.

Let us kick things off right here in Singapore with the June 12 summit between the US and North Korea. The hurdle for success has been lowered but with a low bar comes a much significant tail risk if talk collapse.

White House deadline for finalising tariffs on Chinese goods (June 15) which should not be overlooked by any stretch of the imagination. But China continues to offer a very flexible olive branch, so the hope is that matters de-escalate before the deadline.

Then there's that small matter of the European Central Bank and Federal Reserve Board meeting's which could be very crucial for the markets next tack.

The Fed is widely expected to announce an interest rate hike on Wednesday, but investors will be keying on forward guidance for clues if the U.S. central bank could raise rates a fourth time this year.

While Draghi's lieutenants rolled out a well-orchestrated PR campaign leaving the market convinced the ECB would discuss the removal of QE at next week's meeting. This news is hardly a watershed moment, but being so deprived of any hawkish ECB inference the markets will run take off running at any hawkish glean. But be cautious of Draghi's propensity to downplay QE reduction at the follow-up presser, which could prove to be a bitter pill to swallow if one decides to recklessly go all in on the EUR at this stage of the game.

Let's not forget the Bank of Japan policy decision, but this meeting is shaping up to be a bit of snooze, even more so with inflation flagging again.

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According to the CFTC Commitments of Traders report for the week ended Jun 5, net LENGTH for crude oil futures fell -24 252 contracts to 583 576. Net LENGTH for heating oil futures dropped -6 506 contracts to 38 805 while that for gasoline declined -9 896 contracts to 93 833. Net SHORT for natural gas decreased -2 749 contracts to 59 437 for the week. During the week, crude oil and refinery product prices retreated from recent peak, amidst concerns over OPEC's potential increase in production. Meanwhile, the  Nymex natural gas contract added +0.52% for the week.

Concerning the precious metal complex, speculators were mixed although all stayed in Net LENGTH. Net LENGTH for the gold futures dropped -3 714 contracts to 111 416 while that for silver gained +1 981 contracts to 19 434 for the week. The Comex gold contract slipped -0.09% while the corresponding silver contract added +1.14% during the week. For PGMs, Net LENGTH for platinum slipped -1 870 contracts to 2 146 while that for palladium rose +1 582 contracts to 11 575. The Nymex contract for platinum dropped -0.39% and that for palladium jumped +2.48% for the week.

First, a review of last week’s forecast:

EUR/USD. The basic forecast for this pair, supported by the majority of analysts, assumed its growth to the zone of 1.1800-1.1830. The pair went up indeed, fixing the week's high at 1.1839. So, taking into account the standard backlash, the forecast turned out to be absolutely correct. A rebound followed, and, as a result, the pair completed the trading session at the horizon 1.1770;

GBP/USD. The forecast for this pair was very similar to that for the EUR/USD. 60% of experts had expected that the pound could rise to the level of 1.3420, and, in case of its breakdown, reach the zone 1.3500. It actually happened so - on Thursday, June 08, having broken the resistance of 1.3420, the pair briefly managed to rise to the height of 1.3470, then the bulls' strength dried up, and the pair met the end of the week 70 points lower - in the zone 1.3400;

USD/JPY. Recall that last week the opinions of both analysts and indicators were divided into three almost equal parts - one-third voted for the fall of the pair, one-third were for its growth and another third voted for the sideways trend. And, as is often the case in such situations, everyone was right: the pair first grew to 110.25, then fell back to support 109.20, then again grew up and completed the five-day period almost in the same place where it started, in the zone of 109.55;

Cryptocurrencies. As was said earlier, almost all major cryptopairs have been recently repeating the movements of their leader, BTC/USD. And the bitcoin, in turn, draws the Pennant and, constantly reducing volatility, continues to consolidate in the horizon area slightly above 7,000. So, if you look at the chart of D1, it is clearly visible that this "father" of all virtual currencies moved strictly horizontally in an extremely narrow corridor 7.345 - 7.730 for the whole week. It was followed in the sideways trend by all the major altcoins, and the attempt of the Ethereum and the Litecoin to break away from the leader and break through up at the beginning of the week, was unsuccessful, as expected. As a result, they returned to the initial levels: the Ethereum to around $600 per coin, and the Litecoin to $118.

As for the forecast for the coming week, summarizing the opinions of a number of analysts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:

EUR/USD. President Donald Trump's opponents must be very upset - to their great disappointment, his economic policy brings positive results: the number of jobs in the US in 2018 grew by more than a million, the inflation reached the Federal Reserve's target of 2%, the trade deficit is declining, and the gross domestic product is growing. All this leads to the dollar strengthening, which plays against American importers, and it also leads to the discontent among the financial elites of many countries whose currencies have now reached the historic lows.

As a result, the overwhelming majority of experts (65%), supported by graphical analysis on H4 and D1 and 70% of oscillators, believe that the correction which started last week, will continue, but the pair's growth will be limited by the resistance in the zone of 1.2000. (In case of a breakdown when the pair fixes above, the next target is 100 points higher).

As for the supports, the main ones are located at the levels of 1.1650 and 1.1570;

As for the pair GBP/USD, the correction to the level of 1.3615 is expected to continue by 65% of analysts. The next resistance is at the height of 1.3700, however, only 45% of experts vote for such growth. Graphical analysis on D1 also believes that the correction will be completed in the zone 1.3615, after which the pound sterling will continue its decline. The support levels are 1.3200, 1.3125 and 1.3040;

But as for the Japanese yen, according to the readings of graphical analysis, on the contrary, it should strengthen its position. As a result, the pair USD/JPY may fall to the level of 108.00. However, only 40% of experts agreed with this scenario, 50% supported the growth of the pair, and another 10% are for the sideways trend. The oscillators do not have obvious signals either - on H4,most of them side with the bears, and on D1 the advantage is smoothly passed to the bulls. Resistances are at horizons 110.25 and 111.40;

As for the main cryptocurrencies, their extremely low volatility does not allow us to speak of any stable trends emerging. And we are talking not only about the short-term forecast, but also about the forecast up to the end of this year. Thus, many analysts predict a gradual drying up of this market and a decrease in its capitalization. In this regard, the most likely target for the bitcoin for December 2018. is named as12,500 instead of previously announced 15,000.

On his way to Singapore, after leaving the G7 summit early, Trump ordered his rep NOT to endorse the G7 communique because Canadian Prime Minister Justin Trudeau said something in the press conference. Reuters quoted an unnamed European official saying that “we stick to the communique as agreed by all participants."

Trudeau talked about the retaliation measures on US steel and aluminum tariffs and emphasized that “Canadians, we’re polite, we’re reasonable but we also will not be pushed around.”

So, was the communique "agreed by all participants" before it's released? So Trump made and about turn and deny what he and others agreed to, just because one member said something he doesn't like? Why didn't he bring that out face-to-face to others during the meetings?

Reacting to Trump’s tweets, Trudeau’s office said: “We are focused on everything we accomplished here at the summit. The Prime Minister said nothing he hasn’t said before - both in public, and in private conversations with the President.”

This is Trump's tweet.

https://twitter.com/realDonaldTrump/status/1005586152076689408

https://twitter.com/realDonaldTrump/status/1005586562959093760

And one more question. Are the steel and aluminum tariffs, and the possible automobile tariffs, based on "national security"? Or are the "in response" to Canada's tariffs on dairy?

Confusions usually mean there is dishonesty!