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GBP/USD is decreasing after reaching 1.3399, approaching 1.3295. The pair is trading at endNovember 2017 range. The short-term bearish trend started in mid-April 2018 is maintained. Key support and resistance are given at 1.3062 (13/11/2017 low) and 1.3613 (03/01/2018 low). The technical structure suggests short-term downward moves.

The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline but the pair is moving to 2016 highs. Long-term support and resistance are given at 1.1841 (07/10/2017 low) and 1.5018 (24/06/2016 high).

EUR/USD strong bounce from 1.1510 (29/05/2018 low) stops, the pair is currently trading along 16.85, approaching 16.75. EUR/ USD is trading at end-July 2017 range. The short-term trend remains negative as long as prices remain below hourly resistance at 1.1993 (14/05/2018 high). Hourly support is given at 1.1510 (29/05/2018 low).

In the longer term, the momentum is turning largely negative. We favor a continued bearish bias. Key resistance is holding at 1.2886 (15/10/2014 high) while strong support lies at 1.0341 (03/01/2017 low).

Daily Pivots: (S1) 145.72; (P) 146.31; (R1) 146.78; More...

No change in GBP/JPY's outlook. We'd expect strong resistance from 147.04 support turned resistance to complete the corrective rebound from 143.18. On the downside, below 144.52 minor support will bring retest of 143.18 first. Break will resume the decline from 153.84.

In the bigger picture, for now, we're treating price actions from 156.59 as a corrective move. Therefore, while deeper fall is expected, strong support should be seen above 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) to contain downside and bring rebound. There is still prospect of extending the rise from 122.36. However, considering that GBP/JPY failed to sustain above 55 month EMA (now at 153.94), firm break of 139.29 will confirm trend reversal and turn outlook bearish.

The US dollar continues to advance against the Japanese yen currency, with price fast-approaching the 110.00 resistance level as risk-on trading sentiment returns to broader financial markets. The USDJPY pair has also received a boost from a renewed bid-tone in the greenback, with the US dollar index moving back above the key 94.00 level. USDJPY traders will likely find intraday direction from equity and bond markets and the US dollar index.

The USDJPY pair is strongly bullish while trading above the 110.00 level, further upside towards 110.40 and 111.00 remains possible.

If we see technical failure around 110.00 level, USDJPY sellers may test towards the 109.40 and 109.00 support levels.

The British pound has moved sharply lower against the US dollar, after meeting strong technical selling from just before the key 1.3400 resistance level on Monday. The GBPUSD pair currently trades close to the 1.3300 level, with downside pressures likely to build if sellers breach the 1.3300 level. Traders now look towards the release of PMI Services data from the United Kingdom economy, and the resumption of Brexit talks between the UK and the EU.

The GBPUSD pair is intraday bearish while trading below the 1.3340 level, key support is now located at the 1.3300 and 1.3258 levels.

If the GBPUSD pair moves above 1.3340 level, we may see buyers once again testing towards the 1.3400 resistance level.

Reports on manufacturing and services will dominate the headlines on Tuesday, giving investors the latest glimpse of the Eurozone and US economies. These indicators will be released through a monthly survey called the purchasing managers' index (PMI), which provides a general overview of the economy through the eyes of domestic firms.

Europe will see a deluge of final PMI data for May beginning at 07:15 GMT and ending at 08:30 GMT. Results are expected for Spain, Italy, France, Germany, the Eurozone and United Kingdom.

Germany's final PMI Composite, which tracks output at manufacturing and services companies, is expected to come in at 53.1. The Eurozone's final Composite PMI is projected to read 53.9. Meanwhile, the UK's services scale is expected to read 53.0.

In all the above cases, a reading above 50 signifies expansion in economic activity.

At 09:00 GMT, the European Commission's statistical agency will report on April retail sales. Receipts are retail stores are forecast to climb 0.5% month-on-month, compared with 0.1% for March. In annualized terms, sales likely rose 1.7%.

In terms of monetary policy, the Bank of England's Sir Jon Cunliffe will deliver a speech at 10:00 GMT.

Shifting gears to North America, the Institute for Supply Management (ISM) will report non-manufacturing PMI at 14:00 GMT. The services indicator is expected to rise to 57.5 for May compared with 56.8 the month before.

Markit will also release a separate US services PMI report, which will be accompanied by the Composite reading for May. However, for investors, the ISM report is more closely monitored by the financial markets.

EUR/USD

Europe's common currency is in recovery mode, with prices approaching the 1.1700 US handle. EUR/USD briefly surpassed that level on Monday, having rebounded roughly 200 pips from last week's swing low. The pair is currently trading just below that key level as demand for the dollar ebbs. However, the technical picture remains bearish, which means the bulls should be concerned with a pullback in the coming week.

GBP/USD

Cable's recovery was cut short on Monday as Brexit came under the spotlight once again. GBP/USD reached a high of 1.3385 but has since fallen back down to the low 1.3300 range. Immediate support is located at 1.3290. On the opposite side of the ledger, the first wave of resistance is likely found at 1.3375.

USD/JPY

The Japanese yen is down to start the week, as risk appetite continues to fuel the equity markets. USD/JPY is once again approaching the psychologically important 110.00 handle. On Monday, the uptrend was halted around 109.92. The pair is now eyeing the 110.10 resistance level. A clean break above would likely send the pair to a re-test of the 110.40 region.

• Rates: US 10-yr yield retakes 2.92% resistance
  US stock markets extended their rally, pulling core bonds lower during US dealings. The US 10-yr yield regained 2.92% resistance, suggesting a return towards 3% and more going into next week’s FOMC meeting. Today’s US non-manufacturing ISM is expected to confirm the improvement in US eco data in Q2.
• Currencies: Euro short-squeeze slows
  The euro initially regained further ground yesterday as the ‘post-Italy’ short squeeze continued. However the dollar restored the balance later in the session. Today’s eco data might be marginally USD supportive. We expect the US dollar to remain rather well protected going into next week’s Fed meeting.

The Sunrise Headlines

• In the US, the markets continued their positive trend, with the Nasdaq Composite (+0,7%) ending at a record closing high. Asian stock markets opened mixed with China slightly outperforming the rest.
• Theresa May has abandoned her intentions to present European leaders with a blueprint of the Brexit at the EU-UK summit later this month. This new delay for presenting a detailed plan is again confirming UK’s discord on Brexit.
• Italy’s new populist government has criticized the ECB for scaling back its proportion of Italian sovereign bonds it bought last month. The ECB insists that the reduced Italian share was not influenced by the political turmoil last month.
• Investment banks raised their forecasts for oil prices for the 8th month in a row with concerns of geopolitical risks in Iran and Venezuela escalating. Brent is now expected to average over $70 a barrel this year.
• Japanese household spending unexpectedly decreased in April (-1,3% Y/Y) which increases the possibility of a recession if domestic demand indicators don’t improve before end of June. Chinese PMI’s were stable, as expected.
• Spain’s forced out Popular party threatened to use its majority in the Senate to disrupt the new government’s budget. The PP initially supported the budget but says that their priorities have changed.
• On today’s economic calendar the ISM Non-Manf Composite (May) is released in the US, the Market/CIPS UK Services PMI (May) in the UK and Retail Sales MoM/YoY in Europe.

Currencies: Euro Short-Squeeze Slows

EUR/USD short-squeeze eases

Yesterday, a further easing in intra-EMU spreads supported the squeeze of euro shorts set up during the Italian crisis. Friday’s payrolls supported expecations on three additional Fed rate hikes, but initially it didn’t help the dollar. EUR/USD filled offers near 1.1745. Later, EUR/USD reversed part of the earlier gains and closed the session at 1.1699 (from 1.1659). The gain of USD/JPY was initially negligible, but an overall better bid for the dollar and good US equity gains pushed the pair to close the day at 109.82 (from 109.54). Even so, geopolitical unceainty remains a potential negative for this cross rate.

Asian equities are trading mixed. The risk rally (easing tenions on Italy, good payrolls) slows. The trade-weighted USD stabilizes. EUR/USD fell back below 1.17. The Reserve Bank of Austrlia left its policy unchanged (1.50%). Any tightening is some time away and will be very gradual. The Aussie dollar rebounded over the previous days, but the neutral RBA assessment provides little imputs for an acceleration of the AUD rally.

Today, the eco calendar contains EMU retail sales and the final services PMI. In the US the non-Manufacturing ISM will be published. Of late US, survey evidence remained strong and this might still be the case for the non-Man ISM. European data were less buoyant, but the negative news should be discounted. We expect today’s data to be neutral, maybe slightly USD supportive. Headlines on global trade remain a wildcard. Last week, EUR/USD bottomed as tensions on Italy eased. We have the impression that the positive euro repositioning is slowing. A flaring up in trade tensions might weigh a bit more on the euro than on the dollar. At the same time, Friday’s strong US data should prevent a big USD setback ahead of next week’s Fed meeting. EUR/USD rebounded off the 1.1510 area, but didn’t regain any important level. We’re not convinced of a lasting euro rebound yet. 1.1830 is the first resistance ahead of the 1.1996/1.20 area which we consider not easy to break.

Yesterday, sterling reversed most of Friday’s gains against the euro. Yesterday evening, BoE’s Silvana Tenreyro indicated that the BoE could delay a rate hike and hit the inflation target over time. Overnight, there are also headlines that the UK won’t present a Brexit plan before the June EU summit. THe May services PMI is expected marginally stronger at 53.0. If so, the report won’t support be a big help for sterling. We don’t see a strong case for further sustained sterling gains. Sideways trading in the 0.87/0.88 area might be on the cards.

EUR/USD: post-Italy euro short-squeeze slows

Daily Pivots: (S1) 127.80; (P) 128.24; (R1) 128.89; More....

No change in EUR/JPY's outlook. We'd continue to expect strong resistance from 128.94 support turned resistance to limit upside to complete the rebound from 124.61. Break of 126.29 minor support will bring retest of 124.61 first. Break will resume whole fall from 137.49 and target next medium term fibonacci level at 119.90.

In the bigger picture, the case of medium term trend reversal continues to build up. That is rise from 109.03 (2016 low) could have completed at 137.49 already. This is supported by bearish divergence in daily MACD and firm break of the medium term channel support. Focus is now on 124.08 resistance turned support. Decisive break there will confirm this bearish case and target 61.8% retracement of 109.03 to 137.49 at 119.90 and below. This will be the preferred case as long as 128.94 support turned resistance holds.

Daily Pivots: (S1) 0.8750; (P) 0.8769; (R1) 0.8806; More...

Intraday bias in EUR/GBP remains neutral at this point. On the upside, above 0.8808 will target 0.8844 first. Firm break there will finally confirm our bullish view and resume the rebound from 0.8620 to 0.8967 cluster resistance (50% retracement of 0.9305 to 0.8620 at 0.8963). On the downside, however, break of 0.8679 minor support should indicate completion of the rebound form 0.8620. And intraday bias will be turned back to the downside for this support.

In the bigger picture, for now, the decline from 0.9305 is seen as a leg inside the long term consolidation pattern from 0.9304 (2016 high). Such consolidation pattern could extend further. Hence, in case of strong rally, we'd be cautious on strong resistance by 0.9304/5 to limit upside. Meanwhile, in another decline attempt, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Daily Pivots: (S1) 1.5233; (P) 1.5335; (R1) 1.5396; More....

Intraday bias in EUR/AUD remains on the downside. Current decline from 1.6189 is in progress for 1.5153 key support level. On the upside, break of 1.5529 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rally from 1.3624 (2017 low) should have completed at 1.6189 already, ahead of 1.6587 key resistance (2015 high). 1.6189 is seen as a medium term top. Deeper fall would be seen to 38.2% retracement of 1.3624 to 1.6189 at 1.5209 first. Decisive break there will pave the way to 61.8% retracement at 1.4604. In that case, we'll look for bottoming again below 1.4604. On the upside, firm break of 1.5773 support turned resistance is needed to indicate completion of the fall from 1.6189. Otherwise, further decline is expected in medium term, even in case of strong rebound.