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For the 24 hours to 23:00 GMT, Gold rose 0.9% against the USD and closed at USD1309.90 per ounce, as the US President, Donald Trump’s move to cancel a meeting with North Korea, renewed geopolitical tensions and increased demand for the precious yellow metal.

In the Asian session, at GMT0300, the pair is trading at 1307.00, with gold trading 0.22% lower against the USD from yesterday’s close.

The pair is expected to find support at 1299.00, and a fall through could take it to the next support level of 1291.00. The pair is expected to find its first resistance at 1313.40, and a rise through could take it to the next resistance level of 1319.80.

The yellow metal 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, Silver rose 1.37% against the USD and closed at USD16.70 per ounce, tracking gains in gold prices.

In the Asian session, at GMT0300, the pair is trading at 16.64, with silver trading 0.36% lower against the USD from yesterday’s close.

The pair is expected to find support at 16.47, and a fall through could take it to the next support level of 16.30. The pair is expected to find its first resistance at 16.76, and a rise through could take it to the next resistance level of 16.89.

The white metal 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, Crude Oil declined 1.53% against the USD and closed at USD70.76 per barrel, after Russia signalled at a gradual increase in crude production and the Organisation of the Petroleum Exporting Countries (OPEC) stated that an increase on crude output will be discussed in the June OPEC meeting.

In the Asian session, at GMT0300, the pair is trading at 70.59, with oil trading 0.24% lower against the USD from yesterday’s close.

The pair is expected to find support at 70.16, and a fall through could take it to the next support level of 69.73. The pair is expected to find its first resistance at 71.38, and a rise through could take it to the next resistance level of 72.17.

Crude oil is trading below its 20 Hr and 50 Hr moving averages.

STOCKS

Bears reared their heads again yesterday and might try to assert themselves further today.

Trump's nixing of the Singapore summit with North Korea yesterday is credited with pushing the Dow (24811.76, -0.30%) down a bit. As mentioned yesterday, the Dow needs to breaks its immediate range of 24600-25100 to pick up a direction.

The DAX (12855.09, -0.94%) had already seen a further fall yesterday before the US came on. A day-close below 12800 today, if seen, will confirm the break of uptrend since 11710 (March '18). A rise past 13100 is now needed to negate the bearishness.

Asian indices are trading indecisive today, within the decline that started a few days ago. The Nikkei (22443, 0.03%) just about trades in the green while the Shanghai (3152, -0.09%) looks like it could break below 3150. Both look like they can dip to 21900 and 3125-00 respectively.

Although the Nifty (10513.85, +83.50, +0.80%) recovered a decent part of yesterday's losses, it needs to rise past 10600-700 if it wants to be seen as bullish. At the same time, it needs to break below 10400 to increase near-term bearishness. The Sensex (34663) too might come down if it is unable to build on yesterday's bounce and rise past 34750.

COMMODITIES

Commodities are trading at interesting levels, and look like they are waiting for a stimulus from somewhere to become volatile soon.

Brent (78.67) is falling towards 78, as suggested yesterday. May test 77 also, but decent Support is seen there. News that Russia is talking of hiking output is credited with the dip. Importantly, the WTI (70.60) has dipped below trendline at 71 and may test crucial Support at 70 soon. Need to see if that is as strong a Support as 77 might be on Brent.

Gold (1302.14) trades higherin line with our expectation of a small rally to 1310. Need to see price action at 1310. If it holds, there might be chances of a break below 1290-1280 in the medium term.

Copper (3.0905) continues to trade sideways between 3.05-15, as suggested. Which way the current sideways range will break is unclear.

Silver (16.63) trading sideways. If you are looking for stability, this is the place to be.

FOREX

Dollar index (93.921), as per our expectation, tested support near 93.6 on daily candles yesterday but did not dip further towards 93.3. While above 93.7, it should again test 94. The next 2 sessions could see it move up towards 94.2-94.4, after which there could be another dip towards 94. The upside might be capped by 95.00-95.65.

Euro (1.1710), exactly as we expected, rose to a high near 1.175 yesterday and has again dipped from there. It could now dip further towards 1.165 in the next couple of sessions, followed by some retracement back towards 1.17. As we have been saying, the Euro should test 1.155-1.145 as the Dollar Index tests 95.00-95.65.

Dollar Yen (109.57) had broken support on daily candles near 110.5 on Wednesday and tested a low near 108.9 yesterday. We had written that there might be some horizontal support near 109 and that seems to have produced a bounce. Dollar Yen might again be pushed down from levels near 110.5. However, if it goes above that level, then it could test resistance on weekly candles near 111.5-112.0 in the next week. We expect Dollar Yen to turn bearish over the medium term in the weeks to come.

Euro Yen (128.29): After breaking support near 129.5 on Wednesday, Euro Yen tested lows near 127.7 yesterday as the Dollar Yen tested 108.9. However, earlier mentioned support near 128 on weekly line chart for Euro Yen might just hold well for the time being. In the weeks ahead, the possibility for Euro Yen to turn bearish towards 126 are increasing as the Dollar Yen is expected to turn bearish soon (while the Euro continues its downmove as well).

Pound (1.337): Pound seems to be forming another downward channel on daily candles and could dip towards support in the channel near 1.3275-1.3250 next week. The current downside target for the next couple of weeks is horizontal support
near 1.31 on 3 day candles.

Dollar Rupee (68.3475) : Trend remains bullish, with Supports at 68.30, 68.15 and 68.07.

INTEREST RATES

Against our expectation, US yields had dipped yesterday after the Fed minutes were perceived as dovish. The question now is whether the June rate hike has already been factored in by traders. If that is so, we might not see as quick a rise towards 3.2% for the 10 Year yield as we had been expecting.

US 10 Yr Yield (2.99%), 30 Yr (3.14%), 5 Yr (2.83%), 2 Yr (2.52%):

The 10 year, 5 year and 30 year yields are still continuing to stay near respective supports on short term and medium term charts..

Yesterday we said that we expect this to be a temporary dip only and that there could be a rise from these supports in the sessions ahead. We still maintain this view - however, there might be some scope for the 10 year to dip more towards 2.9% in case the support near 2.98% is broken decisively.

Philadelphia Fed President Patrick Harker said if inflation start to "accelerate" then he's "open to a fourth increase" in interest rate this year. But he emphasized that "I'd have to see evidence of that first". And he noted that it's not so much as a number around 2% but it's acceleration or deceleration. He added that "if we're creeping up to 2 percent and we creep up to, say, 2.25 percent, that's a different story than [if] we're accelerating past 2 percent. "

Harker sees neutral rate as between 2.75% and 3.0%. And asked if Fed would end the current tightening cycle in 2019, he said "could be, yeah, it's possible".

Dallas Fed President Robert Kaplan said he's "not prepared" for interest rates to "go above neutral". And, he estimated that netural rate is between 2.50% and 2.75%. And that is, after four 25bps hike from the current 1.50-1.75%, fed fund rate will hit the neutral level.

For inflation he said "I want to run around 2, and if we got a little bit above it and I thought it would be short term and not long term, I could tolerate it." On the other hand, "if I thought it would persist I think it would affect my policy views."

German Chancellor Angela Merkel was welcomed by Chinese President Xi Jinping in Beijing yesterday. Xi hailed her effort in the bilateral ties since the two countries launched an all dimensional strategic partnership in 2014. Xi urged that China and Germany should set an example of "win-win cooperation". And, "this should be the direction that bilateral ties will move to in the next stage."

In addition, Xi said the Chinese "welcome Germany to grasp opportunities arising from China's new round of reform and opening up." And, there should be expanded industrial and market cooperation. Xi added that "we would like to promote global governance and multilateralism together with Germany within the multilateral frameworks."

North Korean Vice Foreign Minister Kim Kye Gwan responded to Trump's cancellation of the June 12 summit in Singapore in a statement carried by state media.

"We have inwardly highly appreciated President Trump for having made the bold decision, which any other U.S. presidents dared not, and made efforts for such a crucial event as the summit."

"We even inwardly hoped that what is called 'Trump formula' would help clear both sides of their worries and comply with the requirements of our side and would be a wise way of substantial effect for settling the issue."

"His sudden and unilateral announcement to cancel the summit is something unexpected to us and we can not but feel great regret for it." And, North Korea remained open to dialogue with the US "regardless of ways at any time".

"The first meeting would not solve all, but solving even one at a time in a phased way would make the relations get better rather than making them get worse. The U.S. should ponder over it."

Key Highlights

• The US Dollar started a downside correction from 111.37 and declined below 110.00 against the Japanese Yen.
• There was a break below a key bullish trend line with support at 110.05 on the 4-hours chart of USD/JPY.
• The US Initial Jobless Claims for the week ending May 19, 2018 rose from the last revised reading of 223K to 234K.
• Today in the US, the Durable Goods Orders figure for April 2018 will be released, which is forecasted to decline 1.4%.

USDJPY Technical Analysis

The US Dollar started a downside move after topping around the 111.35 level against the Japanese Yen. It seems like the USD/JPY pair has started a major correction and it could extend declines below 110.00.

Looking at the 4-hours chart, the pair declined from 111.37 and moved below the 50% Fib retracement level of the last wave from the 108.64 low to 111.37 high. More importantly, there was a break below a key bullish trend line with support at 110.05 on the 4-hours chart.

The pair also broke the 100 simple moving average (red, 4-hour) and 109.80. It almost tested the 76.4% Fib retracement level of the last wave from the 108.64 low to 111.37 high.

The current price action suggests that the pair broke a key support near 110.00, which may now act as a resistance. If the pair moves back above 110.00, it will most likely resume its uptrend. On the downside, a break below 109.30 and 109.20 could push the pair towards 108.80.

Recently in the UK, the Initial Jobless Claims for the week ending May 19, 2018 was released by the US Department of Labor. The market was looking for a decline in claims from 222K to 220K.

However, the result was disappointing as there was a rise in claims to 234K. Moreover, the last reading was revised up to 223K. The report added:

The previous week’s level was revised up by 1,000 from 222,000 to 223,000. The 4-week moving average was 219,750, an increase of 6,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 213,250 to 213,500.

Overall, the 110.00 level holds a lot of importance for USD/JPY in the near term. A daily close above 110.00 may perhaps push the pair towards 111.00.

Economic Releases to Watch Today

• German IFO Business Climate Index for May 2018 – Forecast 102.0, versus 102.1 previous.
• UK GDP for Q1 2018 (Preliminary) – Forecast +0.1% (QoQ) versus +0.1% previous.
• US Durable Goods Orders for April 2018 – Forecast -1.4% versus +2.6% previous.

AUDUSD - With the pair reversing its losses on Thursday more strength is envisaged. On the downside, support resides at the 0.7550 level where a breach will aim at the 0.7500 level. Below that level will set the stage for a run at the 0.7450 level with a cut through here targeting further downside pressure towards the 0.7400 level. On the upside, resistance lies at the 0.7600 level. A cut through here will turn attention to the 0.7650 level and then the 0.7700 level where a violation will set the stage for a retarget of the 0.7500 level. On the whole, AUDUSD faces further recovery threats.