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Daily Pivots: (S1) 108.85; (P) 109.10; (R1) 109.38; More...

Intraday bias in USD/JPY remains neutral for the moment. Consolidation from 110.02 short could extend with another decline. But in that case, we'd expect strong support from 38.2% retracement of 104.62 to 110.02 at 107.95 to contain downside and bring rebound. Meanwhile, on the upside, break of 110.02 will resume the rise from 104.62 to 61.8% retracement of 114.73 to 104.62 at 110.86 next.

In the bigger picture, corrective decline from 118.65 (2016 high) has completed with three waves down to 104.62. Rise from 104.62 is possibly resuming the up trend from 98.97 (2016 low). This will be the preferred case as long as 55 day EMA (now at 107.95) holds. Decisive break of 114.73 resistance will confirm our view and target 118.65 and above. However, sustained break of 55 day EMA will dampen this bullish view and turn focus back to 104.62 low instead.

Daily Pivots: (S1) 1.1816; (P) 1.1857 (R1) 1.1891; More....

No change in EUR/USD's outlook. Despite diminishing downside momentum, intraday bias stays on the downside with 1.1938 minor resistance intact. Current should extend to 261.8% projection of 1.2475 to 1.2214 from 1.2413 at 1.1730. As it will then be close to 1.1708 medium term fibonacci level, some support could be seen around 1.1708/30 to bring rebound. Meanwhile, break of 1.1938 should confirm short term bottoming, on bullish convergence condition in 4 hour MACD. And stronger rebound would be seen first.

In the bigger picture, current decline and firm break of 1.2154 support confirms rejection by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. A medium term top should be in place at 1.2555 and deeper decline would be seen back to 38.2% retracement of 1.0339 to 1.2555 at 1.1708 first. With current downside acceleration, there is prospect of hitting 61.8% retracement at 1.1186 before completing the decline. But still, we'll need to look at the structure before deciding if it's a corrective or impulsive move.

Daily Pivots: (S1) 1.3494; (P) 1.3550; (R1) 1.3602; More...

GBP/USD is staying in tight range above 1.3485 temporary low. And intraday bias stays neutral for more consolidations. Stronger recovery could be seen to 4 hour MACD (now at 1.3655) and above. But upside is expected to be limited by 38.2% retracement of 1.4376 to 1.3485 at 1.3825 to bring fall resumption. Break of 1.3485 will resume the fall from 1.4376. Further break of 1.3448 fibonacci level will target 1.2874 and below.

In the bigger picture, current development suggests that whole medium term rebound from 1.1936 (2016 low) has completed at 1.4376 already, with trend line broken, on bearish divergence condition in daily MACD, after rejection from 55 month EMA (now at 1.4223). Deeper decline should be seen to 38.2% retracement of 1.1936 (2016 low) to 1.4376 at 1.3448 first. Break will target 61.8% retracement at 1.2874 and below. Outlook will stay bearish as long as 55 day EMA (now at 1.3925) holds, even in case of strong rebound.

Dollar, Sterling and Canadian Dollar remain the strongest three for the week. But is should be noted that the reasons behind the strength are different. The greenback continued to draw support from strength in treasury yields as 10 year yield broke 3% yesterday to 3.004. Fed is also on course for two more rate hikes this year. Yesterday's shallow retreat, except versus Canadian Dollar, was merely profit-taking after the stretched bull run. The greenback's rally could extend if US CPI delivers an upside surprise today.

Meanwhile, Canadian Dollar is boosted by the rally in oil price. WTI crude oil surged to as highest since 2014 after Trump pulled the US out of the Iran deal. It's rally is still in progress in Asian session and hit as high as 71.75. WTI is on course for next long term fibonacci level of 61.8% retracement of 107.68 to 26.05 at 76.50. In addition, BoC remains on tightening path. According to BoC Deputy Governor Timothy Lane's comment earlier this week, it's on hold only because policy makers want to see how past rate hikes are impacting households. And, BoC is awaiting NAFTA uncertainty to be cleared.

However, Sterling remains technically in down trend, except versus Euro and possibly Swiss Franc. The Pound is merely recovering this week from prior losses. It has been hit by a string of weaker than expected data since mid-April. And, the chance of a BoE rate hike today vanished. Traders are just cautious as there is no clue on how dovish BoE could be. The outlook will be reflected clearly with today's quarterly Inflation report. The Pound could have a violent move after the release.

Technically, despite loss off momentum, Dollar is staying in recent bullish move against Euro and Swiss Franc. As long as 1.1938 in EUR/USD and 0.9982 in USD/CHF hold, we'd expect Dollar's rise to continue against the two. GBP/USD is staying near term bearish too, but will need a break of 1.3485 temporary low to confirm decline resumption. USD/JPY failed to take out 110.02 resistance yet despite yesterday's rebound, and therefore, it's still in consolidation. USD/CAD is holding on to 1.2802 support, and thus, it's still maintaining near term bullishness.

BoE to deliver a "hawkish hold" or a "dovish hold"?

BoE is almost certain to keep the Bank rate unchanged at 0.50% today. Weakness in PMI data released last week aggravated concerns that recent the moderation in economic activities might persist. Doubts have arisen that whether the slowdown in 1Q18 is only driven by transitory factors or by some underlying reasons. The majority of the market expects a so called "hawkish hold". That is, MPC members voting 7-2 to leave rate at 0.50%. And, BoE would keep the rhetoric that "an ongoing tightening of monetary policy over the forecast period would be appropriate".

However, we actually believe it is possible for the central bank to turn more dovish. In the quarterly Inflation Report, there could be downward revision in GDP growth and inflation forecasts. Moreover, the known hawks Ian McCafferty and Michael Saunders could change their mind and refrain from voting for rate hike. The market has now priced in only 50/50 chance of an August hike. Indeed, the possibility of an unchanged monetary policy throughout the year has increased.

More in BoE Could be More Dovish than "Hawkish Hold"

Other suggested readings on BoE:

• BoE – Will They Or Won't They?
• Pound Finds Much Needed Support ahead of BOE
• Sterling Bulls Hoping For Hawkish Hold By BoE After Rate Hike U-Turn
• GBP/USD at critical juncture ahead of Bank of England

RBNZ downgraded both GDP growth and inflation forecasts

The overall RBNZ monetary policy decision is rather dovish. OCR is left unchanged at 1.75% for a 19th straight month as widely expected. Governor Adrian Orr noted in the statement that growth and employment remain "robust" and near their "sustainable levels". But CPI remains below the 2% mid-point of target. And, the best way to see inflation moving back to target would be "to keep the OCR [overnight cash rate] at this expansionary level for a considerable period of time". RBNZ is clearly is no rush to raise interest rates.

Adding to that, the GDP growth and inflation forecasts were also downgraded for the period ahead. The downgrade in GDP forecasts were quite significant in 2019 and 2020. CPI is still projected to hit 2.0% target 2021 but is expected to be lower in both 2019 and 2029.

GDP is projected to grow 2.8% (2018), 3.1% (2019), 3.3% (2020), 3.1% (2021). Back in February, GDP projections were 2.9% (2018), 3.3% (2019), 3.5% (2020), 3.1% (2021).

CPI is projected to be at 1.1% (2018, 1.6% (2019), 1.8% (2020), 2.0% (2021). Back in February, CPI projections were 1.1% (2018), 1.7% (2019), 1.8% (2020), 2.0% (2021).

More in RBNZ Turns Dovish, Downgrading Growth and CPI Forecasts

BoJ Kuroda: Inflation expectations may not rise smoothly if there is strong uncertainty

BoJ Governor Haruhiko Kuroda said today that the central could debate stimulus exit if policy makers see increasing chance of hitting the 2% inflation target. He noted that "when the possibility of achieving our price target heightens, conditions of an exit would fall into place. The BOJ's policy board could then discuss conditions for an exit."

However, he emphasized that "With achievement of our price target still distant, it will create market confusion if we explain specific means and timing of an exit (from the easy policy) now." Also, he warned that "if there is strong uncertainty about future growth, firms will hesitate to raise wages." He added that "even if firms' wage- and price-setting stance becomes more proactive, inflation expectations may not rise smoothly."

On the data front

UK RICS house price balance dropped to -8 in April. Japan current account surplus widened to JPY 1.77T in March. China CPI slowed to 1.8% yoy in April, PPI rose to 3.4% Yoy. ECB will release monthly bulletin today. In addition to BoE rate decision, UK will release trade balance and productions. US will release CPI, and jobless claims. Canada will release new housing price index.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3494; (P) 1.3550; (R1) 1.3602; More...

GBP/USD is staying in tight range above 1.3485 temporary low. And intraday bias stays neutral for more consolidations. Stronger recovery could be seen to 4 hour MACD (now at 1.3655) and above. But upside is expected to be limited by 38.2% retracement of 1.4376 to 1.3485 at 1.3825 to bring fall resumption. Break of 1.3485 will resume the fall from 1.4376. Further break of 1.3448 fibonacci level will target 1.2874 and below.

In the bigger picture, current development suggests that whole medium term rebound from 1.1936 (2016 low) has completed at 1.4376 already, with trend line broken, on bearish divergence condition in daily MACD, after rejection from 55 month EMA (now at 1.4223). Deeper decline should be seen to 38.2% retracement of 1.1936 (2016 low) to 1.4376 at 1.3448 first. Break will target 61.8% retracement at 1.2874 and below. Outlook will stay bearish as long as 55 day EMA (now at 1.3925) holds, even in case of strong rebound.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD rose 0.16% against the USD and closed at 0.7461.

LME Copper prices rose 0.95% or $64.0/MT to $6786.0/MT. Aluminium prices declined 3.73% or $89.0/MT to $2295.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7468, with the AUD trading 0.09% higher against the USD from yesterday’s close.

Earlier today, in China, Australia’s largest trading partner, the consumer price index (CPI) rose 1.8% on an annual basis in April, undershooting market expectations for an advance of 1.9%. In the previous month, the CPI had recorded a rise of 2.1%. Furthermore, the nation’s producer price index (PPI) grew 3.4% on an annual basis in April, at par with market expectations. The PPI had registered a rise of 3.1% in the prior month.

The pair is expected to find support at 0.7428, and a fall through could take it to the next support level of 0.7387. The pair is expected to find its first resistance at 0.7493, and a rise through could take it to the next resistance level of 0.7517.

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

For the 24 hours to 23:00 GMT, the EUR declined 0.08% against the USD and closed at 1.1852.

In economic news, industrial production in France unexpectedly retreated 0.4% on a monthly basis in March, defying market expectations for a rise of 0.4%. In the previous month, industrial production had recorded a revised increase of 1.1%. On the other hand, the nation’s manufacturing production rebounded 0.1% on a monthly basis in March, falling short of market consensus for a gain of 0.9%. In the previous month, manufacturing production had registered a revised drop of 0.5%.

In the US, producer price index (PPI) climbed less-than-anticipated by 0.1% on a monthly basis in April, soothing fears of a strong acceleration in the nation’s inflation. The PPI had recorded an advance of 0.3% in the prior month, while markets were expecting for a rise of 0.2%. Meanwhile, the nation’s MBA mortgage applications eased 0.4% in the week ended 04 May, following a drop of 2.5% in the prior week.

In the Asian session, at GMT0300, the pair is trading at 1.1863, with the EUR trading 0.09% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1825, and a fall through could take it to the next support level of 1.1787. The pair is expected to find its first resistance at 1.1899, and a rise through could take it to the next resistance level of 1.1935.

Going ahead, market participants would look forward to the European Central Bank’s (ECB) economic bulletin report, set to release in a few hours. Additionally, the US consumer price index and monthly budget statement, both for April as well as initial jobless claims data, slated to release later today, will keep investors on their toes.

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

For the 24 hours to 23:00 GMT, the GBP slightly rose against the USD and closed at 1.3548.

In the Asian session, at GMT0300, the pair is trading at 1.3560, with the GBP trading 0.09% higher against the USD from yesterday's close.

Overnight data indicated that UK's RICS house price balance fell more-than-expected to a level of 8.0 in April, compared to market expectations for a fall to a level of 1.0. In the prior month, house price balance had recorded a flat reading.

The pair is expected to find support at 1.3504, and a fall through could take it to the next support level of 1.3447. The pair is expected to find its first resistance at 1.3612, and a rise through could take it to the next resistance level of 1.3663.

Trading trend in the Pound today is expected to be determined by the release of the Bank of England's (BoE) monetary policy decision, due later in the day. Additionally, the release of UK's industrial as well as manufacturing production data coupled with trade balance numbers, all for March, will attract 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 USD rose 0.61% against the JPY and closed at 109.75.

On the data front, Japan's flash leading economic index declined more-than-expected to a level of 105.0 in March, compared market expectations for a fall to a level of 105.1. In the previous month, the index had recorded a level of 106.0. Furthermore, the nation's preliminary coincident index climbed to a level of 116.4 in March, meeting market expectations. In the prior month, the index had registered a reading of 116.1.

In the Asian session, at GMT0300, the pair is trading at 109.72, with the USD trading slightly lower against the USD from yesterday's close.

Overnight data revealed that Japan's trade surplus (BOP basis) widened more-than-anticipated to ¥1190.7 billion in March, following a surplus of ¥188.7 billion in the previous month, while markets were anticipating the country's trade surplus to widen to ¥1023.1 billion.

Separately, the Bank of Japan's (BoJ) summary of opinions report showed that officials stressed the need to maintain powerful monetary easing and strengthen its commitment to reach the 2.0% inflation goal.

The pair is expected to find support at 109.47, and a fall through could take it to the next support level of 109.21. The pair is expected to find its first resistance at 109.95, and a rise through could take it to the next resistance level of 110.17.

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 rose 0.33% against the CHF and closed at 1.0051.

In the Asian session, at GMT0300, the pair is trading at 1.0043, with the USD trading 0.08% lower against the CHF from yesterday’s close.

The pair is expected to find support at 1.0012, and a fall through could take it to the next support level of 0.9982. The pair is expected to find its first resistance at 1.0065, and a rise through could take it to the next resistance level of 1.0088.

Amid a lack of macroeconomic releases in Switzerland today, investor sentiment would be determined by global macroeconomic events.

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 declined 0.76% against the CAD and closed at 1.2853.

On the macro front, building permits in Canada rebounded 3.1% MoM in March, beating market expectations for an advance of 2.0%. In the prior month, building permits had fallen by a revised 2.8%.

In the Asian session, at GMT0300, the pair is trading at 1.2838, with the USD trading 0.12% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.2784, and a fall through could take it to the next support level of 1.2731. The pair is expected to find its first resistance at 1.2933, and a rise through could take it to the next resistance level of 1.3029.

Later in the day, Canada's new housing price index for March, will be on investors' radar.

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