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

USD/JPY recovers to as high as 109.63 so far as it's continuing to draw support from near term channel. Nonetheless, upside is limited below 110.02 short term top so far. Thus, intraday bias remains neutral and more consolidation would be seen. On the downside, below 108.64 will bring deeper pull back. But downside should be contained by 38.2% retracement of 104.62 to 110.02 at 107.95 to bring rebound. 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.

Reactions to US withdrawal from the Iran nuclear deal were centered in oil and yield. Stocks had a rather quiet day yesterday with DOW ended up 0.01%, S&P 500 down -0.03% and NASDAQ up 0.02%. At the time of writing, Nikkei is down -0.35%. Meanwhile, after a volatile ride, WTI crude oil is back above 70 hand, trading at 70.6, and it could probably have a take on this week's high at 70.84 later today. Rebound in oil price also lifted 10 year yield which is back at 2.99, comparing to last week's low at 2.91. Gold continues to gyrate in tight range around 1310.

In the currency markets, strength in oil also helps lift Canadian Dollar broadly higher today. And yield support Dollar as the second strongest for today and pushed yes lower as the weakest one. Though, for the week, Sterling remains the strongest one, as it's in recovery mode ahead of BoE rate decision. Dollar is actually the real deal as it's trading above last week's high against all but Yen and Sterling. Canadian Dollar, despite today's recovery, is the third weakest, after Aussie and Euro.

Technically, EUR/CHF's break of 1.1888 minor support yesterday finally confirmed the rejection by 1.2 handle. The pull back will likely extend lower today for 1.18 handle. The point to watch is whether such pull back in EUR/CHF will lift the Swiss Franc elsewhere, or it would pressure Euro against others.

UK, Germany and France urged US not to obstructs Iran deal implementation after withdrawal

US President Donald Trump announced to withdraw from the Iran nuclear deal overnight and blamed that as a "horrible one-sided deal that should have never, ever been made." And, he would reimpose the US economic sanctions on Iran. UK, Germany and France issued a joint statement in response to the decision. The three countries pledged their "continuing commitment" to the JCPoA Iran deal. And they urged the US to "avoid taking action which obstructs its full implementation by all other parties to the deal".

Japan, South Korea and China in first trilateral talk since 2015

Japanese Prime Minister Shinzo Abe, South Korean President Moon Jae-in and Chinese Premier Li Keqiang are meeting in Tokyo today for the first trilateral summit since 2015. As the host of the meeting, Abe said that "for our three nations, building future-oriented cooperative relations is extremely important for the region as a whole." And he urged the three nations to "stay in close touch with international society and demand that North Korea take concrete moves" on denuclearization.

China's Li expressed the willingness to "work with Japan and South Korea to jointly maintain regional stability and push forward the development of the three countries." Separately, China is set to sign a currency swap agreement with Japan, and grant the country a quota of Renminbi Qualified Foreign Institutional Investors (RQFII) for investments.

On the data front

UK BRC retail sales monitor dropped -4.2% yoy in April. Japan labor cash earnings rose 2.1% yoy in March. Main focus will be on PPI inflation data from the US later today.

USD/JPY Daily Outlook

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

USD/JPY recovers to as high as 109.63 so far as it's continuing to draw support from near term channel. Nonetheless, upside is limited below 110.02 short term top so far. Thus, intraday bias remains neutral and more consolidation would be seen. On the downside, below 108.64 will bring deeper pull back. But downside should be contained by 38.2% retracement of 104.62 to 110.02 at 107.95 to bring rebound. 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.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the AUD declined 0.88% against the USD and closed at 0.7449.

LME Copper prices declined 0.90% or $61.0/MT to $6722.0/MT. Aluminium prices rose 2.94% or $68.0/MT to $2384.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7435, with the AUD trading 0.19% lower against the USD from yesterday's close.

The pair is expected to find support at 0.7400, and a fall through could take it to the next support level of 0.7366. The pair is expected to find its first resistance at 0.7494, and a rise through could take it to the next resistance level of 0.7554.

Moving ahead, Australia's consumer inflation expectation data for May, set to release overnight, will be on investors' radar.

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

For the 24 hours to 23:00 GMT, the EUR declined 0.54% against the USD and closed at 1.1861, pressured by fresh worries over political turmoil in Italy.

On the macro front, data showed that Germany’s seasonally adjusted trade surplus widened more-than-anticipated to €25.2 billion in March, compared to a surplus of €18.4 billion in the previous month, while investors had envisaged for the nation’s trade surplus to widen to €22.5 billion. Moreover, the nation’s seasonally adjusted industrial production rebounded more-than-expected by 1.0% on a monthly basis in March, surging by the most in 4 months. Market participants had expected industrial production to rise 0.8%, after recording a revised drop of 1.7% in the previous month.

In the US, data revealed that JOLTs job openings climbed to a record high level of 6550.0K in March, suggesting that companies are adding workers at a robust pace in the wake of nascent economic growth in the world’s largest economy. JOLTs job openings had registered a revised reading of 6078.0K in the previous month, while markets had expected for a rise to a level of 6100.0K. Further, the nation’s NFIB small business optimism index registered an unexpected rise to a level of 104.8 in April, confounding market anticipation for a fall to a level of 104.5. In the prior month, the index had registered a level of 104.7.

In the Asian session, at GMT0300, the pair is trading at 1.1852, with the EUR trading 0.08% lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1816, and a fall through could take it to the next support level of 1.1779. The pair is expected to find its first resistance at 1.1911, and a rise through could take it to the next resistance level of 1.1969.

With no key macroeconomic releases in the Euro-zone today, investors would direct their attention to the US producer price index for April and MBA mortgage applications, slated to release later in the day.

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

For the 24 hours to 23:00 GMT, the GBP declined 0.10% against the USD and closed at 1.3547, following downbeat housing sector report from the UK.

Data indicated that UK’s Halifax house price index dipped more-than-anticipated by 3.1% MoM in April, dropping by the most in nearly 8 years and highlighting that housing demand has softened considerably in the second quarter of 2018. The index had recorded a revised rise of 1.6% in the prior month, while market participants had expected for a drop of 0.2%.

In the Asian session, at GMT0300, the pair is trading at 1.3532, with the GBP trading 0.11% lower against the USD from yesterday’s close.

Data released overnight showed that Britain’s BRC retail sales across all sectors fell 4.2% on an annual basis in April, higher than market expectations for a fall of 0.8%. Retail sales across all sectors had risen 1.4% in the prior month.

The pair is expected to find support at 1.3480, and a fall through could take it to the next support level of 1.3429. The pair is expected to find its first resistance at 1.3588, and a rise through could take it to the next resistance level of 1.3645.

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

For the 24 hours to 23:00 GMT, the USD marginally declined against the JPY and closed at 109.09.

In the Asian session, at GMT0300, the pair is trading at 109.49, with the USD trading 0.37% higher against the JPY from yesterday’s close.

The pair is expected to find support at 109.00, and a fall through could take it to the next support level of 108.51. The pair is expected to find its first resistance at 109.81, and a rise through could take it to the next resistance level of 110.13.

Looking ahead, traders would closely monitor the Bank of Japan’s (BoJ) summary of opinions report as well as Japan’s (BOP basis) trade balance for March, both due to release overnight.

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

For the 24 hours to 23:00 GMT, the USD declined 0.09% against the CHF and closed at 1.0018.

In economic news, Switzerland's seasonally adjusted unemployment rate unexpectedly eased to 2.7% in April, confounding market consensus for an advance to 2.9%. In the previous month, unemployment rate had recorded a revised reading of 2.8%.

In the Asian session, at GMT0300, the pair is trading at 1.0036, with the USD trading 0.18% higher against the CHF from yesterday's close.

The pair is expected to find support at 1.0011, and a fall through could take it to the next support level of 0.9986. The pair is expected to find its first resistance at 1.0053, and a rise through could take it to the next resistance level of 1.0070.

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

For the 24 hours to 23:00 GMT, the USD rose 0.52% against the CAD and closed at 1.2952.

The Canadian Dollar lost ground against the USD, after Canada's seasonally adjusted housing starts declined more-than-estimated to a level of 214.4K in April, compared to a level of 225.2K in the prior month, while markets were anticipating housing starts to fall to 220.0K.

In the Asian session, at GMT0300, the pair is trading at 1.2957, with the USD trading marginally higher against the CAD from yesterday's close.

The pair is expected to find support at 1.2899, and a fall through could take it to the next support level of 1.284. The pair is expected to find its first resistance at 1.3007, and a rise through could take it to the next resistance level of 1.3056.

Later in the day, market participants would eye Canada's building permits data for March.

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, Gold rose 0.06% against the USD and closed at USD1315.40 per ounce, lifted by increased geopolitical concerns after the US President, Donald Trump announced his decision to pull out of the Iran nuclear deal.

In the Asian session, at GMT0300, the pair is trading at 1311.00, with gold trading 0.33% lower against the USD from yesterday’s close.

The pair is expected to find support at 1305.30, and a fall through could take it to the next support level of 1299.60. The pair is expected to find its first resistance at 1317.60, and a rise through could take it to the next resistance level of 1324.20.

The yellow metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Silver rose 0.06% against the USD and closed at USD16.52 per ounce, tracking gains in gold prices.

In the Asian session, at GMT0300, the pair is trading at 16.46, with silver trading 0.33% lower against the USD from yesterday’s close.

The pair is expected to find support at 16.35, and a fall through could take it to the next support level of 16.23. The pair is expected to find its first resistance at 16.56, and a rise through could take it to the next resistance level of 16.66.

The white metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.