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XAUUSD (1321.59): Gold prices were seen establishing a bottom near the 1316 levels on Friday before price attempted to push higher. The breakout from the descending wedge pattern could trigger a shortterm rally to the resistance level of 1325. However, further gains can be expected only on a strong breakout above this resistance level. In such an event, the upside target in gold prices could extend to the 1337 level where the previously breached support level could be tested for resistance. To the downside, a breakdown below the 1316 levels could potentially trigger a sell off to the 1300.00 round number support.

GBPUSD (1.3780): The British pound posted strong losses on the day on Friday following a weaker than expected preliminary GDP report and a stronger than expected GDP data from the United States. The breakout below the 1.3900 level of support pushed the pound sterling lower to test weekly lows of 1.3770, briefly falling below lows from 8th March. In the near term, we expect price action to post a modest recovery. Any gains are likely to be limited to the 1.3900 level where resistance could be established. This is validated by the hidden bullish divergence seen on the 4-hour Stochastics indicator.

Daily Pivots: (S1) 1.2078; (P) 1.2105 (R1) 1.2156; More....

Intraday bias in EUR/USD remains neutral for consolidation above 1.2054 temporary low. In case of stronger recovery upside should be limited by 1.2214 support turned resistance to bring another decline. Below 1.2054 will target 161.8% projection of 1.2475 to 1.2214 from 1.2413 at 1.1991 first. Break will target 200% projection at 1.1891.

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. We'll look at the structure and momentum of such decline before decision if it's an impulsive or corrective move.

EURUSD (1.2126): The EURUSD was seen attempting to recover from the ECB led declines from Thursday. Price action touched down to the lows of 1.2055 before a modest recovery. The decline to 1.2055 marks a touchdown to the support level and we expect to see a rebound in price in the near term. Resistance at 1.2180 is likely to be the upside target if price action can hold the current support levels. Further gains cannot be ruled out, but the next resistance level is seen at 1.2250. In the near term, we expect EURUSD to hold the range within 1.2180 and 1.2090 - 1.2070 levels.

China’s National Bureau of Statistics reported that manufacturing PMI eased to 51.4 in April, from 51.5 a month ago. This, however, came in better than consensus of 51.3. The non-manufacturing improved to 54.8 in April from 54.6 in the prior month. The composite PMI output index also edged +0.1 point higher to 54.1 for the month. The moderation in the manufacturing sector was driven by slowdown in foreign demand, as well as the aftermath of the rapid easing in credit growth in the first quarter. Focusing on small and medium firms, Caixin/ Markit’s manufacturing PMI, due Wednesday, probably slipped -0.1 point to 50.9, while services PMI, due Friday, steadied at 52.3 in April.

Looking into details of the official manufacturing PMI, the “new orders” index dropped -0.4 point to 52.9 while the “production” index stayed flat at 53.1. Trade-related indices fell across the board, with the “new export orders” index slipping to 50.7 from 51.3 in March and “import” index plunging -1.1 points to 50.2. Falling for 5 months in a row, the “input prices” index was down -0.4 point to 53. Despite ongoing weakness in input prices, the indication on April’s PPI is less certain due to a low base.

The slowdown in manufacturing PMI might be the first evidence that Chinese economic activities continued to ease in the second quarter. The world’s second economy has begun to feel the pain of trade tensions with the first! Indeed, the Politburo meeting last week called for “persistently boosting domestic demand” and “more hard work” to achieve the GDP growth target of “about 6.5%” this year. In mid-April, PBOC announced to cut RRR by -100 bps, effective April 25, for large commercial banks, joint-stock banks, city commercial banks, rural commercial banks, and foreign banks. This was another proof that the authority is fully aware of the challenge ahead.

US-China trade tensions remain a major event to monitor. The visit of US economic and trade officials to China this week is closely watched. We remain hopeful that a trade war can be averted eventually, should China reveal more concrete plans to expand imports and liberalize the financial services and manufacturing sectors.

The U.S. dollar remained flat on Friday despite some bullish fundamentals. The U.S. preliminary GDP report beat forecasts to rise 2.3% on the quarter. Economists' forecast a 2.0% increase during the quarter. Despite the beat on the forecasts, the quarterly GDP was slower than the 2.9% increase seen previously.

Data from the UK disappointed as the UK's GDP was seen rising just 0.1% in the first three months of the year. The British pound extended losses on the news release.

Looking ahead, the markets get off a busy start. The European trading session will see the release of the German retail sales report. Economists forecast that retail sales rebounded in March, rising 0.8% on the month. This would potentially offset the 0.7% decline seen the month before. Germany's preliminary inflation report is also due to be released, and the data is expected to show a 0.1% decline in consumer prices following a 0.4% increase.

The NY trading session will see the release of the core PCE price index data. The Fed's preferred gauge of inflation is forecast to rise 0.2% on the month, rising at the same pace as the month before. Personal spending and income data is expected to rise 0.4%. The U.S. pending home sales report is forecast to rise at a slower pace of 0.6% on the month after a 3.1% increase seen the month before.

Daily Pivots: (S1) 1.3703; (P) 1.3819; (R1) 1.3891; More...

Intraday bias in GBP/USD remains on the downside as fall from 1.4376 is in progress. Deeper decline would be seen to 1.3711 key support level next. Decisive break there should confirm medium term reversal and target 1.3448 fibonacci level. On the upside, above 1.3835 minor resistance will turn intraday bias neutral and bring consolidations first, before staging another fall.

In the bigger picture, bearish divergence condition in daily MACD is raising the chance of medium term reversal. Also, note that GBP/USD has just failed to sustain above 55 month EMA (now at 1.4257) again. Focus is back on 1.3711 support. Firm break there will confirm medium term reversal and target 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. For now, sustained break of 55 month EMA is needed to confirm medium term upside momentum. Otherwise, we won't turn bullish even in case of strong rebound.

Daily Pivots: (S1) 0.9859; (P) 0.9890; (R1) 0.9908; More...

Intraday bias in USD/CHF remains neutral for consolidation below 0.9919 temporary top. Deeper retreat could be seen after hitting 0.9900 fibonacci resistance. But downside should be contained above 0.9648 resistance turned support and bring another rally. Above 0.9919 will target 1.0037 resistance next.

In the bigger picture, medium term decline from 1.0342 has completed with three waves down to 0.9186. Rise from there is currently viewed as a leg inside the long term range pattern. Hence, while further rally would be seen, we'd be cautious on strong resistance from 1.0342 to limit upside. For now, further rise is expected as long as 0.9648 resistance turned support holds, even in case of pull back.

At 12:00 GMT, German Harmonised Index of Consumer Prices (YoY) (Apr) is expected to come in unchanged at 1.5%. Harmonised Index of Consumer Prices (MoM) (Apr) is expected to be 0.0% from a previous 0.4%. This data is expected to match the previous reading on a yearly basis, with a fall in the monthly reading adding to concerns about German economic strength. EUR crosses may be moved by this data.

At 12:30 GMT, US Personal Consumption Expenditures – Price Index (YoY) (Mar) is expected to be 2.0% from 1.8% previously. Core Personal Consumption Expenditures – Price Index (MoM) (Mar) is expected to be unchanged at 0.2%. Personal Consumption Expenditures – Price Index (MoM) (Mar) is expected to come in at 0.1% from 0.2% previously. Personal Income (MoM) (Mar) is expected unchanged at 0.4%. Personal Spending (Mar) is expected at 0.4% v 0.2% previously. Core Personal Consumption Expenditures – Price Index (YoY) (Mar) is expected to be 1.9% from 1.6% previously. This data is expected to come in largely as expected, with a notable increase in personal spending likely and some upward pressure on inflation. USD crosses may be heavily traded as a result of this data.

Major data releases for this week:

On Tuesday, at 04:30 GMT, the RBA will release its Interest Decision and Rate Statement.

At 18:30 GMT, BOC Governor Poloz will deliver a speech.

At 22:45 GMT, New Zealand Jobs data will be released.

On Wednesday, at 09:00 GMT, Eurozone GDP Data will be out.

At 18:00 GMT, the US Fed’s Monetary Policy Statement and Rate Decision will be released.

On Thursday, at 09:00 GMT, Eurozone Consumer Price Index will be released.

On Friday, at 01:30 GMT, the RBA Monetary Policy Statement will be published.

At 12:30 GMT, US Nonfarm Payrolls and Average Hourly Earnings data will be released.

Daily Pivots: (S1) 108.79; (P) 109.16; (R1) 109.42; More...

Intraday bias in USD/JPY remains neutral for consolidation below 109.53 temporary top. Deeper retreat cannot be ruled out. But downside should be contained by 107.77 resistance turned support to bring another rally. Break of 109.53 will resume the rise from 104.62 and target 61.8% retracement of 114.73 to 104.62 at 110.86 next.

In the bigger picture, break of 108.12 support turned resistance now suggests that corrective fall from 118.65 (2016 high) has completed with three waves down to 104.62. And, rise from 98.97 (2016 low) could be resuming. Focus is back on 114.73 resistance and break there will pave the way to 118.65 and above. This will now be the preferred case as long as USD/JPY stays above 55 day EMA (now at 107.60).