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Mexican President Enrique Pena Nieto, US Vice President Mike Pence and Canadian Prime Minister Justin Trudeau met in Lima, Peru, on the sidelines of the Summit of the Americas.

After the meeting, Nieto said there were agreement to "accelerate" the efforts on NAFTA renegotiation. And he added "we hope in the coming weeks we can reach an agreement".

Trudeau also said "we'd like to see a re-negotiated deal land sooner than later." And, "we have a certain amount of pressure to try to move forward successfully in the coming weeks."

Pence also said he left the summit "very hopeful that we are very close to a renegotiated NAFTA", and "there is a real possibility that we could arrive at an agreement within the next several weeks."

It's believed that all parties would like to complete the deal by Mexican elections on July 1.

According to a poll by Nippon TV, support for Japan Prime Minister Shinzo Abe dropped to 26.7%, hitting the lowest point after taking office back in December 2012. Another survey by Kydo news agency also showed Abe's supported from -5.4 points to 37%. Another poll by Asahi also showed Abe's support at only 31%.

Recent suspected scandals have clearly hurt Abe's popularity and raised doubts on whether can win a third term as PM as LDP leader in the September vote.

Former Prime Minister Junichiro Koizumi questioned whether Abe may "resign around the time parliament's session ends (on June 20)?", as quoted in weekly magazine Aera. Koizumi also said that "situation is getting dangerous".

Speculators were mixed over the energy complex in the week ended April 10. Net LENGTH for crude oil futures rose +7 535 contracts from a week ago to 707 080. NET LENGTH of heating oil added +330 contracts to 14 31 while net LENGTH for gasoline plunged -7 566 contracts to 70 909. Net SHORT for natural gas increased +768 contracts to 98 273 for the week.

With the exception of silver, speculators stayed bearish over the precious metal complex last week. Net LENGTH for gold decreased -11 217 contracts to 155 372. Net SHORT for silver dropped -2 132 contracts to 14 833 for the week. For PGMs, net LENGTH for platinum fell -4 743 contracts to 19 000 while that for palladium declined -2 057 contracts to 8 160.

Initial reactions to the Syria strike by US, UK, and France were rather "insensitive". The "one-time shot" was performed and finished quickly and there was no further escalation after that over the weekend. Markets are not pricing in additional geopolitical risks for the moment.

But after a calm start, markets turn into risk averse mode again as the Asian session goes, led by selloff in Chinese and Hong Kong stocks. At the time of writing, China SSE is down -1.6%, HK HSI is down -1.5%.

JPY and CHF jumps in the current 4H bar while CAD, AUD, NZD are pressured. CAD is additionally weighed down by WTI crude dipping below 67 to 66.8.

Key Highlights

• The Euro declined this past week and tested the 1.2300 support zone against the US Dollar.
• There is a key bullish trend line forming with support at 1.2325 on the 4-hours chart of EUR/USD.
• The Euro Zone Trade Balance in Feb 2018 posted a trade surplus of €21.0B, better than the forecast of €20.2B.
• Today, the US Retail Sales for March 2018 will be released, which is forecasted to increase 0.3% (MoM).

EURUSD Technical Analysis

The Euro struggled this past week against the US Dollar, especially after an unexpected dovishness from the ECB. The EUR/USD pair tumbled and tested the 1.2300 support area.

However, the pair managed to hold the 1.2300 support and slightly recovered. The best part was the fact that there was no close below the 100 (red) and 200 (green) simple moving averages (4-hours).

The pair is currently trading above the 23.6% Fib retracement level of the last decline from the 1.2396 high to 1.2299 low. On the downside, there is a key bullish trend line forming with support at 1.2325 on the 4-hours chart of EUR/USD.

As long as the pair is above the trend line support at 1.2325 and stays above the 100 (red) and 200 (green) simple moving averages (4-hours), it remains supported for a recovery in the near term.

On the upside, a break above the 50% Fib retracement level of the last decline from the 1.2396 high to 1.2299 low is needed for more gains. Above 1.2345, the pair may continue to move higher and it could even retest the 1.2400 handle.

On the downside, a break and close below the 1.2300 support zone could open the doors for further losses. The next major support sits around the 1.2250 level.

EURUSD - The pair faces further downside pressure as it looks to extend downside pressure. On the upside, resistance comes in at 1.2350 level with a cut through here opening the door for more upside towards the 1.2400 level. Further up, resistance lies at the 1.2450 level where a break will expose the 1.2500 level. Conversely, support lies at the 1.2300 level where a violation will aim at the 1.2250 level. A break of here will aim at the 1.2200 level. Below here will open the door for more weakness towards the 1.2150. All in all, EURUSD faces further downside threats.

GOLD - The commodity reversed its Wednesday gain on Thursday. On the downside, support comes in at the 1,340.00 level where a break will turn attention to the 1,330.00 level. Further down, a cut through here will open the door for a move lower towards the 1,320.00 level. Below here if seen could trigger further downside pressure targeting the 1,310.00 level. Conversely, resistance resides at the 1,350.00 level where a break will aim at the 1,360.00 level. A turn above there will expose the 1,370.00 level. Further out, resistance stands at the 1,380.00 level. All in all, GOLD looks to strengthen further higher but with caution.

Markets take Syria Strikes in Stride.

The markets are taking the surgical strike at the heart of Syria’s chemical weapon program in stride as traders had priced in this outcome with a high degree of probability. Given the universal condemnation and overwhelming support for this military action, it’s improbable there will be retaliation from Russia or Iran, Syria’s principal backers, and for the time being, the US_UK _France alliance is considering this a mission accomplished.

With trade war and now Syria fatigue likely to set in, however, it’s best not to get too comfortable at this point as market risk sentiment swings will remain large this week. Even more so with the market focusing on positive trade headlines and Syria de-escalation, investors could be caught flatfooted to any negative headline turns in the days ahead.

Global political concerns look likely to remain a focus in the week ahead, so we should expect the markets to stay at the mercy of headlines risk. However, so far the market is showing little appetite to chase risk assets higher.

Enough has been written and said about trade wars in the last few days, but it is far to early to put trade tariff on the back burner anytime soon as this tit for tat escalation is a lot more intense than anyone expected. Moreover, with the level of investor complacency running high the market is very prone to headline risk. Especially with China making overtones for Japans cooperation in dealing with US restriction on steel imports

Oil Prices

While Syria risk fatigue will likely set in today, so we should expect some profit taking to occur. Nevertheless, Middle East tensions and geopolitical risk remain incredibly high suggesting the oil markets risk premiums will stay in check, as the global oil supplies remain vulnerable to any significant supply disruption.

Recent events suggest re-imposing Iran sanctions remain high given Tehran is a principal backer of Syria. Traders should not under-price the Bolton factor. Also, if we factor Saudi Arabia, Iran and even Israel into the escalation matrix, things could get messy very quickly, and Oil prices would surge.

Gold Prices

With much of Syria escalation risk priced into the Gold Markets, it’s a somewhat muted Asia open for gold markets despite the weekend escalation. However, the markets remain on heightened risk alert for more escalations and provocations in the Middle East, which remains a real powder keg. The potential for full-out regional conflict remains high not to mention all the Cold War memories has investors on edge. Also, while U.S. President Donald Trump tweeted out “mission accomplished” following the air strikes on Syria, the world is no safer now than before. But at least for the time being market remains stable

Currency Markets

The currency markets are starved for some basic fundamental premise. However, other than a heavy dose of Fed speak there not much to highlight besides March retail sales on Monday, but the remainder of the US calendar is unusually light. China, on the other hand, has the monthly ” data dump” GDP, industrial production, retail sales, and fixed asset data which should all be of particular interest to the markets.
Nevertheless, with former FBI Director Comey’s book tour set to start this means that headlines around the Russia investigation could dominate currency views this morning.

The Japanese Yen

With all the geopolitical risk in the market, it is hard to see USDJPY move above 108. Also heard on the street in Tokyo, Japanese exporters are expected to increase USD selling when the market approaches that level.

The Euro

The market remains confined to well-worn ranges and in desperate need of some central bank guidance as both ECB and FEDS appear non-committal at this stage.

The Australian Dollar

Aud remains supported by stronger Chinese imports and suggestions US may re-join TPP. However, the Aussie remains very prone to shifting risk sentiment.

Malaysian Ringgit

Risk sentiment remains fragile and despite the improving prospects of trade and tariff war reconciliation $Asia continues to trade in a disorderly fashion.

Much of the MYR appeal has come from its undervalued call, and this should continue to gain interest among investors. But with the BNM likely to stay neutral the remainder of the year in the wake of tepid inflation readings, it will be up to the USD dollar to do the heavy lifting to reach the 3.80 USDMYR levels.

Inflows ahead of the election remain tepid, as such; the MYR should remain confined to the upper end of its recent trading ranges.

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EUR/USD recovered to 1.2396 last week but lost momentum since then. Initial bias stays neutral first with focus on 1.2302 minor support. Break there will indicate completion of the rebound from 1.2214. Intraday bias would be turned back to the downside for 1.2214. Firm break there will revive the bearish case of trend reversal. On the upside, above 1.2396 will target 1.2475 and above to 1.2516/2555 key resistance zone.

In the bigger picture, key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 remains intact despite attempts to break. Hence, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive. Firm break of 1.1553 support will add more medium term bearishness. However, sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862 in medium term.

In the long term picture, 1.0339 is seen as an important bottom as the down trend from 1.6039 (2008 high) could have completed. It's still early to decide whether price action from 1.0339 is developing into a corrective or impulsive pattern. Reaction to 38.2% retracement of 1.6039 to 1.0339 at 1.2516 will give important clue to the underlying momentum.

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