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GBP/JPY has seen a substantial 5.7% retracement since May 10th.

The price has been trading above the downside short term major downtrend line support since May 18th.

It has seen a 2% fall since the general election date, caused by the disappointing Hung Parliament outcome.

This morning in early European session, the psychological support line at 140.00 was broken, the bears further broke the downtrend line support and the support line at 139.50 with increased bearish momentum.

The bears are currently edging down with the attempt to test the next psychological support at 139.00.

On the 4-hourly chart, the price is still trading below the downward heading 10-SMA at present, indicating ongoing bearish trend.

In the short term, GBP is likely to remain moderately bearish, as a Hung Parliament will likely weaken the UK's position during the upcoming Brexit negotiations.

The resistance level is at 139.50, followed by 140.00.

The support line is at 139.00, followed by 138.50.

The CAC index has started the week with losses, dropping 0.89% on Monday. Early in the North American session, the CAC is at 5253.30 points. On the release front, there are no French or eurozone events on the schedule. On Tuesday, France releases Nonfarm Payrolls and the eurozone releases ZEW Economic Sentiment.

European stock markets have sagged on Monday, following sharp losses on the Nasdaq, which dropped 1.8% on the Friday session. Heavyweight technology stocks such as Apple, Facebook, and Google were all down by more than 3 percent. Apple led the downturn with losses of close to 4 percent. On the French stock exchange, BNP Paribas has dropped 1.60%, and Societe Generale is down 1.92 percent. On the political front, there was little suspense in the first round of French parliamentary elections, as President Emmanuel Macron led with 28% of the vote. Macron is expected to win a huge majority in the second round of voting on Sunday, which will determine the makeup of the 577 seats in the National Assembly. Macron, whose party is just a year old, is expected to put forward pro-business legislation, which will not sit well with the powerful labor unions. Macron wants to streamline government and overhaul labor laws, in order to revive a weak economy. Any changes to France's generous employment benefits is bound it be contentious, but a strong majority in parliament will make it easier for Macron to push through reforms.

The ECB meeting did not make any moves at last week's meeting, but it did tweak its monetary stance. The ECB kept the benchmark rate pegged at 0.00% and maintained its asset-purchase plan (QE) of EUR 60 billion/month. The cautious ECB did, however, remove its guidance on rate cuts, as the ECB rate statement said that it expected interest rates to remain at "present levels" for an extended period of time. This was slightly more hawkish than the April statement, which said that policymakers expected rates to remain at present or lower levels" for an extended period. As well, Mario Draghi characterized risks to the economy as "broadly balanced", compared to previous warnings that risks were "tilted to the downside. The subtle nuance in wording appears to be a nod to improving economic conditions in the euro-area, and could be a sign that the ECB may look to wind up its stimulus program before it terminates in December, if the economy continues to improve. The ECB has revised upwards its growth forecast for 2017 and 2018, although it has lowered its inflation forecast, which may have weighed on the euro and prevented any gains following the ECB rate meeting.

The euro has ticked higher in at the start of the week. In Monday’s European session, EUR/USD is trading at 1.1220. There are no major releases out of the eurozone or the US. On Tuesday, Germany releases ZEW Economic Sentiment and the US publishes PPI.

The markets had low expectations going ahead of the ECB meeting last week, so there was some surprise as the central bank did tweak its monetary stance. The ECB kept the benchmark rate pegged at 0.00%, and made no changes to its asset-purchase plan (QE) of EUR 60 billion/month. The cautious ECB did, however, remove its guidance on rate cuts, as the ECB rate statement said that it expected interest rates to remain at “present levels” for an extended period of time. This was slightly more hawkish than the April statement, which said that policymakers expected rates to remain at present or lower levels” for an extended period. As well, Mario Draghi characterized risks to the economy as “broadly balanced”, compared to previous warnings that risks were “tilted to the downside. The subtle nuance in wording appears to be a nod to improving economic conditions in the euro-area, and could be a sign that the ECB may look to wind up its stimulus program before it terminates in December, if the economy continues to improve. The ECB has revised upwards its growth forecast for 2017 and 2018, although it has lowered its inflation forecast, which may have weighed on the euro and prevented any gains following the ECB rate meeting.

There was little suspense in the first round of French parliamentary elections, as President Emmanuel Macron led with 28% of the vote. Macron is expected to win a huge majority in the second round of voting on Sunday, which will determine the makeup of the 577 seats in the National Assembly. Macron, whose party is just a year old, is expected to put forward pro-business legislation, which will not sit well with the powerful labor unions. Macron wants to streamline government and overhaul labor laws, in order to revive a weak economy. Any changes to France’s generous employment benefits is bound it be contentious, but a strong majority in parliament will make Macron’s job easier.

All major headlines and attention are still surrounding the United Kingdom following the uncertain outcome to the UK election at the end of last week.

The British Pound appears to have stabilized and is trying to maintain its footing around 1.27, after suffering a decline just above 2% at one point following it becoming clear that the UK was heading for a hung parliament. There is a viewpoint that the Pound should remain supported over the near-term despite the uncertainty, due to the likelihood that the forming of a coalition government would encourage Theresa May to cool it down when it came to her previous hardline approach towards the European Union and the imminent Brexit negotiations. The possibility that Theresa May will be left with no choice but to adopt a diplomatic approach towards Brexit is what has been seen as the most supportive factor for the Pound over the near-term. It’s not something that I am buying into however, and I think this might be a short-lived consolidation around 1.27.

I personally still see downside risks for the Sterling and see the potential for the market to become encouraged towards selling in the likelihood that the UK is set to begin negotiations next week and looks very unprepared for such complex negotiations. The whole reason for the UK election in the first place was so that Theresa May would have more powers to influence the Brexit process, but not only has this play backfired, the UK looks more unprepared than ever to go head-to-head with the EU as it currently stands. I personally remain bearish on the Sterling.

What was noticeable when European trading commenced on Monday was that the FTSE dipped lower, which some could attribute to the uncertainty in the aftermath of the UK election. It is also worth pointing however that the FTSE looked under pressure around the same time that the Pound was at that point consolidating a little higher, which could be the inverse Sterling/FTSE relationship that we have talked about in the past. There has been a trend over the past year where increased Sterling purchasing sentiment can encourage selling in the FTSE and selling momentum in the Sterling can support the FTSE, which we saw once again at the end of the UK election. It certainly is a strange correlation, but it is thought to be supported by the mindset that when corporations on the FTSE exchange their earnings back into Sterling they are left with more currency.

While the attention around the United Kingdom is by all accounts going to remain centred around the political uncertainty, there is also key economic data to come out over the week ahead. The latest inflation reading, employment data and BoE interest rate decision are all scheduled to be announced in the next few days. When it comes to the jobs data and inflation numbers, the major headline will be whether further indications are provided that price pressures are increasing at a faster pace than wage growth. This is seen as a crucial factor in the possibility that consumer spending might be pressured over the upcoming months. By most accounts the Bank of England (BoE) is expected to leave interest rates unchanged as they have been for nearly a year, but it will be interesting to see if Governor Carney comments on the current political instability and what it means to the monetary policy outlook for the United Kingdom.

Time for another US interest rate rise?

Away from the United Kingdom and the ongoing political uncertainty that is dominating attention, the Federal Reserve is largely expected to raise US interest rates on Wednesday evening. Most of the expected US interest rate rise has already been priced into the Dollar, but the US currency might find support in the run up to the Federal Reserve decision. Will the probable US interest rate rise direct the Dollar over the longer-term? Not really, and as soon as the Fed most likely pulls the trigger on another rate rise on Wednesday, attention will circle towards when the central bank will next raise interest rates as it’s expected that another oneor two will be announced before the end of the year.

Any hesitance from the Federal Reserve when it comes to providing clarity on its future monetary policy outlook and interest rate circle will likely weigh on the Dollar as investors want clarity.

What about emerging market currencies?

The likelihood that the Federal Reserve will be raising US interest rates this coming week might put a pause to the recent rally we have witnessed in emerging market currencies, like the Malaysian Ringgit and Chinese Yuan.

Whether the emerging market currencies can later brush away the probable US interest rate hike this Wednesday will depend on the timing of the next interest rate rise from the United States, which by most accounts knowing the previous language from the Federal Reserve, will not include precise timing for the next rate increase and later support the emerging currencies. By most accounts the Dollar topped a long time ago, and this means those emerging currencies that were heavily pressured in the six months following US election day can continue to push on and attract buyers.

Update on WTI Oil

After a pressured couple of weeks following the OPEC meeting, WTI Oil has found support at $45 and is expected to attempt a recovery from here. There is still a risk that US inventories/shale production will offset the efforts from OPECNon-members when it comes to trimming the oversupply in the markets, however Oil looks oversold at $45 to my eye until we can see clear signs that there is increased inventories from the United States.

Three more central banks are slated to announce their respective policy decisions this week – the Fed (June 14), the Bank of England (June 15) and Bank of Japan (June 15).

The Fed starts its two-day meeting tomorrow and ends on Wednesday at which it is widely expected to increase its fed funds rate by +25 bps to +1% – +1.25%. The focus is on whether the Fed thinks the U.S. economy is robust enough to withstand further rate increases through this year. U.S policy makers are expected to raise interest rates twice more in 2017, but conviction for a move beyond this week has faded for many, along with the outlook for inflation.

Note: The BoE and BoJ are anticipated to maintain their current policy rates of +0.25% and minus -0.1%.

Price data will also be released in the U.K, the Eurozone and Japan. Both the U.K and Australia will be reporting last months labor stats.

Geopolitical risks again will be an issue this week. Ongoing developments in the U.K following last week's snap election will be keeping U.K capital markets very busy, while Stateside, AG Jeff Sessions will face questions about the firing of FBI Director Comey and undeclared meetings with Russian officials at a U.S Senate hearing tomorrow.

1. Global stocks see 'Tech Red”

In Asia, Japan's Nikkei share average ended lower (-0.5%) overnight, dragged down by declines in technology shares after the Nasdaq 100 -2.4% plunge in Friday afternoons session. The broader Topix was little changed.

In South Korea, the Kospi lost -1%, with Samsung slumping -1.6%. In Hong Kong, the Hang Seng Index declined -1.1% – the most in nearly two months – as tech share selling triggered broader profit-taking in one of the world's best-performing equity markets this year.

In China, the Shanghai Composite Index retreated -0.6%, after a four-day rally, while markets in Australia, Malaysia and the Philippines were closed for holidays.

In Europe, indices trade lower across the board led by the tech sector continuing to see the brunt of the sell off after the sharp sell off in the Nasdaq on Friday – Nasdaq futures are down a further -1% ahead of the U.S open.

U.S stocks are set to open in the ‘red.'

Indices: Stoxx50 -0.9% at 3556, FTSE -0.4% at 7499, DAX -0.6% at 12735, CAC-40 -0.8% at 5256, IBEX-35 -1.2% at 10845, FTSE MIB -0.6% at 20990, SMI -0.3% at 8818, S&P 500 Futures -0.3%.

2. Oil prices supported by future bets, gold shines

Oil spot prices have rallied overnight as futures traders lay bets that the market may have bottomed after the recent -10% falls, and this despite the physical market remaining bloated, especially from an upticks in U.S production drilling numbers.

Brent crude futures is at +$48.29 per barrel, up +14c, or +0.3% from Friday's close. U.S. West Texas Intermediate (WTI) crude futures is at +$45.95 per barrel, up +12c, or +0.3%.

Note: U.S drillers' added eight oilrigs in the week to June 9, bringing the total count up to +741, the most since April 2015 (Baker Hughes Inc.).

The drive to find new oil has pushed up U.S output by over +10% since mid-2016, to +9.3m bpd. The EIA expects this number to push above the +10m benchmark next year.

For the oil ‘bear' U.S production undermines any effort led by OPEC to cut almost -1.8m bpd of production until the Q1, 2018 in order to prop up global prices.

Gold prices (up +0.1% at +$1,266.90 an ounce) have inched up ahead of the U.S open as global stocks fall and as the ‘big' dollar eases ahead of the Fed announcement that many hope will give clues on the pace of interest rate hikes over the rest of the year.

3. U.S yields back up

Friday's sell-off in U.S Treasuries suggests that the market is preparing for a crowded U.S auction calendar this week. Dealers backed up yields to make room to take down 3-, 10- and 30-year debt.

Note: The yield on 10-year U.S Treasuries is heading higher for a fourth day, advancing +2 bps to +2.22%.

The pending Fed rate announcement has also put the U.S short-end under pressure in anticipation of another interest rate increase on Wednesday. Fed fund futures are pricing in a +93% chance of a rate hike. The markets focus will be on rhetoric that may give a clue on the pace of future rate hikes.

Dollar ‘bulls' are concerned that the Fed could come across as ‘dovish' at this week's meeting given the lack of domestic wage and inflation pressure.

Elsewhere, U.K Gilt yields are flat (+0.97%) after dropping -3 bps on Friday. French (OAT's) yields fell -2 bps to +0.60%, while German Bunds are little changed (+0.24%).

4. 'Big' dollar's mixed results

The EUR is firmer outright (+0.2% at €1.1222) as regional geopolitical concerns ease a little over the weekend.

In France, President Macron's La Republique en Marche made big gains in the first round of parliamentary elections on Sunday (see below), while in Italy, the anti-establishment 5-Start Movement suffered setbacks in municipal elections.

The focus this week is on a likely U.S Fed rate rise on Wednesday. However, this is widely expected and with investors looking towards the prospect of the ECB scaling back monetary easing, immediate dollar gains are being considered somewhat limited.

In the U.K, 'uncertainty” is expected to dominate the various asset prices with risks looking tilted towards further downside pressure for the pound (£1.2700) as investors wait for clues on what might happen next.

The outcome of the election is likely to change U.K Brexit policies now that PM May is trying to enter a coalition with Ulster's DUP.

USD/JPY continues to straddle atop of the psychological ¥110.00 handle. Ahead of this week's Bank of Japan (BoJ) meeting, overnight tier II data (May preliminary machine tool orders y/y- 24.4% vs. 34.7% prior) continues to give little justification for rumored discussion about their QE exit process.

5. President Macron wins handily, but on low turnout

A first-round French parliamentary election result is promising President Macron a crushing majority in parliament, however, the result appears on the back of the lowest voter turnout in modern history.

Pollsters said Macron was on course to win as much as three quarters of National Assembly seats in the June 18 second round after +28% of those who voted in first round chose his Republic on the Move (LREM) party.

It's expected to be France's biggest majority in decades, and according to analysts it effectively leaves only the trade union movement as a potential obstacle to the Macron's pro-business he has promised to introduce in a bid to boost domestic growth and jobs.

GOLD Trading lower within uptrend channel.

Gold is consolidating within uptrend channel. Hourly support is located at 1246 (18/05/2017 low). Stronger support is given at 1195 (10/03/2017 low). Expected to show renewed upside pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

SILVER Lack of follow-through.

Silver declines. Closest support is given at 16.20 (04/05/2017 low). Strong support is given at 15.63 (20/12/2017 low). Key resistance is given at a distance at 19.00 (09/11/2017 high). Expected to push back towards 61.8% Fibonacci retracement around 17.75.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

CRUDE OIL Bearish momentum is fading.

Crude Oil 's decline is stopping since the recent collapse from $52. Support is given at a distance 43.76 (05/05/2017 low). The technical structure suggests further weakness towards 43.76.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 (13/11/2002) while resistance can now be found at 55.24 (03/01/2017 high)

EURUSD is consolidating after pausing its recent uptrend. The market was unable to rise above the key 1.1300 level and has now found support around another important psychological level at 1.1200. This support area is also highlighted by the tenkan-sen line.

The bullish market structure that has been in place since the rise from the January 3 low of 1.0340 to the six-month high of 1.1284 is still intact. Upside pressure has faded and this is indicated by the RSI which has turned back down. The MACD has also stopped rising. This has resulted in a neutral bias in the near-term.

A daily close below 1.1200 would target further support at 1.1100 and 1.1000. Below this, the bias to the downside could gain momentum with scope for prices to fall to the 200-day moving average around 1.0817. A break below this would change the bigger picture and the medium-term trend would shift to neutral from bullish.

The market would have to rise above 1.1300 to resume the uptrend and target 1.1400. the bullish crossover of the 50-day moving average above the 200-day MA and the rising ichimoku cloud are supporting the bullish outlook for now. Meanwhile, the RSI and MACD remain in bullish territory.

After the Conservatives defeat in Thursday's UK election, the main question on most investors' mind is: What happens next and how will this affect the Brexit negotiating process? On Saturday morning, PM May's office said it had agreed an outline deal with Northern Ireland's Democratic Unionist Party, in which the DUP would support the Tories on some key votes. Nevertheless, hours after the announcement, May's office admitted that the accord is not yet finalized.

Meanwhile, the leader of the Labour Party, Jeremy Corbyn noted that he will put forward an alternative government program and invite lawmakers to vote for it, hoping that MPs will vote down the Queen's Speech, which is scheduled on the 19th of June (the same day as UK-EU negotiations are set to begin).

'I think it's quite possible there'll be an election later this year or early next year, and that might be a good thing because we cannot go on with a period of great instability', Corbyn also noted.

The defeat of Theresa May and the Conservatives may be seen as a rejection of her 'hard Brexit' stance by the British people. As such, she may have to soften her approach. If so, something like that could be interpreted as positive for the pound, but given the current uncertainty surrounding the agreement with the DUP and the Queen's speech, we expect sterling to remain under pressure in the short run.

GBP/USD rebounded from slightly above the 1.2615 (S1) support zone on Friday, after it collapsed from near 1.2960 on the election's first exit poll. At the time of writing, the pair is testing the 1.2770 (R1) as a resistance, where a decisive break may open the way for the 1.2850 (R2) territory. Nevertheless, given that the pair is now trading back below the key hurdle of 1.2850 (R2), and also below the downside resistance line taken from the peak of the 18th of May, we would treat any possible intraday recovery as a corrective phase. We expect the bears to take the reins again soon, and perhaps drive the battle back down near the 1.2700 (S1) support. A dip below that level, may set the stage for a test at the next support of 1.2615 (S2).

CAD strengthens on stellar employment gains

On Friday, Canada's employment report showed that the economy added 54.5k jobs in May, beating estimates of 11k. The employment gains were driven by the 77k increase in full-time jobs, which more than offset the 22k slide in part-time employment. The unemployment rate ticked up to 6.6% from 6.5% in April, but this was due to the entry of 78.4k people into the labor force.

USD/CAD slid on the release as these encouraging news increase the likelihood for the BoC to maintain its balanced tone at its upcoming policy gathering, on the 12th of July. The pair fell below the support (now turned into resistance) of 1.3485 (R1), to stop once again near the 1.3420 (S1) zone. The pair has been trading within a sideways range between that level and the resistance of 1.3540 (R2) since the 25th of May and as such, we consider the short-term outlook to be flat for now. However, given that the rate is trading below the important territory of 1.3600 (R3), we see the likelihood for the pair to trend lower again in the foreseeable future. A dip below 1.3420 (S1) could confirm the case and may initially aim for our next obstacle of 1.3380 (S2).
As for today, we have a relatively quiet day, with no major events or indicators due to be released.

As for the rest of the week:

On Tuesday, we get the UK CPI data for May. Also, the new UK Parliament meets for the first time. On Wednesday, all eyes will be on the FOMC policy decision. The Fed is almost certain to hike rates and thus, the focus will be on any signals regarding the pace of future hikes. As for the data, we get US CPI and retail sales for May. The UK employment report is also coming out. On Thursday, the BoE and the SNB hold their meetings. Neither Bank is expected to alter its monetary policy. On the indicators' front, we get New Zealand's GDP for Q1, Australia's employment figures for May, and UK retail sales for the same month. Finally on Friday, we have a BoJ gathering. The Bank could shift to a slightly more upbeat tone given the recent improvement in Japan's economic data.

GBP/USD

Support: 1.2700 (S1), 1.2615 (S2), 1.2515 (S3)

Resistance: 1.2770 (R1), 1.2850 (R2), 1.2910 (R3)

USD/CAD

Support: 1.3420 (S1), 1.3380 (S2), 1.3335 (S3)

Resistance: 1.3485 (R1), 1.3540 (R2), 1.3600 (R3)

EUR/JPY Fading momentum.

EUR/JPY is trading lower. Hourly support is given at 122.56 (18/05/2017 low). Hourly resistance can be found at 125.82 (16/05/2017 high). Major support is given at 114.90 (18/04/2017low).

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Volatility declines.

EUR/GBP has broken resistance at 0.8787 (13/03/2017 high). The pair keeps on going higher. Strong support can be found at 0.8304 (05/12/2017 low).

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.

EUR/CHF Pausing on short-squeeze.

USD/CHF is trading lower. The pair has broken support given at 1.0866 (18/05/2017 low). We believe that the medium-term pattern suggests us to see continued bearish pressures towards hourly support that can be found at 1.0792 (03/05/2017 low).

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

USD/CHF Back to bearish.

USD/CHF continues its decline despite some ongoing consolidation. Hourly resistance can be found at 0.9808 (30/05/2017 high). Strong resistance is given at 1.0107 (10/04/2017 high). Expected to show continued weakness towards strong support at 0.9550 (09/11/2017 low).

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015

USD/CAD Trading mixed.

USD/CAD is trading sideways. Hourly support can be found at 1.3388 (25/01/2017 high). Expected to show continued weakness.

In the longer term, there is now a death cross with the 50 dma crossing below the 200 dma indicating further downside pressures. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low

AUD/USD Short-term consolidation.

AUD/USD is pushing higher since the pair has failed to reach hourly support given at 0.7329 (09/05/2017 low). As long as prices remain below resistance at 0.7608 (17/04/2017 high), there are nonetheless strong downside risks.

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.