Sample Category Title

Daily Pivots: (S1) 1.0834; (P) 1.0853; (R1) 1.0868; More...

No change in EUR/CHF's outlook. We'd continue to expect strong support from 1.0791/0872 support zone, probably around 55 day EMA (now at 1.0830) to complete the correction from 1.0986. Break of 1.0902 minor resistance will turn bias back to the upside for 1.0986/0999. Overall, rise from 1.0629 is expected to resume later.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0791 support holds.

Daily Pivots: (S1) 1.4815; (P) 1.4867; (R1) 1.4912; More...

With 1.5016 minor resistance intact, the correction from 1.5526 might extend lower to 38.2% retracement of 1.3980 to 1.5226 at 1.4750 as the correction continues. At this point, we'd expect strong support from 1.4669 to contain downside and bring rebound. Above 1.5015 minor resistance will turn bias to the upside for 1.5226 first. Break will resume the rise from 1.3624 and target next medium term fibonacci level at 1.5455.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 is now expected to target 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. In any case, outlook will now stay cautiously bullish as long as 1.4669 support holds. Break of 1.4669 will dampen the bullish view and would at least bring deeper fall back to 55 week EMA (now at 1.4539).

The Euro managed to close above rising 20SMA on Friday that sidelined immediate downside risk after short-lived dip to 1.1166.

Recovery extension Monday was so far capped by hourly cloud (1.1216), keeping intact the upper pivot at 1.1232 (10SMA). Sustained break above the latter is needed to generate stronger bullish signal and turn near-term focus higher.

However, risk of deeper pullback remains as bearish candle of last week and bearish divergence on daily MACD/RSI weigh.

Firm break below 20SMA (1.1203) would signal an extension of pullback from multiple upside rejections at 1.1285 towards next pivotal supports at 1.1114/09 (Fibo 38.2% of 1.0839/1.1285/30 May trough), loss of which would confirm reversal.

Key event of the week, FOMC policy meeting which ends on Wednesday is in focus, as Fed is widely expected to hike interest rates for the second time this year that would increase rate divergence and put the Euro under increased pressure.

Res: 1.1216, 1.1232, 1.1269, 1.1285
Sup: 1.1197, 1.1166, 1.1114, 1.1109

EUR/USD

Current level - 1.1208

My outlook remains bearish, for a slide towards 1.1108 low. A break through the latter will signal a deeper slide towards 1.1020 major support. Initial resistance lies at 1.1240.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 110.21

There is a minor reversal at 110.80 and the slide form the mentioned peak could dive deeper, towards 109.10 low.

GBP/USD

Current level - 1.2758

Intraday allow a brief test of 1.2830 resistance area, before another drowning towards 1.2610 zone.

Sterling has stabilized after Friday's big tumble against the dollar following the shock UK election result that brought about political uncertainty. Prime Minister Theresa May was left with a minority government and she reshuffled her cabinet over the weekend. Focus turns to the Brexit negotiations that begin in about a week. Meanwhile, the Bank of England holds a policy meeting on Thursday. This would be the next risk event for the pound, which continued to trade below the key $1.2800 level during the Asian session today.

Another key central bank meeting this week will be in the US, where the Federal Reserve is expected to raise interest rates by 25 basis points. While this move is mostly priced in by the markets, the FOMC's forward guidance and Fed Chair Janet Yellen's speech will be closely scrutinized for any hints of further rate hikes this year. A dovish tone by the Fed would weigh on the dollar, which has been gaining against the yen in recent days to rise back above the key 110-yen level. The pair was steady during the Asian session, trading around 110.25 yen. The dollar index gave back Friday's gains to trade down to 97.06 in Asia.

The euro jumped higher after the legislative elections in France on Sunday which showed that President Emmanuel Macron's party is set for a large parliamentary majority. The euro rose to an Asian session high of $1.1215. The single currency's gains may be limited as markets look to the final round of voting which takes place next Sunday.

In other major currencies, the New Zealand dollar slipped against the greenback to $0.7170. The kiwi hit a three-month high of $0.7222 last week. The Australian dollar saw little movement in a quiet session due to a local public holiday, and it traded just above the $0.7520 level.

Economic data out during the Asian session showed Japan's core machinery orders fell more than expected in April, down 3.1% month-on-month versus a 1.3% decline expected. This followed a 1.4% increase in March.

In commodities, gold consolidated losses after a weak performance last week which saw the precious metal drop to $1264.50 an ounce on Friday. WTI oil was steady just below the $46 a barrel level.

Daily Pivots: (S1) 0.8670; (P) 0.8764; (R1) 0.8879; More...

Intraday bias in EUR/GBP stays on the upside for the moment with focus on 0.8851 resistance. Decisive break there will extend the rally from 0.8312 to retest 0.9304 high. At this point, there is no clear sign of larger up trend resumption yet. Hence, we'll be cautious on topping around 0.9304. On the downside, however, break of 0.8639 support will now indicate near term topping and bring deeper pull back to 55 day EMA (now at 0.8601) and below.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. The leg from 0.9304 should have completed after testing 0.8332 structural support. But it's too early to say that larger rise from 0.6935 is resuming. Rejection from 0.9304 will extend the consolidation with another falling leg. Meanwhile, firm break of 0.9304 will target 0.9799 (2008 high). In case of another decline, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound.

Sterling trades mildly softer against Dollar, Euro and Yen today. But it's holding above last week's low so far. After the disastrous election, UK Prime Minister Theresa May announced her new cabinet on Sunday. Stability was clearly seen as her priority as all the most senior ministers stay. The list includes Chancellor of Exchequer Philip Hammond, Foreign Secretary Boris Johnson, Defense Secretary Michael Fallon and Home Secretary Amber Rudd. Also, David Davis kept his job as Brexit Secretary. While there are still calls for May to quit, she seems to have steadied the boat, as least for the moment. And preparing for Brexit negotiation with EU would now be back as one of her top priorities.

The Brexit negotiation with EU is scheduled to formally start on June 19. Ahead of that, May is facing pressure from all front to drop her "hard brexit" approach, including within Conservatives, Labour and her coalition partner DUP. In particular, the Northern Ireland's DUP is believed to be pushing for a "frictionless border" with the Republic of Ireland, rather than a hard one. And May's position of "no deal is better than a bad deal" doesn't have much support from others.

Macron's LREM to get overwhelm majority in parliament

In France, President Emmanuel Macron's centrist party looks set to take an overwhelming majority in parliament after the first round of election yesterday. The new La Republique En Marche and its ally MoDem won 32.32% of votes in the first round, well ahead of rival Les Republicain's alliance at 21.56%. The far-right Front National got 13.2% while Socialist got 9.5%. Based on current estimations, the La Republique En March could get up to 430 seats in the 577 seat parliament after the final round on June 18. And if that happens, it would be a boost for Macron to implement his center right policies including loosing up labor laws and reforming the welfare system.

German Chancellor Angel Merkel expressed her "heartfelt congratulations" to Macron on the "great success" of the party in its first ballot. She hailed that the result was a "strong vote for reforms" that could strengthen the German-French alliance. Both expressed common goal to develop a roadmap to strengthen EU and the Eurozone when they met in Berlin last month. And Macron is clear about his wish to push for reforms in EU, strengthening of Eurozone with a common budget and introduce new executive power in Eurozone with a Euro chamber and a Euro commissioner.

FOMC and BoE to highlight the week, SNB and BoJ also featured

The economic calendar is rather light today. Japan machine orders dropped -3.1% mom in April. Domestic CGPI rose 2.1% yoy in May. Machine tool orders rose 24.4% yoy in May. Looking ahead, meeting of four central banks are the key focuses of the week.

Fed is widely expected to raise interest by another 25bps to 1.00-1.25%. Fed fund futures are pricing in 95.8% chance of that. The biggest question in traders mind is whether Fed is still ready to hike another time in September, to make a total of three hikes. There are doubts on whether the US economy could withstand that. And the new economic projections to be released with the rate announcement should shed some lights on policy makers' mind on it. Also from US, PPI, CPI, retail sales, regional Fed surveys, industrial production and some housing data will be released.

BoE monetary policy decision will be another focus. Main policy rate will be held at 0.25% while the asset purchase target kept at GBP 435b. This is the general expectation. The voting will be the main focus. In particular, markets would like to see if Kristin Forbes would continue to vote for a rate hike. And head of the meeting, UK will also release CPI, employment and retail sales. Headline CPI is expected to be unchanged at 2.7% yoy in May and a surprise there might change Forbes' mind. SNB and BoJ will also meet this week and both are expected to stand pat. These two are most likely non-events.

Here are some highlights for the week:

• Tuesday: Australia NAB business confidence; UK CPI and PPI; German ZEW; US PPI
• Wednesday: China industrial production, retail sales, fixed asset investment; UK employment; Eurozone employment, industrial production; US CPI, retail sales, FOMC
• Thursday: New Zealand GDP; Australia employment; SNB rated decision, CPI; UK retail sales, BoE; Eurozone trade balance; Canada manufacturing sales; US jobless claims, Empire State manufacturing index, Philly Fed survey, import price, industrial production, NAHB housing index.
• Friday: BoJ; Eurozone CPI final; US housing starts and building permits, U of Michigan sentiment

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8670; (P) 0.8764; (R1) 0.8879; More...

Intraday bias in EUR/GBP stays on the upside for the moment with focus on 0.8851 resistance. Decisive break there will extend the rally from 0.8312 to retest 0.9304 high. At this point, there is no clear sign of larger up trend resumption yet. Hence, we'll be cautious on topping around 0.9304. On the downside, however, break of 0.8639 support will now indicate near term topping and bring deeper pull back to 55 day EMA (now at 0.8601) and below.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. The leg from 0.9304 should have completed after testing 0.8332 structural support. But it's too early to say that larger rise from 0.6935 is resuming. Rejection from 0.9304 will extend the consolidation with another falling leg. Meanwhile, firm break of 0.9304 will target 0.9799 (2008 high). In case of another decline, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound.

Economic Indicators Update

The markets are continuing to take cues from Friday's developments with the UK general elections. With the economic calendar light today, the markets are likely to remain flat for the most part except for the British pound. Currently, price action is attempting to push higher with some retracement in sight.

The failure to get a clear majority on the elections held in the UK on Thursday has put more uncertainty in the composition of the British parliament, especially with the Brexit talks ready to start on 19 June. Thus, investor sentiment could remain cautious.

Besides the UK, the Fed, Bank of Japan, BOE and the SNB's central bank decisions are lined up this week. Although for the most part, not many changes are expected, the Fed is all set to raise interest rates this week. This is likely to bring some volatility to the markets.

EURUSD intraday analysis

EURUSD (1.1206): EUR/USD closed below 1.1200 on Friday, but price action is likely to remain supported above this level in the short term. With the Fed's decision on interest rates on Wednesday, we could expect some subdued price action in the near term. On the daily chart, theprice is consolidating within 1.1285 and 1.1100 forming a rising wedge pattern. We can expect some near-term upside to 1.1265 with the potential for a downside break. This will send EURUSD back to 1.1100 support level with the possibility of further downside testing 1.1000.

GBPUSD intraday analysis

GBPUSD (1.2758): The British pound closed strong below 1.2800 on Friday although prices were seen pulling back from a 2-month low. In the near term, GBPUSD could retest 1.2800 where resistance could now be developed. The overall bias remains to the downside, and if the 1.2800 resistance holds we could see further downside to 1.2600 which completes the head and shoulders pattern for the GBPUSD. Below 1.2600, further downside will push the currency pair towards 1.2400 support level which is pending retest.

USDJPY intraday analysis

USDJPY (110.26): USDJPY rallied to 110.79 on Friday before promptly giving up the gains. The declines we see could post a higher low on the chart. This could occur between 110.00 and 109.50. A higher low could signal a potential change in the short-term trend. USDJPY could retest the resistance at 110.79 followed by a move to 112.00.

Weekly

    •    Last Candlesticks pattern: Shooting star 
    •    Time of formation: 03 May 2016
    •    Trend bias: Down

Daily

    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 3 May 2016
    •    Trend bias: Sideways

EUR/USD – 1.1208

As the single currency has retreated after faltering below resistance at 1.1285 (this month’s high), suggesting consolidation below this level would be seen, however, as long as support at 1.1109 holds, bullishness remains for recent upmove to resume after initial sideways trading, break of said resistance at 1.1285 would extend recent upmove from 1.0340 low to previous resistance at 1.1300, then 1.1327, however, near term overbought condition should limit upside to previous chart resistance at 1.1366 and reckon 1.1440-50 would hold from here, risk from there is seen for a retreat later.

On the downside, whilst initial pullback to 1.1160-65 cannot be ruled out, as long as support at 1.1109 holds, prospect of another rally remains. A daily close below said support at 1.1109 would defer and risk test of the Kijun-Sen (now at 1.1062) but a sustained breach below there is needed to suggest a temporary top is possibly formed instead, risk correction to 1.1025 (previous resistance now support), break there would add credence to this view, then correction to 1.0950-60 would follow, having said that, support at 1.0839 should remain intact.

Recommendation: Hold long entered at 1.1120 for 1.1320 with stop below 1.1105.

On the weekly chart, as euro has eased after rising to 1.1285 earlier this month, suggesting consolidation below this level would be seen and pullback to 1.1160-65 cannot be ruled out, however, reckon support at 1.1109 would limit downside and bring another rise later, above said resistance at 1.1285 would signal the rise from 1.0340 low is still in progress and bring a test of previous resistance at 1.1300 but a break of another previous resistance at 1.1366 is needed to signal early downtrend has ended at 1.0340, bring further subsequent rise to 1.1428, then towards 1.1500, having said that, price should falter well below another previous chart resistance at 1.1616.

On the downside, expect pullback to be limited to 1.1160-65 and bring another rise later to aforesaid upside targets. Below said support at 1.1109 would defer and risk weakness to the upper Kumo (now at 1.1091), then test of 1.1025 (previous resistance now support) but break there is needed to signal top is formed instead, bring further fall to 1.0965-70, however, 1.0922-28 (previous support and current level of the Tenkan-Sen) should remain intact, price should stay well above another previous support at 1.0839, bring another rise later.

Sunrise Market Commentary

• Rates: Risk sentiment key, but FOMC can keep investors at bay
  Today's eco calendar is empty. Risk sentiment could be key for trading, especially if European stocks pick up signals from WS. A correction lower is positive for core bonds via safe haven flows, but we don't expect big moves ahead of Wednesday's FOMC meeting.
• Currencies: Tentative USD rebound slows as tech stocks fall off a cliff
  On Friday, the dollar failed to maintain cautious intraday gains as US tech stocks nosedived later in the session. This morning, the euro doesn't profit from the Macron victory in France. A negative risk sentiment might be negative for USD/JPY, but neutral for EUR/USD as investors look forward to the Fed policy's decision on Wednesday

The Sunrise Headlines

• Nasdaq was hard hit on Friday (-1.8%) as heavy profit taking in the hugely overbought tech universe took place. Other US markets closed little changed. Asian equities are mostly lower (till about 1.2%) with a few positive outsiders.
• En Marche!, the party of president Macron is on track for a sweeping majority in the National Assembly. The party got 31.5% of the votes in the 1st round which should lead to a huge/absolute majority in the 2nd round a.
• UK PM May's office backtracked on a statement that a deal was reached with the Democratic Unionist Party (N-Ir), adding to a sense of chaos around her government after last week's disastrous election, and 8 days before Brexit talks.
• PM May could face a leadership challenge as soon as Tuesday if she fails to rally a meeting of her lawmakers that day, while five cabinet ministers are urging Johnson to oust her, the Sunday Times reported.
• Moody's downgraded South Africa's rating from Baa2 to Baa3, negative outlook, citing weakening of the institutional framework, reduced growth prospects and continued erosion of fiscal strength. It is now close to junk status, which is already the case at S&P and Fitch.
• The anti-establishment party Five Star Movement was brace for a setback in Italian municipal elections, as it failed to make run-off contests in many cities.
• Today's eco calendar is empty. Attention goes to the results of the French parliamentary and Italian local elections, UK PM May's struggle to safeguard her premiership and Friday's sell-off in Nasdaq

Currencies: Tentative USD Rebound Slows As Tech Stocks Fall Off A Cliff

Dollar rebound slows at Tech stocks tumble

On Friday, the swings in the major cross rates, excluding sterling, were modest. In a session deprived of important eco data, the dollar initially continued Thursday's gradual comeback. At the same time, Thursday's cautious ECB approach capped the topside of the euro. Later in the session, the dollar returned most of the intra-day gains, partially driven by a correction of US Tech stocks. EUR/USD closed the session at 1.1195. USD/JPY touched an intraday top in the 110.81 area, but closed the day at 110.32.

Overnight, there is little high profile economic news. Most Asian equity markets are feeling some fall-out from the tech correction in the US on Friday. For now, the impact on the major FX cross rates is modest. USD/JPY hovers sideways in the lower half of the 110 big figure. In France, Macron succeeded a major victory in the first round of the French parliamentary elections and will secure a comfortable majority in the second round. At least on the Asian markets, the French election doesn't support further euro gains. EUR/USD stabilises in the 1.1210 area.

There are no eco releases of interest. The political after-shocks from the UK election probably also won't be important for the major euro and USD cross rates. The convincing Macron victory is/was a potential positive for French/European equities and for the euro. However, in Asia the focus is on the US tech correction and this might also be the case at the European opening. Investors will also look forward to the FOMC meeting (Wedn). At the end of last week, the dollar started a bottoming out process as event risks (Comey, UK election, ECB) were out of the way, but the USD momentum petered out late on Friday. More technical trading ahead of the Fed policy decision is likely. If the Tech correction would continue or spread to other markets, USD/JPY remains most vulnerable. The picture for EUR/USD is neutral going into the Fed policy decision. We still favour the view that further EUR/USD gains will be difficult if sentiment on risk turns outright negative (negative pressure from EUR/JPY).

Technical picture

The USD/JPY rally ran into resistance in early May. A mini sell-off pushed the pair below the previous top (112.20), making the short-term picture negative. The post-payrolls USD sell-off below 110 deteriorated the picture further. The pair declined further in the 108.13/114.37 range. At the end of last week the USD/JPY decline slowed, but there is no convincing sign of a U-turn yet.

Earlier in May, EUR/USD failed to break below the 1.0821/1.0778 support (gap). Poor US data and US political upheaval propelled EUR/USD north of the 1.1023 range top. The pair initially reached a short-term correction top at 1.1268. There was a minor break after disappointing US payrolls, but no sustained followthrough gains occurred. The Trump top/correction top at 1.1300/1.1366 is next resistance. USD sentiment will have to be quite negative to clear this hurdle short-term. A return below 1.1023 would indicate that the upside momentum has eased.

EUR/USD: Off the recent highs, but no follow-through losses

EUR/GBP

Sterling sell-off slows, but uncertainty continues to weigh

On Friday morning, investors adapted positions as UK PM May's conservative party lost its majority in Parliament. Sterling selling started in Asia as soon as it became clear that the UK was heading for a hung Parliament and reaccelerated early in Europe. EUR/GBP tested the 2017 top in the 0.8855 area. However, no sustained break occurred. On the contrary, the UK currency gradually found its composure and rebounded. Markets pondered whether the new political context could lead to a softer Brexit. Such a scenario could be less negative for sterling. The jury is still out on this issue as UK PM May wants to join forces with the Northern Ireland's DUP. EUR/GBP closed the session at 0.8682. Cable finished the week at 1.2746.

There are a gain no important eco data in the UK today. The focus will be on the political scene. Today and tomorrow May will face plenty political opposition in her own conservative party. It's unsure if this will lead to a resignation of May in the very short-term, but the pressure will remain. At the same time, there is a lot of speculation whether the new political context will lead to a softer Brexit. In theory this might be supportive/less negative for sterling, but it's too early to play this card already. For now we assume that political risk will prevail and that there is no trigger for a sustained sterling rebound yet.

From a technical point of view, EUR/GBP broke above the 0.8774 resistance and tested the 0.8854 area(2017 top) on Friday. A real break didn't occur. A retest of that area is possible. A break beyond would open the way to the 0.90 area. A return below the 0.8655 correction low would be an indication that the pressure on, sterling is easing

EUR/GBP: first test of 2017 top rejected, but sterling remains in the defensive

Download entire Sunrise Market Commentary