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The French stock market has ticked lower in the Monday session, and the CAC index has dropped 0.68 percent. Currently, the CAC is trading at 5,307.80 points. On the release front, there was mixed news from the services sector, as French and Eurozone PMIs continue to point to expansion. French Services PMI improved to 57.2, but this missed the estimate of 58.0 points. Eurozone Services PMI edged lower to 56.3, above the forecast of 56.2 points. On Tuesday, the Eurozone releases Sentix Investor Confidence and Retail Sales.

It was a quiet week for the French stock markets, but that could change, with French voters going back to the polls on June 11. In two rounds of voting, the French electorate will choose the 577 members of the National Assembly. French President Emmanuel Macron's LREM party is on track to win the first round, with the latest polls giving Macron's party 31 percent of the vote, well ahead of the conservative Republicans, who are at just 22 percent. If Macron can translate this lead into a strong showing in the second round, the LREM could form a majority in parliament, which would mark a major victory for Macron.

The US labor markets has been performing well, so the markets were all the more surprised at the dismal Nonfarm Payroll report, which was released on Friday. The economy produced just 131 thousand jobs in May, well short of the forecast of 181 thousand. Wage growth remains soft, and edged down from 0.3% to 0.2%. The unemployment rate dropped to 4.3%, but this reading can be largely explained by a decline in the participation rate. The disappointing employment reports are unlikely to alter the Fed's plan to raise rates next week, but policymakers remain cautious, and if upcoming data misses expectations, additional rate hikes could be in jeopardy.

Despite some disappointing US job numbers, the odds of a rate hike have climbed to 96%, according to the CME Group, up from 88% just a week ago. Traders should note that ahead of the March hike, the odds of a rate hike were also close to 100%, and the dollar actually lost ground after the Fed followed through with a quarter-point increase. Although an increase in interest rates would mark a vote of confidence in the US economy, the Fed continues to have its concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets are skeptical, with the odds of a September rate hike at just 26%.

EUR/USD - 1.1240

Original strategy  :

Bought at 1.1205, Target: 1.1305, Stop: 1.1235

Position : - Long at 1.1205

Target :  - 1.1305

Stop : - 1.1235

New strategy  :

Hold long entered at 1.1205, Target: 1.1305, Stop: 1.1235

Position : - Long at 1.1205

Target :  - 1.1305

Stop : - 1.1235

As euro has eased after marginal rise to 1.1285, suggesting minor consolidation below this level would be seen, however, reckon 1.1235-40 would contain downside and bring another rise later, above said resistance at 1.1285 would extend recent upmove to another previous chart resistance at 1.1300, break there would encourage for headway to 1.1340-45 but overbought condition should limit upside to chart point at 1.1366.

In view of this, we are holding on to our long position entered at 1.1205. Only below support at 1.1202 would abort and signal top is formed instead, risk weakness towards indicated support at 1.1164, once this level is penetrated, this would signal recent upmove has ended, bring further fall to 1.1130-40 first. 

USD/JPY - 110.62

Original strategy  :

Sell at 111.00, Target: 110.00, Stop: 111.35

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 111.00, Target: 110.00, Stop: 111.35

Position :  -

Target :  -

Stop : -

As the greenback has recovered after marginal fall to 110.31, suggesting consolidation above this level would be seen and corrective bounce to 110.80 cannot be ruled out, however, reckon the Kijun-Sen (now at 110.99) would limit upside and bring another decline later, below said support at 110.31 would extend recent decline to previous support at 110.24 but break there is needed to provide confirmation that early selloff from 114.37 top has resumed for weakness to 109.90-00 first.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 111.00 should limit upside. Only above the upper Kumo (now at 111.41) would abort and signal low is formed, bring another bounce towards Friday’s high of 111.71.

Daily Pivots: (S1) 1.1229; (P) 1.1256 (R1) 1.1308; More....

Intraday bias in EUR/USD remains on the upside for 1.1298 resistance. Decisive break there will carry larger bullish implication and target 1.1615 resistance next. Near term outlook will now remain bullish as long as 1.1109 support holds. Nonetheless, we'd stay cautious on rejection from 1.1245/98 (138.2% projection of 1.0339 to 1.0828 from 1.0569 at 1.1245) resistance zone. Break of 1.1109 will indicate short term topping and turn bias back to the downside.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0888). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Daily Pivots: (S1) 0.9587; (P) 0.9652; (R1) 0.9686; More.....

Intraday bias in USD/CHF remains on the downside for the moment. Deeper decline could be seen through 100% projection of 1.0342 to 0.9860 from 1.0099 at 0.9617. But we'd start to look for bottoming signal again as it approaches 0.9443 key support level. On the upside, above 0.9718 minor resistance will turn intraday bias neutral first. But near term outlook will stay bearish as long as 0.9807 resistance holds.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

Daily Pivots: (S1) 109.93; (P) 110.81; (R1) 111.31; More...

Intraday bias in USD/JPY remains neutral cautiously on the downside with focus on 110.23 support. Break there will resume the decline from 114.36. In such case, deeper fall should be seen to 108.12 and below. Whole decline from 118.65 is seen as a correction and is still in progress. We'll look for bottoming signal at 61.8% retracement of 98.97 to 118.65 at 106.48 as the correction extends. Meanwhile, above 111.70 will turn intraday bias back to the upside. But we'd expect strong resistance from 61.8% retracement of 114.36 to 110.23 at 112.78 to limit upside and bring fall resumption.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Daily Pivots: (S1) 1.2854; (P) 1.2879; (R1) 1.2913; More...

GBP/USD recovers again today but at this point it's staying below 1.2926 minor resistance. Intraday bias remains neutral and deeper fall is still in favor. Break of 1.2768 will turn bias to the downside for 1.2614 resistance turned support first. Break there should also indicate completion of whole consolidation pattern from 1.1946 and target a retest on this low. However, break of 1.2926 will turn focus back to 1.3047 instead.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. The rejection from 55 week EMA is maintaining bearishness in the pair. Also, at this point, as long as 1.3444 resistance holds, fall from 1.7190 is still expected to continue. Break of above mentioned 1.2614 support will affirm this bearish case.

Sterling recovers mildly today as last Guardian/ICM poll showed that the Conservative is still having 11 pt lead over Labor ahead of Thursday's election. The poll showed that 45% of respondent would vote for Conservatives, unchanged from last week. Meanwhile, 34% would vote for Labour, up 1% from last week. FTSE continues it's negative correlation with Pound and trades mildly lower today, down -0.3% at the time of writing. Technically, 1.2925 minor resistance in GBP/USD and 0.8654 minor support in EUR/GBP will be watched for indication of strength in the Pound.

Looking at other poll results, according to a poll by Survation for The Mail on Sunday, support for Conservative dropped further to 40%, while that for Labour rose to 39%. That is, the Tories are only have a 1-point lead over Labour. On other hand other, a ComRes poll showed that support for Conservatives rose one to 47% and that for Labour also rose one 35%. In that case, Tories still maintained a 12-point lead. In the middle, Opinium poll for the Observer found that support for Conservatives was down 2 points to 43%, and that for Labour was up 2 to 37%. That was a 6-point lead.

Turnout pattern weighs on election results

However, according to an article by Patrick Sturgis and Will Jennings of University of Southampton these polls tend to be wrong with historical tendency to "over-state Labour support". One of the key factor is that support for Labour appears to be "soft" and they may change their mind before election day. Also, the turnout rate and pattern would have a huge impact on the actual results. Based on their model, the ever lead of Conservatives over Labour could be doubled from 5 to 10 pts after applying turnout weight.

UK PMI services missed

UK PMI services dropped sharply to 53.8 in May, down from 55.8 and below expectation of 55.0. Markit noted in the release it's seeing "a renewed slowdown in business activity growth across the UK service economy, following the four-month peak achieved in April." And, "optimism about the year ahead is running below the long-run average, weighed down principally by concerns over Brexit, political uncertainty and weaker spending by households".

Eurozone PMI services revised up

Eurozone PMI services was revised slightly up to 56.3 in May. Overall composite PMI was unchanged at 56.8. Markit noted that "the outlook for the Eurozone economy seems to be tilting to the upside, and it seems likely that we'll start to see many forecasters' expectations for 2017 growth revised higher." Also, "with the rate of job creation rising to one of the highest seen over the past decade, the recovery is also becoming more sustainable, as the improved labour market should feed through to higher consumer spending."

Also from Europe, Germany PMI services was revised up to 55.4 in May. France PMI services was revised down to 57.2 in May. Italy PMI services dropped to 55.1 in May.

China PMI services improved

China Caixin services PMI rose to 52.8 in May, up from 51.5, beat expectation of 51.4. Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group noted that "the improvement in the services sector bolstered the Chinese economy in May." But he also warned that "the rapid deterioration in the manufacturing industry is worrying. We need to closely monitor whether the diverging trends in manufacturing and services will widen further." Released last week the Caixin PMI manufacturing dropped to 49.6, the first contraction reading in nearly a near.

RBA in upcoming Asian session

RBA will announce rate decision in the upcoming Asian session. The central bank is widely expected to keep the key interest rate unchanged at 1.50%. Most economists expect RBA to stand pat at least through 2017. But there are some who warned of the risk of a cut this year as the economy under performs RBA's forecast. AUD/NZD's fall from .1017 accelerated to as low as 1.0389 last week but rebounded from there since then. The corrective three wave structure of the rise from 1.0234 to 1.1017 suggests medium term bearishness. Hence we'd expect recovery to be limited by 1.0608 resistance to bring another fall through 1.0234. There is prospect of a test on 2015 low at 1.0016 in medium term.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2854; (P) 1.2879; (R1) 1.2913; More...

GBP/USD recovers again today but at this point it's staying below 1.2926 minor resistance. Intraday bias remains neutral and deeper fall is still in favor. Break of 1.2768 will turn bias to the downside for 1.2614 resistance turned support first. Break there should also indicate completion of whole consolidation pattern from 1.1946 and target a retest on this low. However, break of 1.2926 will turn focus back to 1.3047 instead.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. The rejection from 55 week EMA is maintaining bearishness in the pair. Also, at this point, as long as 1.3444 resistance holds, fall from 1.7190 is still expected to continue. Break of above mentioned 1.2614 support will affirm this bearish case.

Economic Indicators Update

The DAX index has started the trading week with gains. The index is closed on Monday, as German stock exchanges are closed for a holiday. The DAX closed on Friday at 12,822.84 points. On the release front, Eurozone and German Services PMIs continue to point to expansion. German Services PMI was unchanged in May, with a reading of 55.4, just above the forecast of 55.2 points. Eurozone Services PMI inched lower to 56.3, edging above the forecast of 56.2 points. On Tuesday, the Eurozone releases Sentix Investor Confidence and Retail Sales.

The DAX drifted for most of last week, but showed some life in the Friday session, posting strong gains of 1.25%. German stock markets took advantage of a weaker US dollar, which lost ground to the euro after soft US employment numbers on Friday. The markets were genuinely surprised at the Nonfarm Payrolls report. The economy produced just 131 thousand jobs, well short of the forecast of 181 thousand. Wage growth remains weak, and edged down from 0.3% to 0.2%. The unemployment rate dropped to 4.3%, but this reading can be largely explained by a decline in the participation rate. The disappointing employment reports are unlikely to alter the Fed's plan to raise rates next week, but policymakers will remain very cautious about additional rate hikes in the second half of the year.

Stock markets on both sides of the pond are keeping a close eye on the Federal Reserve, which holds its policy meeting on June 14. The odds of a rate hike have climbed to 96%, according to the CME Group, up from 88% just a week ago. Last week's dismal Nonfarm Payroll report has failed to put a dent in market confidence in a June rate hike. Traders should note that ahead of the March hike, the odds of a rate hike were also close to 100%, and the dollar actually lost ground after the Fed followed through with a quarter-point increase. Although an increase in interest rates would mark a vote of confidence in the US economy, the Fed continues to have concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets are skeptical, with the odds of a September rate hike at just 26%.

As doubts grow of over-supply in the Oil market, its price continues to drift lower, putting pressure on the CAD, I expect this weakness of the CAD to be more prevalent than the USD weakness of recent. At this point we can see a slow bullish grind on intra day time frame towards W H4/D H5 confluence zone 1.3540-50. The POC zone (trend line, 50.0, D L3, Atr pivot, historical buyers) might spike the price up towards 1.3500, 1.3520 and if 1.3520 breaks towards 1.3550. The price is above W L3 and D L3 so the bulls are currently in control. The price should ideally stay above 1.3422 for bullish outcome.