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'The near-term balance of risk appears to favor JPY strength.' – Scotiabank (based on FXStreet)

Pair's Outlook

As was anticipated, the resistance area circa 111.40 caused the US Dollar to weaken against the Japanese Yen on Tuesday, with the weekly S1 at 110.76 limiting the losses. The pair remains contained within a specific trading range, namely between 110.50 and 111.40, leaving little room for another leg down. However, technical indicators suggest that bears are likely to prevail today, although from a broad technical perspective the Buck should strengthen. In either case neither the immediate support nor the resistance are expected to be pierced, leaving the USD/JPY pair to ‘consolidate' for another day ahead of the US NFP data.

Traders' Sentiment

There are 57% of traders holding long positions today (previously 58%), whereas 55% of all pending orders are to buy the Greenback.

'A U.S. rate hike is probably coming soon though the Federal Reserve may want to delay if inflation remains soft.' – Vijaykumar Vedala, Reuters

Pair's Outlook

Seems like the yellow metal is set to lose more value than it was previously though. On Wednesday morning the bullion managed to fall and traded below the weekly PP, which is located at the 1,261.80 mark and was set to provide support to the commodity price. Due to the fact that this level of significance has been passed from a technical analysis perspective it can be expected that the weekly S1 and the 55-day SMA are the next support levels to be reached. The just mentioned support levels are located, respectively, at 1,253.91 and 1,254.25 levels.

Traders' Sentiment

SWFX traders remain almost neutral, as 51% of open positions are long. Meanwhile, only 59% of set up orders are to buy the metal, compared to 66% of pending commands previously.

The Aussie dollar is back to red on Wednesday after attempts to extend Tuesday's strong recovery rally stalled at 0.7475, capped by top of 4-hr cloud.

Subsequent weakness is probing below 4-hr cloud at 0.7446 (also 50% retracement of 0.7415/0.7475 recovery rally), which may further weaken near-term structure and shift focus towards key near-term support at 0.7415 (Tuesday's low) and risk extension of pullback from 0.7516 high on break lower.

Mixed signals from daily studies show no clear near-term picture, with break through either pivot (0.7415 or 0.7475) needed for stronger direction signal.

Res: 0.7475, 0.7492, 0.7516, 0.7545
Sup: 0.7446, 0.7415, 0.7400, 0.7388

The Brexit negotiation process is one of the focuses of the upcoming UK election. Although the Conservative Party has pledged a smooth and orderly Brexit, Theresa May expressed on Monday evening that she will push for a hard Brexit without any deal than paying a hefty bill for leaving the EU. She expects a fair settlement to be reached between the UK and the EU.

It is inspiring to see the country has a leader with a strong posture. However, if the UK leaves the EU without any deal, then UK trade will be under the WTO (World Trade Organisation) rules where higher tariffs will be imposed on UK products being exported to the single market.

The tariff will likely cause substantial and adverse impacts on some sectors, such as the dairy and agri-food sectors with up to a 40% tariff and the automotive sector with up to a 10% tariff. UK exporters would be forced to either absorb the extra costs themselves or increase their product prices. The latter will result in inflation rising higher.

Labour Party leader Jeremy Corbyn said he would ensure a Brexit deal is made. However, Corbyn appears to have a soft stance on negotiating with the EU. If Labour wins, this uncertainty, and the markets’ disbelief in their ability to negotiate a fair divorce deal, will likely result in a GBP sell off.

If the polls continue to swing in favour of the Labour Party before the election date of June 8th it will likely deepen market concerns on vague post-Brexit political and economic prospects and further weigh on GBP.

There are plenty of complex issues that need to be discussed during the 2-year Brexit negotiation process. The associated Brexit turmoil, the uncertain economic outlook and the Bank of England unlikely to raise rate by end of 2019, will still likely pose downward pressure to GBP prospect.

On Tuesday, GBP/USD bulls retreated after approaching the significant resistance level at 1.2900. On Wednesday, during the early European session, GBP/USD bears are testing the significant support line at 1.2800 again. If the support is broken, we will likely see an extended downtrend. EUR/GBP hit a 3-day high of 0.8738 because of the weakening of GBP.

On Tuesday and Wednesday morning, the dollar index rebounded twice after testing the support line at 97.00. On Tuesday, spot gold rebounded after testing the support line at 1260.

US pending home sales for April will be released at 15:00 BST this afternoon. Be aware that it will likely affect USD and USD crosses.

EUR/USD

The EUR/USD pair ended day as it started, trading a handful of pips below the 1.1200 level, but intraday moves said much about were speculative interest is standing on these days. Headlines suggesting that Greece may default again spurred risk aversion during Asian trading hours, supporting temporarily the greenback, although once London opened, selling of the American currency resumed. What prevented the pair from appreciating further was a downward surprise coming from European data, as consumer confidence in the region fell 3.3 points in May, matching expectations, whilst the Economic sentiment indicator fell to 109.2 from previous 109.7, and against the 110.0 expected. Also, preliminary May German inflation came below previous and expected. Headline CPI dropped to 1.5% YoY from 2.0% YoY in April, while in the month, German prices decreased by 0.2%.

In the US, things were not better, as April spending and income figures came in line with market's forecasts, while the CB consumer confidence index fell for a second consecutive month, down to 117.9 from a previous 119.4, all of which maintained the dollar under pressure, prompting additional selling.

Technically, the pair remains unable to surpass the 1.1200 figure, although chances of a downward move are quite limited, as it's clear that the market is far from interested in buying the greenback. Not yet confirmed, a downward corrective movement may have been completed with Tuesday's slide down to 1.1109. In the 4 hours chart, the price is now battling around its 20 SMA that lost its bearish strength, whilst technical indicator have bounced from near oversold territory, now struggling around their mid-lines. The pair needs now to advance beyond 1.1220, the immediate resistance to be able to advance further, with scope to extend its rally beyond current yearly high and up to 1.1300.

Support levels: 1.1160 1.1120 1.1080

Resistance levels: 1.1220 1.1260 1.1300

USD/JPY

The USD/JPY pair closed the day below the 111.00 mark for the first time in two weeks, with the yen boosted at the beginning of the day by risk aversion, and comments from Yamaguchi, the Komeito Party leader, who said that the next Bank of Japan´s governor should avoid dramatic changes. Kuroda's term ends on April 2018. Additionally, US Treasury yields edged lower as US inflation data spurred concerns over Fed's ability to raise rates as soon as this June. Trading around 110.80, the pair is slowly gaining bearish traction, as intraday technical readings favor additional declines. In the 4 hours chart, the price moved further below its 100 and 200 SMAs that are still lacking directional strength, whilst the Momentum indicator turned south after faltering around their mid-lines, whilst the RSI indicator also turned south, now standing around 36. The pair has an immediate support at 110.50, the 61.8% retracement of its latest bullish run, the level to break to confirm a new leg south.

Support levels: 110.50 110.10 109.75

Resistance levels: 111.10 111.65 112.05

GBP/USD

The GBP/USD pair advanced for a second consecutive day, posting, however, some modest gains, as both currencies are among the weakest in the G10 bloc. Soft US data helped the pair to advance up to 1.2887 during US trading hours, but gains were quickly trimmed, as upcoming general elections in the UK and following start of Brexit negotiations, dent demand for the Pound. The UK will release its money figures this Wednesday, but will likely pass unnoticed in price action, although later on the week, the kingdom will release PMIs figures, which will have more weigh on the GBP's value. From a technical point of view, the risk remains towards the downside, given that in the 4 hour chart, the price remains well below a bearish 20 SMA, whilst technical indicators head nowhere, but hold within negative territory. Approaches to the 1.2920 region, will likely result in a retracement, not because of selling interest aligned around it, but because of dollar's bears taking profits out of the table, not willing to risk much ahead of June 8th.

Support levels: 1.2790 1.2765 1.2730

Resistance levels: 1.2840 1.2885 1.2920

GOLD

Spot gold was unable to sustain early gains, closing the day down at $ 1,262.97 a troy ounce, with no certain catalyst behind the decline and is spite of dollar's weakness. Risk aversion backed the metal at the beginning of the day, fueled by news suggesting that the country might opt out its next payment, but retreated after official sources denied it. Speculative interest is now centered on the upcoming US Nonfarm Payroll report to be released next Friday, hoping it will clear the picture over what the Fed will do this June. The technical picture has barely changed, as in the daily chart, the price remains within its latest consolidative range and above its moving averages, whilst technical indicators pulled modestly lower, but remain well above their mid-lines. In the 4 hours chart, however, the risk turned towards the downside, as the commodity settled below its 20 SMA, whilst technical indicators have entered negative territory, but have lost directional strength, overall indicating that a downward correction is possible, although far from suggesting a steeper bearish movement.

Support levels: 1,254.60 1,245.20 1,238.50

Resistance levels: 1,272.90 1,283.10 1,290.00

WTI CRUDE OIL

West Texas Intermediate crude oil futures edged lower on Tuesday, settling at $49.65 a barrel, weighed by news indicating that Libya's oil production is expected to start rising to 800,000 bpd. Speculative interest was already doubting OPEC's extension of its output cut deal would be enough to offset rising oil production, and news like this further dent sentiment towards the commodity. From a technical point of view, the daily chart shows that WTI managed to bounce from a bullish 20 SMA, whilst the Momentum indicator is losing downward strength, turning flat right above its 100 level, whilst the RSI indicator hovers around 50, indicating diminishing buying interest. In the shorter term, the 4 hours chart the price is struggling around a congestion of moving averages, whilst technical indicators turned lower within neutral territory, leaving it at risk of falling further, particularly on a break below 49.03, the daily low.

Support levels: 49.00 48.35 47.60

Resistance levels: 49.80 50.50 51.20

DJIA

Wall Street put an end to a seven-day winning streak, weighed by declines in the energy and the financial sector. The Dow Jones Industrial Average lost 50 points or 0.24%, to close at 21,029.47, while the S&P settled at 2,412.91, down 0.12%. The Nasdaq Composite ended at 6,203.19, after losing 7 points or 0.11%. Within the Dow, Goldman Sachs was the worst performer, down 1.6%, while Morgan Chase that shed 1.71%. Chevron and Exxon Mobile followed suit, undermined by weaker oil prices. Verizon Communications on the other hand, led winners' list with a 1.94% gain. The daily chart for the DJIA shows that the index remains above horizontal moving averages, whilst technical indicators keep losing ground within positive territory, increasing chances of a downward corrective movement. In the 4 hours chart, the technical outlook also favors a downward move, with the index developing below a marginally bearish 20 SMA, whilst technical indicators gain bearish traction within negative territory.

Support levels: 21,003 20,972 20,940

Resistance levels: 21,048 21,075 21,112

FTSE100

The FTSE 100 retreated from record highs, shedding 21 points this Tuesday to close at 7,526.51. The sour sentiment around European equities weighed on the Footsie alongside with further Pound's gains. Financial-related equities were among the worst performers, following the lead of their EU counterparts. Mediclinic international was the worst performer, down 3.25% and followed by Shire that lost 3.19%. 3i Group on the other hand led gainers for a second consecutive session, adding 2.30%. The index retains its bullish tone, although a downward corrective movement can't be disregarded, given that in the daily chart, technical indicators are beginning to pullback from overbought readings, although the index remains well above bullish moving averages, suggesting slides will likely remain limited. Shorter term, and according to the 4 hours chart, the technical outlook turned neutral, with the index now a few points above a horizontal 20 SMA, and technical indicators heading nowhere, with the Momentum around its mid-line and the RSI indicator around 58, this last, also limiting chances of a downward move.

Support levels: 7,515 7,490 7,455

Resistance levels: 7,554 7,590 7,620

DAX

European equities closed in the red this Tuesday, with the banking sector leading the way lower. The German DAX lost 30 points and closed at 12,598.68, with Deutsche Bank leading decliners with a 1.64% loss. European jitters weighed on equities, particularly on news that Italy may call for an early election. The banking sector in the country has been on a tear for over a year already, and the main reason why Mateo Renzi took a step down. Also, weighing on the DAX were softer-than-expected preliminary May figures. The index remained confined to a tight range daily basis, consolidating below a flat 20 DMA and with technical indicators gaining bearish traction within neutral territory, not enough to support a steeper decline, but suggesting buyers have taken a step back at the moment. Shorter term, and according to the 4 hours chart, the index was unable to advance beyond the 12,630 region, where the 20 SMA converges with the 100 SMA, whilst technical indicators lack directional strength, retaining a neutral stance.

Support levels: 12,542 12,490 12,430

Resistance levels: 12,631 12,675 12,729

EUR/USD

Current level - 1.1190

The recent rise from 1.1108 low signals a major reversal and the intraday bias here is positive, for a further appreciation towards 1.1267 peak, en route to 1.1300 area. 

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 110.93

A break through the crucial 111.50 will initiate an uptrend towards 113.00 hurdle. Major support is projected at 110.20.

GBP/USD

Current level - 1.2818

Yesterday's peak at 1.2890 shows a completion of the corrective rebound above 1.2770 and the downtrend is renewed, for a slide towards 1.2705 zone. Minor intraday resistance lies at 1.2840.

The pair remains at the back foot in early Wednesday's trading and returned below 111.00 handle after recovery attempts stalled at 111.22.

Tuesday's long red daily candle weighs on market, along with political uncertainty that prompted investors into safe haven assets.

Bearish setup of daily studies keeps the downside at risk, with focus on 110.50 (Fibo 61.8% of 108.11/114.36 rally) and key support at 110.23 (18 May low, reinforced by rising 200SMA.

Close below 110.50 is needed for bearish signal, while break below 110.23 would open another pivotal support at 110.00 (psychological support/daily cloud base).

Solid resistance at 111.34 (converged 10/55SMA's) should cap upside attempts and keep intact upper pivots at 111.80 (daily cloud top) and 112.12 (24 May recovery rejection).

Res: 111.34; 111.46; 111.80; 112.12
Sup: 110.66; 110.50; 110.23; 110.00

The Euro holds bullish near-term sentiment that was sparked by speculations about early change of the policy on Wednesday.

The pair rallies in early European trading after overnight's dips were contained above strong support at 1.1160 zone and is attacking 1.1200 barrier again.

Wednesday's long-tailed bullish daily candle is seen as bullish signal and break above daily Tenkan-sen (1.1182) and 10SMA (1.1187) will bring daily studies in full bullish setup.

Close above strong barrier at 1.1190/1.1207 zone (4-hr cloud top/Fibo 61.8% of 1.1268/1.1109 pullback/Wednesday's high) is needed to confirm reversal and open way for possible full retracement of 1.1268/1.1109 downleg.

Initial support lies at 1.1160, followed by strong support at 1.1109/04 (Wednesday's low/Fibo 38.2% of 1.0839/1.1268 upleg).

Today's release of EU inflation and unemployment data will be closely watched for further signals.

Res: 1.1207; 1.1234; 1.1250; 1.1268
Sup: 1.1 172; 1.1160; 1.1145; 1.1109

Cable was down in Asia and returned below 1.2800 handle on fall from session high at 1.2863. Sterling came under fresh pressure after release of results of the latest poll which showed that position of Conservative Party against its main rival, Labour party is weakening, just one week ahead of June 8 vote.

The pair dipped close to 26 May 1.2775 one-month low which offers solid support, reinforced by Fibo 38.2% of 1.2365/1.3047 rally.

Weak studies on lower timeframes see risk of further weakness after overnight’s recovery attempts were capped by hourly cloud and completion of asymmetric H&S pattern on hourly chart would generate stronger bearish signal.

Firm break below 1.2775 pivot would risk bearish acceleration towards 1.2706 (50% retracement and 1.2670 (top of rising daily cloud).

Bear-crosses 10/20SMA’s / daily Tenkan-sen/Kijun-sen) are forming on daily chart and signal increasing downside pressure.

Session high at 1.2863 marks initial resistance, followed by Tuesday’s high at 1.2887, which is expected to cap extended recovery attempts.

Res: 1.2820, 1.2831, 1.2863, 1.2887
Sup: 1.2787, 1.2775, 1.2755, 1.2706

The US dollar was mixed yesterday as the PCE data showed a 0.2% increase on the core or 1.5% on a year over year basis. This was below the Fed's 2.0% inflation target rate. However, personal income and spending both managed to post some modest gains, rising 0.4% on both as forecast.

The euro spiked higher back to $1.1200 before giving up the gains. The rally came on speculation that the ECB could remove the easing bias when it meets in June with the possibility of announcing further tapering as early as September. The euro, however, gave up the gains towards the close.

The monetary policy makers in the US, however, were slightly dovish with Lael Brainard saying that the soft inflation could lead her to reassess the path for monetary policy.

Looking ahead, the Eurozone's flash inflation estimates for May will be released today with expectations showing a modest decline following an increase in April. In Canada, the GDP numbers will be coming out for March with forecasts showing a 0.3% increase on a month over month basis.

EURUSD intraday analysis

EURUSD (1.1174): The EURUSD remained a bit volatile as price slipped to a 7-day low at $1.1109 before pulling back higher to close at $1.1184. Price action is likely to remain range bound into this Friday's payrolls numbers.

On the 4-hour chart, support at 1.1167 is critical as a breakout above this level could signal a continuation to the upside which will see EURUSD test $1.1262, close to the recent highs that were posted previously. However, a downside break below 1.1167 could signal a continuation to $1.1100 where a test of support is yet to be established.

GBPUSD intraday analysis

GBPUSD (1.2817): The British pound is seen consolidating near the $1.2800 support level with price action currently looking weaker and reversing yesterday's gains. However, the bias could remain to the upside in the near term.

Watch for a breakout above $1.2860 for further continuation towards $1.2900 and the possibility for theprice to test $1.3000 as well. Alternately, a break down below $1.12800 will signal a decline that will see price test $1.2600 support level. With the UK elections, just around the corner, the currency pair is likely to exhibit some volatility heading into the event

USDJPY intraday analysis

USDJPY (111.04): USDJPY is seen trading within 112.00 and 110.00 price levels since last week. The support level at 110.97 has been tested multiple times with price action consolidating into a triangle pattern.

A breakout to the upside could potentially signal a move towards 112.50 initially followed by a continuation in price towards 113.50. However, given the consolidation that has formed following the strong declines off 114.00, USDJPY could also slip towards 109.50 in the event of a break down below 110.79.