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For the 24 hours to 23:00 GMT, the AUD declined 0.08% against the USD and closed at 0.7438.

LME Copper prices rose 0.1% or $6.0/MT to $5671.0/MT. Aluminium prices declined 0.2% or $4.0/MT to $1950.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7427, with the AUD trading 0.15% lower against the USD from yesterday's close.

Early morning data indicated that Australia's seasonally adjusted building approvals rebounded 4.4% on a monthly basis in April, more than market expectations for an advance of 3.0%. In the preceding month, building approvals had fallen 10.3% in the prior month.

The pair is expected to find support at 0.7412, and a fall through could take it to the next support level of 0.7397. The pair is expected to find its first resistance at 0.7446, and a rise through could take it to the next resistance level of 0.7465.

Looking ahead, investors will focus on Australia's private sector credit data for April, slated to release tomorrow.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.26% against the USD and closed at 1.1136, on dovish comments from the European Central Bank (ECB) Chief, Mario Draghi.

The ECB President, in his testimony to the European Parliament, reaffirmed his view that the Euro-zone's economy still needs support of the central bank's expansive monetary stimulus to durably stabilise inflation around 2.0%, even though the common currency region is showing strong resurgence in the economic growth. Further, Draghi added that the ECB will be in a better position at its June meeting to reassess the outlook for growth and inflation.

On Friday, data indicated that Italy's consumer confidence index dropped more-than-anticipated to a level of 105.4 in May, compared to a revised reading of 107.4 in the prior month, while markets were expecting the index to ease to a level of 107.3.

On Friday, the second estimate of US annualised gross domestic product (GDP) was revised up sharply to 1.2% on a quarterly basis in the first quarter of 2017, compared to an advance of 0.7% registered in the preliminary print, suggesting that weakness in the nation's economic performance is likely to be transitory. However, it was the weakest performance since the first quarter of 2016. The GDP had risen 2.1% in the previous quarter, while investors had envisaged the nation to expand 0.9%.

In other economic news, flash durable goods orders in the US eased less-than-expected by 0.7% on a monthly basis in April, dropping for the first time in five months and compared to market expectations for a fall of 1.5%. In the prior month, durable goods orders had gained by a revised 2.3%. Meanwhile, the nation's final Reuters/Michigan consumer sentiment index rose less-than-expected to a level of 97.1 in May, compared to a reading of 97.0 in the previous month, while the preliminary print had indicated an increase to a level of 97.7.

Separately, on Friday, the Federal Reserve (Fed) Bank of San Francisco President, John Williams, reiterated his view that the Fed is likely to raise interest rates a total of three times this year.

In the Asian session, at GMT0300, the pair is trading at 1.1128, with the EUR trading 0.07% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1103, and a fall through could take it to the next support level of 1.1079. The pair is expected to find its first resistance at 1.1171, and a rise through could take it to the next resistance level of 1.1215.

Moving ahead, investors will look forward to Germany's flash inflation figures and the Euro-zone's final consumer confidence data, both for May, slated to release in a few hours. Moreover, in the US, consumer confidence, personal income and personal spending data, all for May, set to be released later today, will be on investors' radar.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP slightly rose against the USD and closed at 1.2820.

In the Asian session, at GMT0300, the pair is trading at 1.2817, with the GBP trading marginally lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2791, and a fall through could take it to the next support level of 1.2766. The pair is expected to find its first resistance at 1.2846, and a rise through could take it to the next resistance level of 1.2876.

Going ahead, market participants await the release of UK’s consumer confidence data for May, scheduled to release overnight.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.1% against the JPY and closed at 111.26.

In the Asian session, at GMT0300, the pair is trading at 110.84, with the USD trading 0.38% lower against the JPY from yesterday's close.

Overnight data showed that Japan's jobless rate remained unchanged at 2.8% in April, meeting market expectations. Meanwhile, the nation's seasonally adjusted retail trade advanced more-than-expected by 1.4% MoM in April, compared to a gain of 0.2% in the previous month. Market expectation was for retail trade to climb 0.1%. Also, the nation's large retailers' sales rebounded 1.1% in April, following a drop of 0.8% in the previous month.

The pair is expected to find support at 110.61, and a fall through could take it to the next support level of 110.39. The pair is expected to find its first resistance at 111.23, and a rise through could take it to the next resistance level of 111.63.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.35% against the CHF and closed at 0.9788.

On the macro front, Switzerland's total sight deposits inched up to a level of CHF576.0 billion in the week ended 26 May, from CHF575.5 billion reported in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9787, with the USD trading marginally lower against the CHF from yesterday's close.

The pair is expected to find support at 0.9748, and a fall through could take it to the next support level of 0.9709. The pair is expected to find its first resistance at 0.9810, and a rise through could take it to the next resistance level of 0.9833.

Moving ahead, traders await the release of Switzerland's KOF leading indicator data for May, due in a few hours.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.07% against the CAD and closed at 1.3472.

In the Asian session, at GMT0300, the pair is trading at 1.3474, with the USD trading a tad higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.3442, and a fall through could take it to the next support level of 1.3411. The pair is expected to find its first resistance at 1.3491, and a rise through could take it to the next resistance level of 1.3509.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

Market movers today

Focus today will be on inflation in the US and Germany, which will provide an important gauge of the underlying inflation pressures after a couple of months with volatile readings due to the timing of Easter.

In the US, the PCE inflation data for April is released. After the weak CPI report earlier in May, we estimate that PCE core rose 0.1% m/m, implying a core inflation rate of just 1.4% y/y (a decline from 1.6% in March).

As a prelude to the highly important CPI release for the whole euro area economy tomorrow, German inflation figures are released today. In line with our expectation, markets expect them to fall back in May versus April.

In Sweden, the main event this week is undoubtedly 2017 Q1 GDP data released today. We expect growth to come in at around 2.5% y/y (calendar adjusted) which is well in line with our exanteforecast . In Norway we have retail sales (for more details see page 2).

Selected market news

Yesterday, the market kept a close eye on the Draghi hearing for monetary policy clues ahead of the 8 June ECB meeting. But Draghi stuck to the party line saying that " Despite a firmer recovery, and looking through the volatile readings in HICP inflation over recent months, underlying inflation pressures have remained subdued. Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation toward our medium-term objective. For domestic price pressures to strengthen, we still need very accommodative financing conditions, which are themselves dependent on a fairly substantial amount of monet ary accommodation". Draghi added: "We remain firmly convinced that an extraordinary amount of monetary policy support , including through our forward guidance, is still necessary for the present level of under-utilized resources to be re-absorbed and for inflation to return to and durably stabilize around levels close to 2 percent within a meaningful medium-term horizon".

Hence, there was no sign that the ECB is about to make a U-turn despite the better economic data from the euro zone. We continue to hold the view that the ECB will deliver a relatively dovish message next week and importantly keep the commitment to low or " lower" rates.

Following the French election and the strong support for Merkel's CDU in t he German ländern elect ions, we have seen less focus on European politics and instead the focus has moved back to the Trump administration. However, yesterday Italy came into the spot light once again. 10Y Italian government bonds lost 12bp to Germany after former prime minister Mat teo Renzi suggested on Sunday that Italy's next election should be held in September around the same time as Germany's, saying that this would reduce market uncertainty about Italy, not increase it. The fixed income market obviously did not agree. Given that the media also reported that an agreement on the Italicum (electoral reform) is getting closer, a snap election in the autumn has become more likely. Most political analysts until recently had looked for elections to take place early in 2018. The Italian bond market could potentially be in for a volatile summer.

Global Markets:

• Asian stock markets: Nikkei down 0.45 %, ASX 200 gained 0.05 %, Shanghai Composite and Hang Seng closed for holiday
• Commodities: Gold at $1270 (+0.15 %), Silver at $17.45 (+0.70 %), WTI Oil at $49.75 (-0.15 %), Brent Oil at $52.40 (-0.50 %)
• Rates: US 10-year yield at 2.24, UK 10-year yield at 1.02, German 10-year yield at 0.30

News & Data

• Japan Retail Sales y/y 3.2 % vs 2.3 % expected
• Japan Unemployment Rate 2.8 % vs 2.8 % expected
• Japan Household Spending m/m 0.5 % vs 1.1 % expected
• Japan Household Spending y/y -1.4 % vs -0.7 % expected
• Australia Building Approvals 4.4 % vs 3.0 % expected
• New Zealand Building Consents m/m -7.6 % vs -1.2 % previous
• Greece, Italy tensions hit euro, Asian stocks, lift yen, gold – RTRS
• Oil inches up in quiet holiday trade, focus on crude glut – RTRS
• Dollar firms against sterling, euro amid political uncertainties – RTRS
• Draghi says ECB stimulus still needed despite better growth – RTRS

Markets Update:

The Euro came under pressure following comments from ECB President Draghi and news that there might be an early election in Italy in September. Draghi stated that there is still need for a substantial stimulus as inflation remains subdued. Meanwhile, former Prime Minister Renzi, who is looking for a political comeback, said that he supports an election as early as September. Domestic stock markets reacted negatively, and Italian government bonds also declined.

EUR/USD fell from 1.12 to a low of 1.1120 in Asia. Immediate support is seen at 1.111, but the next important level is 1.1050.

GBP/USD is also suffering from political developments. British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points as the latest poll showed. Following the break below 1.2820 support, a test of 1.27 seems likely in the near-term.

The commodity currencies were quiet overnight. AUD/USD consolidated in a 0.7420-40 range, while NZD/USD traded between 0.7035 and 0.7055.

Upcoming Events:

• 07:45 BST – French GDP
• 10:00 BST – Euro Zone Consumer Confidence
• 10:00 BST – Euro Zone Business Climate
• 13:00 BST – German CPI
• 13:30 BST – US Personal Spending
• 13:30 BST – US Personal Income
• 13:30 BST – Canadian Current Account
• 15:00 BST – US CB Consumer Confidence

Currency pair EUR/USD

The EUR/USD has broken below the support trend line (dotted blue) which could kick start momentum within wave 3 (blue) towards the Fibonacci targets. A break above the resistance (red/orange) invalidates the wave 3 formation.

The EUR/USD seems to be building a 5 wave extension (purple) within the 3rd wave (blue).

Currency pair GBP/USD

The GBP/USD is building a small correction but a break below support (green) could see wave 3 (blue) continue.

The GBP/USD stopped and reversed at the 38.2% Fibonacci level of wave 4 (orange) as expected in yesterday's analysis. A break above the trend line (orange) could see price challenge higher Fibs but a break above the 61.8% Fib makes a wave 4 unlikely.

Currency pair USD/JPY

The USD/JPY is in a descending wedge pattern with support (green) and resistance (orange) nearby. A bearish break could see price fall towards the Fibonacci retracement levels of wave B (blue).

The USD/JPY broke below support (dotted blue) and completed a wave 4 (blue). Price remains in a 5th wave as long as it remains below resistance (orange).

Key Points:

• The pair has reached a very robust level of support.
• Upsides will be tangible but not as pronounced as last time's reversal.
• Keep an eye on the RBNZ's report, due shortly.

Given the rather sedate prior session resulting from public holidays in both the US and the UK, some of the more exotic crosses are worth investigating a little more closely today. In particular, the AUDNZD has set itself up for what could be a decent rally over the coming week – at least if its technical bias is anything to go by.

As is shown below, the rout that has been gripping the pair over the past few sessions has come to an abrupt end as support kicked in strongly. However, this really shouldn't come as a total surprise given that we have reached the point of intersection of the declining trend line and the lower extreme of the regression trend channel. What's more, the presence of this channel suggests that we might now see some form of recovery as we move forward.

Indeed, we are already beginning to see buying pressure return as the market attempts to relieve the highly oversold stochastic oscillator. If this continues, it could mean that we have a near-term corrective manoeuvre on our hands which is good news for the bulls out there. This being said, we aren't currently expecting to see a huge degree of upside action moving ahead as there is a highly robust zone of resistance in place at around the 1.0611 level.

More precisely, the intersection of the regression channel's basis line and the 38.2% Fibonacci level will likely prove to be a hard cap on gains without some form of fundamental upset. This cap is only reinforced by the parabolic SAR and EMA biases – both of which are bearish. Ultimately, whilst they shouldn't hamstring the bulls altogether, these readings are likely to prevent the kind of kneejerk price spike that we saw only a few weeks ago and this means that we are unlikely to see more than 70 pips netted in a single session this week.

Overall, expect to see some buying pressure coming down the line but don't ignore the presence of that resistance level. Although, keep half an eye on the RBNZ which will be releasing its Financial Stability Report shortly as this could generate some unexpectedly strong bullish sentiment for the pair should the bank have a more dour tone than we have seen recently.