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The much anticipated OPEC meeting held in Vienna yesterday saw the OIL cartel announce an extension of the oil production cuts until March 2018 as informally reported earlier. Yet, despite the announcement, crude oil prices fell sharply on the day with the NYMEX Crude oil futures falling 4.8% on the day.

The weaker oil prices also pulled down the price of other commodities including gold which slipped to $1256 an ounce. The US dollar managed to post some modest gains but remains largely flat, trading below the 97.50 handle.

In the UK, the Office for national statistics (ONS) revised down the first quarter GDP growth from the initially reported 0.3% QoQ to only 0.2%. The revised numbers came on account of consumers feeling the pinch with rising inflation and weak wage growth.

Looking ahead, the US Commerce department will be releasing the second revision to the first quarter GDP. Economists are expecting a higher revision to 0.9% from first estimates of 0.9%.

EURUSD intraday analysis

EURUSD (1.1197): The EURUSD attempted another go at testing the previous highs above 1.1200, but price action closed with a doji type candlestick pattern which indicates indecision in the markets.

However, for some meaningful correction to be expected, price action will need to follow through with a bearish close today, preferably below 1.1200. This will indicate a move towards the first support level at 1.1100. On the 4-hour chart, supporting the bearish view is the fact that yesterday's gains resulted in a lower high which suggests that some downside may be in store. The economic data today is relatively quiet as far as data from the eurozone is concerned, which will leave most of the heavy-lifting to the U.S. revised GDP numbers.

GBPUSD intraday analysis

GBPUSD (1.2888): The British pound tested the 1.3000 handle briefly yesterday before closing bearish. The price action currently is indicating further declines in GBPUSD. The bearish momentum came on a weaker than expected GDP numbers for the first quarter.

Support at 1.2800 remains as the key support to the downside which will be the initial target. On the 4-hour chart, the breakout validates the rising wedge pattern which will see price action extend the declines to 1.2800. In the event of a retracement, watch for the resistance level at 1.3000 region which is likely to be tested once again. However, in the near term, GBPUSD is expected to test the support at 1.2800.

EURCAD intraday analysis

EURCAD (1.5105): The EURCAD was bullish yesterday as the Canadian dollar was hit by the selling in oil prices. The declines came as crude oil prices fell sharply despite the OPEC announcement to cut oil production.

EURCAD posted a bullish close yesterday back at the resistance level of 1.5102 - 1.5147. The re-adjusted rising wedge pattern suggests that in the short term, price action could be seen moving slightly higher towards 1.5147, reaching the top end of the resistance level. Following this minor push, EURCAD could be seen eventually breaking out from the rising wedge pattern. Initial support at 1.4832 will be tested, followed by a test towards 1.4519.

Daily Pivots: (S1) 1.3417; (P) 1.3455; (R1) 1.3524; More....

A temporary low is in place at 1.3387 as USD/CAD recovered and intraday bias is turned neutral first. Some consolidation would be seen but upside should be limited by 1.3570 resistance and bring another fall. Below 1.3387 will target 1.3222 support first. As noted before, corrective rally from 1.2460 could have finished ahead of 1.3838 fibonacci level. Break of 1.3222 will affirm this case and target 1.2968 key support level for confirmation.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Weekly
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 19 Sep 2016
    •    Trend bias: Down

Daily
    •    Last Candlesticks pattern: Doji
    •    Time of formation: 28 Mar 2017
    •    Trend bias: Near term up



EUR/JPY – 124.81




Although the single currency has maintained a firm undertone and bullishness remains for recent rise from 114.85 to extend further gain to 125.05-10, however, break of previous chart resistance at 125.82 is needed to signal recent upmove has resumed and extend subsequent headway to 126.50-60, then 127.00-10 but near term overbought condition should limit upside and price should falter well below 128.00-10. If resistance at 125.82 continues to hold, then minor consolidation would take place and risk of another retreat to 123.90-00 and then 122.56 support cannot be ruled out, however, still reckon 121.60-65 (38.2% Fibonacci retracement of 114.85-125.82) would limit downside and bring another rise later.

On the downside, whilst initial pullback to 123.90-00 and then 123.00 cannot be ruled out, reckon downside would be limited to 121.60-65 (38.2% Fibonacci retracement of 114.85-125.82) and bring another upmove later to aforesaid upside targets. Below indicated previous support at 120.60 would abort and signal a temporary top has been formed, bring retracement of recent entire rise to 120.30-35 (50% Fibonacci retracement) and then 120.00 but reckon downside would be limited to 119.40-50 and price should stay above indicated support at 118.92, bring rebound later. 

Recommendation: Buy at 121.60 for 124.60 with stop below 120.60.

On the weekly chart, as the single currency has  continued trading with a firm undertone, suggesting the erratic rise from 109.49 low is still in progress and bullishness remains for this move to extend gain to 126.45-50, then towards 127.40-50, however, reckon another previous resistance at 128.23 would limit upside and price should falter below 129.60-65 (50% Fibonacci retracement of 149.79-109.49) and price should falter below psychological resistance at 130.00, bring retreat later next month.

On the downside, although initial pullback to 123.90-00 and possibly 123.00 cannot be ruled out, reckon downside would be limited to 122.40-50 and renewed buying interest should emerge around 121.60-65 and bring another rise later. Only below support at 120.60 would defer and risk weakness to the Kijun-Sen (now at 120.34) and then 120.00 which is likely to hold on first testing. Looking ahead, euro needs to penetrate indicated support at118.92 to shift risk to the downside for further fall to 118.00, however, downside should be limited to previous resistance at 117.82 and bring rebound later. A weekly close below 117.82 would suggest first leg of rebound from 114.85 has ended, bring weakness to 117.00 but price should stay above 116.20-25, bring another rebound later.

US Session Highlights

(US) Edmunds forecasts May US sales at 1.53M, +7.5% y/y; auto industry seasonally adjusted annual rate (SAAR) at 16.8M

(US) INITIAL JOBLESS CLAIMS: 234K V 238KE; CONTINUING CLAIMS: 1.92M V 1.93ME

(US) APR PRELIMINARY WHOLESALE INVENTORIES M/M: -0.3% V 0.2%E

(US) APR ADVANCE GOODS TRADE BALANCE: -$67.6B V -$64.5BE

Stocks continued to rise as markets were buoyed by strong earnings reports from retailers and positive unemployment data, despite the sharp drop in oil prices. S&P set another all-time intra-day high at 2418.7 before paring a bit to finish the day at its new highest close. The worst-performing S&P sector was Energy, dropping 1.7%, and the two best performing sectors were Consumer Discretionary and Utilities, gaining 1.1% and 0.9% respectively.

US markets on close: Dow +0.3%, S&P500 +0.4%, Nasdaq +0.7%

Best Sector in S&P500: Consumer Discretionary

Worst Sector in S&P500: Energy

Biggest gainers: BBY +21.5%; PVH +4.8%; CSRA +4.6%

Biggest losers: SIG -7.8%; RIG -7.6%; MRO -7.1%

At the close: VIX 10.0 (flat); Treasuries: 2-yr 1.29% (flat), 10-yr 2.26% (-1bps), 30-yr 2.92% (-2bps)

US movers afterhours

NTNX: Reports Q3 -$0.42 v -$0.43e, R$191.8M v $186Me; Guides Q4 -$0.38 v -$0.31e, R$215-220M v $202Me, gross margin ~58% ; +16.3% afterhours

DECK: Reports Q4 +$0.11 v -$0.06e, R$369.5M v $359Me; Guides Q1 -$1.70 to -$1.65 to $ v -$1.73e, Rev up low single digits % y/y; +12.9% afterhours

EGHT: Reports Q4 $0.05 v $0.03e, R$66.5M v $65.7Me; Guides initial FY18 Rev $296-300M v $295Me; income margin 7-9% ; +6.1% afterhours

ULTA: Reports Q1 $2.05 v $1.79e, R$1.31B v $1.28Be; +3.9% afterhours

COST: Reports Q3 $1.59 v $1.31e, R$28.2B v $28.7Be; +1.9% afterhours

MRVL: Reports Q1 $0.24 v $0.21e, R$579M v $570Me; -2.0% afterhours

SPLK: Reports Q1 -$0.01 v -$0.05e, R$242.4M v $233Me; Guides Q2 R$267-269M v $268Me, Non-GAAP op margin ~4% ; -5.7% afterhours

GME: Reports Q1 $0.63 v $0.49e, R$2.05B v $1.89Be; Affirms FY17 $3.10-3.40 v $3.25e, SSS (Ex Tech Brands) -5% to flat ; -6.9% afterhours

ZOES: Reports Q1 $0.01 v $0.01e, R$90.6M v $92.2Me; Cuts FY17 Rev $314-322M v $324Me, SSS -3% to flat; -10.8% afterhours

Politics

(US) White House advisor Jared Kushner said to be under the FBI investigation in Russia probe - US press

(US) Republican candidate Greg Gianforte wins Congressional seat in Montana, defeating Democrat Rob Quist

(UK) According to the latest YouGov/Times poll, Conservatives lead Labour by 43% to 38% ahead of June 8th elections (note: poll was taken after Manchester terror attacks); Smallest lead since Apr 2016

Key economic data

(JP) JAPAN APR NATIONAL CPI Y/Y: 0.4% (3-month high) V 0.4%E ; CPI EX FRESH FOOD (CORE) Y/Y: 0.3% (2-year high) V 0.4%E

(JP) JAPAN MAY TOKYO CPI Y/Y: 0.2% (6-month high) V 0.0%E; CPI EX-FRESH FOOD Y/Y: 0.1% (18-month high) V 0.0%E

(JP) JAPAN APR PPI SERVICES (CGPI) Y/Y: 0.7% V 0.9%E (3-month low)

(KR) South Korea May Consumer Confidence: 108.0 v 101.2 prior

Asia Session Notable Observations, Speakers and Press

Asian markets traded mixed despite continued bullish momentum on Wall St, where 6th consecutive gaining session took US cash indices to new record highs. US gains were particularly impressive given the large sell-off in Energy, as mere extension (rather than expansion) of OPEC supply cut weighed on oil prices to the tune of about 5%. Consumer discretionary has supported markets with a strong beat for big box electronics store Best Buy (up over 20%) as well as more strength in Amazon.

ASX200 is underperforming thanks to a drop in Mining space, with Dalian iron ore futures down 4% while tech-heavy Kospi is adding to its record highs with more gains. In FX, dollar majors are generally rangebound, though USD/JPY is under some notable pressure with a 40pip drop to 111.40. Comments from Fed's Bullard were seen weighing on the greenback as he noted prices deviating noticeably from 2% inflation path and called market expectations of 2 more rate hikes this year as too aggressive. GBP/USD was impacted to the downside as well, with the latest YouGov survey showing Conservative's lead over Labour continue to narrow ahead of next month's elections.

In economic data, rising energy prices last month are finally making a dent in disinflationary forces in Japan, as Headline CPI hit 3-month high while Core CPI (ex food) hit a 2-year high. Recall the latest soft patch of CPI prints, both in Japan and US, have been attributed to price pressure in mobile communications space.

China

(CN) Moody's comments following recent sovereign downgrade of China: China may no longer get A1 rating if there are signs that debt keeps rising and debt exceeds expectations

(CN) China can meet 2017 GDP target of around 6.5% despite slowing economic indicators in Apr - Chinese press

Japan

(JP) Japan PM Abe and US President Trump to hold bilateral meeting at G7 on Friday, May 26th - financial press

Australia/New Zealand

(NZ) Moody's: New Zealand budget shows better debt and growth than AAA rating

(AU) Capital Economics: Australia retail sales growth in April likely weak due to disruptions from Cyclone Debbie - press

Asian Equity Indices/Futures (00:45ET)

Nikkei -0.4%, Hang Seng flat, Shanghai Composite +0.1%, ASX200 -0.6%, Kospi +0.6%

Equity Futures: S&P500 flat; Nasdaq +0.1%, Dax -0.1%, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:45ET)

EUR 1.11.85-1.1215; JPY 111.55-111.85; AUD 0.7420-0.7460; NZD 0.7005-0.7025

June Gold +0.2% at 1,259/oz; July Crude Oil -0.6% at $48.60/brl; July Copper flat at $2.60/lb

(CN) PBOC SETS YUAN MID POINT AT 6.8698 V 6.8695 PRIOR

(CN) PBOC to inject combined CNY40B v CNY70B prior

(AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 1.7612%; bid-to-cover: 4.45x

Asia equities notable movers

Australia

Appen (APN) +4.5%; Guides FY17

Alumina (AWC) -1.6%; CEO sells shares

Ansell (ANN) -6.9%; Cut at UBS

Select Harvests (SHV) -9.7%; Cuts FY17 crop estimate to 13.5K-14K MT, expects material impact on earnings

Japan

Nissan (7201) -0.2%; China's GSR said to be close to $1B deal to purchase Nissan's rechargeable battery unit - financial press

Toshiba (6502) -0.2%; Western Digital said to secure large amount of financing and emerging as a frontrunner for Toshiba chip unit - Japan press

Hong Kong

Oriental Watch Holdings (398) +1.7%; Positive profit alert

China Agri-Industries Holding (606) +1%.6%; To acquire COFCO Fortune Foods for CNY1.05B in cash

GOME Electrical Appliances (493) +1.0; Reports Q1

Weekly
    •    Last Candlesticks pattern: Shooting doji
    •    Time of formation: 02 May 2016
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Bearish engulfing
    •    Time of formation: 5 May 2017
    •    Trend bias: Up


USD/CAD – 1.3408




As the greenback has dropped again after brief bounce to 1.3670, dampening our bullishness and suggesting top has been formed at 1.3794, hence consolidation with downside bias is seen for further weakness to the upper Kumo (now at 1.3357),  however, break of support at 1.3262 is needed to retain bearishness and bring test of key level at 1.3223. Looking ahead, only a daily close below this support would signal recent entire rise from 1.2461 has ended instead, bring further fall to 1.3150-60 and possibly towards 1.3100 but support at 1.3056 should remain intact and price should stay above 1.3009.

On the upside, whilst initial recovery to 1.3530-40 cannot be ruled out, reckon the Tenkan-Sen (now at 1.3555) would limit upside and bring another decline. Only a daily close above the Kijun-Sen (now at 1.3591) would defer and suggest first leg of decline from 1.3794 has ended instead, bring a stronger rebound to 1.3630 and then 1.3670 but upside should be limited to 1.3700-10 and price should falter below said resistance at 1.3794, bring another decline later. 


Recommendation: Sell at 1.3540 for 1.3340 with stop above 1.3640.


On the weekly chart, the greenback has slipped again this week after last week’s long black candlestick, reinforcing the view of a bearish reversal pattern (shooting doji), suggesting top has been formed at 1.3794 and consolidation with downside bias is seen for weakness to 1.3345-50, then towards 13262 support but break of key level at 1.3223 is needed to add credence to this view, bring further fall to 1.3140-50, then 1.3080-85, however, downside should be limited to 1.3000-10 and previous chart support at 1.2969 should remain intact.

On the upside, expect recovery to be limited to 1.3541 resistance and bring another decline. Above the upper Kumo (now at 1.3576) would bring a stronger rebound towards resistance at 1.3670 but still reckon upside would be limited to 1.3700 and bring another decline later. Only a break of 1.3794 resistance would revive bullishness and signal recent erratic upmove from 1.2461 (2016 low) has resumed and extend further gain to 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) and then 1.3900 but psychological resistance at 1.4000 should remain intact.

Daily Pivots: (S1) 1.2934; (P) 1.2967; (R1) 1.3007; More...

GBP/USD's fall from 1.3047 accelerates lower but it's staying above 1.2844 support for the moment. Intraday bias remains neutral first. As long as 1.2844 minor support holds, further rise remains mildly in favor. Nonetheless, as we are still viewing price actions from 1.1946 as a corrective move, we'd expect upside to be limited below 1.3444 resistance to bring near term reversal. On the downside, break of 1.2844 will indicate short term topping and turn bias back to the downside for 1.2614 resistance turned support first.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There are signs of reversal, like breaking of 55 week EMA, weekly MACD turned positive, and monthly MACD crossed above signal line. But still, break of 1.3444 resistance is need to confirm medium term bottoming. Otherwise, outlook will remains bearish for extend the down trend through 1.1946 low.

Daily Pivots: (S1) 111.54; (P) 111.74; (R1) 112.02; More...

No change in USD/JPY's outlook. The corrective price actions from 110.23 could still extend. But after al, it's a correction and the larger fall is expected to resume later. On the downside, below 110.85 minor support will turn bias to the downside to extend the fall from 114.36 to 108.12 low. Break there will resume the whole decline from 118.65. In that case, we'll look for bottoming signal again at 61.8% retracement of 98.97 to 118.65 at 106.48.

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) 0.9707; (P) 0.9722; (R1) 0.9745; More.....

Intraday bias in USD/CHF remains neutral as it's staying in consolidation from 0.9691. In case of another rise, upside is expected to be limited by 0.9858 support turned resistance and bring fall resumption. Whole decline from 1.0342 is still in progress and below 0.9691 will target 100% projection of 1.0342 to 0.9860 from 1.0099 at 0.9617. We'll start to look for reversal signal below there.

In the bigger picture, USD/CHF is 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.

Daily Pivots: (S1) 1.1185; (P) 1.1218 (R1) 1.1242; More....

Intraday bias in EUR/USD remains neutral as consolidation from 1.1267 is still in progress. We'd stay cautious on strong resistance from 1.1245/98 (138.2% projection of 1.0339 to 1.0828 from 1.0569 at 1.1245) resistance zone to limit upside and bring reversal. But decisive break of 1.1298 will carry larger bullish implication and target 1.1615 resistance next. On the downside, though, break of 1.1020 resistance turned support will indicate rejection from 1.1245/98 and turn bias to the downside for 1.0838 support first.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD now far above 55 week EMA. 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.

Market movers today

The main event today is the G7 meeting in Italy as well as the impact on inflation from the continued decline in the oil prices after the OPEC meeting.

There are only have a few data releases out of the US today, where the second round of US GDP numbers as well as the second estimated for PCE for Q1 are due to be published this afternoon.

Yesterday, European government bond yields fell on the back of the move in US Treasury yields on Wednesday after the release of the FOMC minutes. The minutes were seen to be dovish by the market. Given the comments from the FOMC, we have changed our call for three-four hikes to three hikes next year. There were also more signals on the reduction on the balance sheet (QT). Read more on our view on the Federal Reserve, rate hikes and QT in FOMC Minutes, Fed outlines QT principles and expects to hike soon, 24 May 2017.

Selected market news

The oil price continued to decline after the OPEC meeting disappointed the market. OPEC extended the supply cuts but the market had hoped for more. Read more here: Flash Comment International: OPEC supply cut extension disappoints the oil market, 25 May 2017.

This has dragged down energy shares in the Asian region and many of the Asian equity indices have declined this morning and have been unable to follow the positive sentiment from the US markets yesterday.

In the currency market, the euro is trying to break through the 1.12 versus the USD, while USDJPY has been range-trading around the 111-112 level. The People's Bank of China is planning to change the yuan reference calculation by adding a ‘counter-cyclical adjustment factor'. This should aim to limit big swings in the market.

The Fed's James Bullard supported the statements in the FOMC minutes in comments made to reporters in Tokyo this morning that the Fed is ‘very close' to where it needs to be on monetary policy.

In Europe, both Fitch and Moody's have published positive statements on Portugal after the EU commission recommended that Portugal should be exiting the ‘excessive deficit procedure'. Moody's notes this is a credit positive, while Fitch notes that this ‘underscores the strengthening in the country's public finances following policy adjustments and an economic recovery'. This is supportive for the PGB market even though short term, the focus will be on the possibility of additional issuance, as the Portuguese Debt Office recently announced that it will step up the repayment of the IMF debt.