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The Greenback was under pressure on Tuesday with prices finding comfort near a six-month low against a currency basket as political turmoil in Washington weighed heavily on sentiment. A growing sense of anxiety over Trump's ability to move forward with the pro-growth policies amid this uncertainty has added to the downside risks. With the soft U.S economic data compounding to an already messy mix yet again, questions have been raised over the impact this will have on the Fed hawks.

Much attention will be directed towards the pending Fed minutes on Wednesday which investors expect to provide some sort of confirmation of a rate hike in June. Although the Federal Reserve has placed itself on an aggressive hiking path this year, the combination of political instability in Washington and soft economic data could obstruct the central bank's efforts to raise rates three times this year. The rising Trump jitters are likely to influence the Federal Reserve's monetary stance in the longer term with the third pending rate hike in 2017 coming under threat.

From a technical standpoint, the Dollar remains heavily pressured on the daily charts. Repeated weakness below 97.00 should encourage a further decline towards 96.00.

Euro continues to shine

A noticeable relief from political risk in Europe has boosted the appetite for the Euro this month with prices skyrocketing to a fresh six-month high above 1.1200 as of writing. With Emmanuel Macron's market friendly victory in the French elections dealing a symbolic blow to populism, investors have redirected all their attention towards the improving economics of Europe. There is a growing possibility of the European Central Bank rattling the financial markets in the pending ECB meeting as the recent political relief invites ECB hawks. With economic data from Europe following a positive trajectory, the European Central Bank could start considering a stimulus exit at the next meeting which may strengthen the Euro further.

From a technical standpoint, a vulnerable Dollar has attributed to the upside rally on the EURUSD and has the ability to send the EURUSD towards 1.1300. A breakout above 1.1300 should provide enough encouragement for bulls to target 1.1500.

Sterling steady ahead of inflation report hearing

Sterling edged lower on Tuesday as investors remained on standby ahead of the Inflation Report Hearing at the UK Treasury Select Committee. With the repeatedly soft economic data and uncertainty over Brexit weighing on sentiment, it will be interesting to see how today's inflation report hearing plays out. A verbal battle between BoE Mark Carney and the treasury committee over Brexit and the economic outlook could spark some Sterling volatility.

The Brexit risk should limit gains on Sterling with further downside expected in the medium to longer term as the official Brexit talks and negotiations get under way. GBPUSD bears need to break back below 1.2900 to open a path lower towards 1.2775.

Commodity spotlight – Gold

Gold edged higher on Tuesday with prices clipping above $1260 as political uncertainty in the U.S and geopolitical tensions boosted appetite for safe-haven investments. Bulls remain in control on the daily charts and should be instilled with enough inspiration to conquer $1260 this week if the Dollar continues to depreciate. Although U.S rate hike expectations may dictate where Gold trades in the longer term, short term bulls remain in firm control with further upside expected once $1260 is breached. Technical traders may exploit the decisive break and daily close above $1260 to propel prices higher towards $1275.

Tuesday May 23: Five things the markets are talking about

Trump risk and geopolitical concerns triggered by the U.K news overnight has investors prone to risk-aversion moves.

The yen has rallied and the pound has dropped along with stocks, as the market turns cautious after a suspect terrorist bomb attack in the U.K and the latest reports on the Trump administration.

In the U.S, political wrangling returns to the fore, taking the focus away from global economic growth. It's being reported that President Trump asked intelligence chiefs to publicly deny any collusion between his campaign and Russia.

Also, the White House is set to deliver Trump's first full budget to lawmakers later today. The plan is to cut -$3.6T in government spending over 10 years - Investors should expect fallout.

1. Stocks mixed results

Risk aversion mood has kept many investors on the sidelines overnight.

In Japan, the Nikkei stock average fell -0.1%. Its broader Topix dropped -0.2%.

In South Korea, the Kospi rallied +0.3%, while in Hong Kong, the Hang Seng fell -0.1%.

In China, the Shanghai Composite Index lost -0.5%.

The selloff of Brazilian assets has resumed, the Ibovespa index has slumped another -3.9% in overnight trading as a political crisis has returned to the country after last year's impeachment process.

In Europe, regional indices are trading modestly higher buoyed by stronger PMI and IFO data out of Europe (see below). Some positive earnings results are also adding to the sentiment.

U.S stocks are set to open in the black (+0.1%).

Indices: Stoxx50 +0.6% at 3598, FTSE +0.2% at 7509, DAX +0.3% at 12660. CAC-40 +0.7% at 5359, IBEX-35 +0.9% at 10885, FTSE MIB +0.6% at 21449, SMI -0.4% at 9049, S&P 500 Futures +0.1%

2. Oil prices fall on White House proposal to sell U.S oil reserves, gold unchanged

Ahead of the U.S open, oil prices are under pressure, weighed down by Trump's plan to sell off half of the U.S's stockpile, threatening a future and further "glut" despite OPEC trying to tighten the market.

Brent crude has ended a run of four consecutive session gains to trade -36c lower at +$53.51 per barrel. U.S. light crude (WTI) is down -33c at +$50.80.

Note: The White House plans to sell -50% of its oil stockpile from 2018 to 2027 to raise +$16.5B to help balance the budget. The budget is to be delivered to Congress today.

OPEC meet on Thursday, May 25 and are expected to extend the period of their pledge to cut output by -1.8m bpd from just the first half of this year to all of 2017 and the first quarter of 2018.

Note: Yesterday, Kuwait's oil minister said 'not' all OPEC countries and allies were on board for a nine-month extension and producers would discuss this week whether to extend output cuts by six or nine months.

Gold prices are little changed (+$1,259.49 per ounce) despite the geopolitical events overnight. President Trump controversies and a weaker USD have been providing the yellow metal support over the past week.

Note: Spot gold advanced +2.2% last week over Trump's alleged links to Russia and his firing of former FBI chief James Comey raised concerns about his ability to push through promised fiscal stimulus.

3. U.S debt supply to back up yields

This week's U.S Treasury debt supply is expected to back up U.S yields a tad. Today, there is +$26B sale of two-year notes is due, followed by +$34B five-year notes tomorrow and +$28B sale of seven-year notes Thursday.

Ahead of the U.S open, 10's are trading at +2.24%. U.S yield have been under pressure by political worries out of D.C. that is deflating investors' optimism towards a rollout of large fiscal stimulus this year.

Note: The Fed's minutes for May are due tomorrow afternoon. The market will focus on clues about the pace of interest-rate increases as well as discussions about how to wind down the Fed's balance sheet.

Currently, fed funds show a +79% chance that the Fed would raise short-term interest rates at its June 13-14 meeting - the odds was at +74% on Friday and +51% a month ago.

Elsewhere, yields on Aussie debt lost -4 bps to +2.45%, while German bunds slipped -1 bps, France and the U.K fell -2 bps.

4. U.S dollar losing its luster

The EUR/USD (€1.1258) trades atop of its six-month high aided by yesterday's comments from German Chancellor Merkel reiterating that the large German surpluses are being "aided by a weak EUR currency." Other regional data (see below) this morning is also providing the single unit support.

The pound (£1.2988) is off its overnight highs on the terror incident in Manchester, but still within reach of the psychological £1.3000 handle. However, to many, £1.3000 is considered the key pivot and with any momentum through theses levels expect the structural shorts out there post-Brexit will be looking to wind back. Short-term sterling bulls are now targeting £1.3350/1.3400.

JPY (¥111.14) has befitted from safe-haven flows following the U.K terror incident.

5. Eurozone composite PMI stronger than expected

Data this morning showed that the composite PMI for the eurozone was slightly stronger than expected in May, with an unchanged reading of 56.8 comparing to a consensus forecast for a slight drop to 56.6.

Digging deeper, it's a six-year high and points to robust growth in Q2. Most of the support comes from France and Germany, both of which recorded significant increases, while other economies slowed.

The surveys also pointed to a possible weakening of activity in coming months, with new orders at their lowest for four-months. Inflationary pressures have also eased slightly.

The DAX index has edged upwards on Tuesday, reversing the losses which marked the Monday session. Currently, the DAX is trading at 12,679.50 points. On the release front, German and eurozone numbers were solid. German Final GDP posted a gain of 0.6%, matching the forecast. There was positive news from the manufacturing sector, as German and Eurozone Manufacturing PMIs beat their estimates. As well, German Ifo Business Climate rose to 114.6, easily beating the estimate of 113.1 points.

Germany's economy continues to perform well, and this has meant stronger growth for the euro-area. German numbers continue to impress. Final GDP for the first quarter remained at a respectable 0.6%, unchanged from the Preliminary GDP reading. The Ifo Business Climate report sparkled, climbing to 114.6, marking its highest level since 1991. As well, the manufacturing sector continues to expand, as German Manufacturing PMI improved to 59.4, its highest reading since February 2011. Exports and manufacturing propelled the economy in the first quarter, and these sectors should remain strong, so we can expect strong economic expansion in the second quarter as well. The strong manufacturing numbers in Germany have also boosted eurozone numbers, as the manufacturing sector continues to expand. Eurozone Manufacturing PMI climbed to 57.0 in April, the ninth straight month that the indicator has improved.

Greece hasn't been in thee headlines for quite some time, but that could change. EU finance ministers met on Monday, and a key issue was debt relief for Greece. However, the ministers could not reach an agreement, and opted to try and hammer out an agreement at the June meeting. The uncertainty caused by the delay will only exacerbate concerns about the fragile Greek economy. Greece has undergone a severe austerity plan and understandably, the Greek government is reluctant to adopt further painful measures. Greece could be headed on a collision course with the EU, if the latter insists that the further reforms are needed. German Finance Minister Wolfgang Schaeuble praised the reforms implemented by Greece as “remarkable”, but insisted that Greece must take further steps before the EU provides further financial aid. Greek's debt woes once resulted in the country almost leaving the eurozone, and if the EU holds up aid, the euro could lose ground.

The euro has edged higher in the Tuesday session, as EUR/USD is currently trading at 1.1250. In economic news, it's a very busy day in the Eurozone. German Final GDP posted a gain of 0.6%, matching the forecast. There was positive news from the manufacturing sector, as German and Eurozone Manufacturing PMIs beat their estimates. German Ifo Business Climate rose to 114.6, easily beating the estimate of 113.1 points. In the US, today's highlight is US New Home Sales, which is expected to drop to 611 thousand.

German numbers continue to impress, and a strong German economy has helped lift up the eurozone economy, which hasn't looked this strong in years. German Final GDP for the first quarter remained at 0.6%, unchanged from the Preliminary GDP reading. The Ifo Business Climate report sparkled, climbing to 114.6, marking its highest level since 1991. As well, the manufacturing sector continues to expand, as German Manufacturing PMI improved to 59.4, its highest reading since February 2011. Exports and manufacturing propelled the economy in the first quarter, and these sectors should remain strong, so we can expect strong economic expansion in the second quarter as well. Eurozone numbers are likewise pointing to expansion, as reflected in the manufacturing sector. Eurozone Manufacturing PMI also impressed at 57.0, the ninth straight month that is has improved.

EU finance ministers met on Monday, and a key issue was debt relief for Greece. However, the ministers could not reach an agreement, and opted to try and hammer out an agreement at the June meeting. The uncertainty caused by the delay will only exacerbate concerns about the fragile Greek economy. Greece has undergone a severe austerity plan and understandably, the Greek government is reluctant to adopt further painful measures. However, Greece could be headed on a collision course with the EU, if the latter insists that the further reforms are needed. German Finance Minister Wolfgang Schaeuble praised the reforms implemented by Greece as “remarkable”, but insisted that Greece must take further steps before the EU provides further financial aid. Greek's debt woes once resulted in the country almost leaving the eurozone, and if the EU holds up aid, the euro could lose ground.

GOLD Medium-term bullish

Gold seems on its way back up. Hourly support is located at 1246 (18/05/2017 low). Stronger support is given at 1195 (10/03/2017 low). Expected to show further upside pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

SILVER Short-term bullish.

Silver increases. Strong support is given at 15.63 (20/12/2017 low). Closest support is given at 16.20 (04/05/2017 low). Key resistance is given at a distance at 19.00 (09/11/2017 high). Expected ton increase until 50% Fibonacci retracement around 17.30.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

CRUDE OIL Positive technical structure.

Crude oil continues to bounce on shortsqueeze move. Support is given at a distance 43.76 (05/05/2017 low). Demand is very strong and the road is wide-open for further increase.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 (13/11/2002) while resistance can now be found at 55.24 (03/01/2017 high).

GBP/USD – 1.2965

Recent wave: Wave V of larger degree wave (III) has ended at 1.1986 and major correction has commenced from there for gain to 1.3000 and 1.3140-50

Trend: Near term up

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although cable jumped to as high as 1.3043 yesterday, failure to penetrate indicated resistance at 1.3048 and the subsequent retreat has retained our view that further consolidation below this level would be seen and pullback to 1.2940 cannot be ruled out, however, reckon downside would be limited to 1.2920-25 and bring another rise later. A break of said resistance at 1.3048 would confirm upmove has resumed and extend further rise to 1.3075-80, then 1.3100-10 but near term overbought condition should limit upside to 1.3050-60 and price should falter well below 1.3100-10.

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has ended at 1.7192, the subsequent selloff is the larger degree wave (C) which is still unfolding with minor wave (III) of larger degree wave 3 ended at 1.1986, hence wave (IV) correction is in progress which could either be a triangle wave (IV) of a complex formation but upside should be limited to 1.3500 and price should falter well below 1.4000, bring another decline in wave (V) of 3 for weakness to 1.1500, then 1.1200.

On the downside, whilst pullback to 1.2940 is likely, reckon 1.2920-25 would limit downside and bring further consolidation. Only below said support at 1.2889 would signal top has been formed at 1.3048 and bring retracement of recent upmove to 1.2866, then towards previous support at 1.2844 which is likely to hold from here.

EUR/JPY Sideways price action.

EUR/JPY is trading mixed. Hourly support is given at 122.56 (18/05/2017 low). Major support is given at 114.90 (18/04/2017low). Expected to see further renewed buying pressures towards 126.00.

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away

EUR/GBP Growing demand.

EUR/GBP is strengthening. The technical has turned positive since the pair has broken resistance at 0.8530 (25/04/2017 low). Support can be found at 0.8304 (05/12/2017 low). Expected to see further continued increase towards 0.8700.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.

EUR/CHF Bullish consolidation.

EUR/CHF is trading higher. Despite the sharp increase and the recent bullish breakout which was very likely psychological, we believe that the medium-term pattern suggests us to see at some point renewed bearish pressures towards key support that can be found at 1.0623 (24/06/2016 low).

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

GBP/JPY - 144.25

Recent wave: Medium term low formed at 120.50 and (A)-(B)-(C) major correction has commenced with (A) leg ended at 148.45, hence wave (B) is unfolding for retreat to 131.00-10.

Trend: Near term up

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Sterling has remained confined within recent established range and although weakness to 143.75-80 cannot be ruled out, reckon downside would be limited and previous support at 143.37 should hold, bring rebound later. Only a drop below this level would signal the decline from 148.11 top has resumed for correction of early upmove to 143.00, then 142.30-35 which is likely to hold from here.

On the upside, whilst recovery to 144.70-75 cannot be ruled out, reckon upside would be limited to 145.10 and resistance at 145.39 should hold from here. Only a break of this level would revive near term bullishness for the rebound from 143.37 to extend gain to resistance at 145.90-95, having said that, break there is needed to confirm low has been formed, bring a stronger rebound to 146.30-35 but resistance at 147.10 should remain intact, bring retreat later.

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.


USD/CHF Weakening towards support at 0.9550.

USD/CHF continues to push lower since the pair broke support located at 0.9814 (27/03/2017 low). Strong resistance is given at 1.0107 (10/04/2017 high). Expected to continue going lower.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January

USD/CAD Continued weakness.

USD/CAD keeps on weakening since the pair reached 1.3800. Hourly support can be found at 1.3411 (24/04/2017 high) then 1.3353 (20/01/2017 high). Expected to show continued bearish pressures.

In the longer term, there is a golden cross with the 50 dma crossing the 200 dma indicating further upside pressures. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Breaking symmetrical triangle.

AUD/USD is pushing higher since the pair reached hourly support at 0.7329 (09/05/2017 low). As long as prices remain below the resistance at 0.7608 (17/04/2017 high), the shortterm technical structure is negative. Expected to show renewed weakness.

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Monitoring resistance at 1.1300

EUR/USD is trading higher towards strong resistance at 1.1300 (09/11/2017 high). Hourly support can be found at 1.0842 (11/05/2017 low). Strong support is now given at 1.0682 (21/04/2017 base) and key support can be found at 1.0494 (22/02/2017 low). Expected to continue growing higher.

In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD Holding below 1.3000.

GBP/USD is trading sideways. Hourly resistance is given at 1.3048 (18/05/2017 high). Hourly support are given at 1.2831 (04/05/2017 low) and1.2757 (21/04/2017 low). An unlikely break of this last support would indicate further weakness. Expected to push higher.

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Consolidating.

USD/JPY has exited the symmetrical triangle and keeps pushing lower despite ongoing bullish consolidation. Hourly support is given at 110.24 (18/05/2017 low). Stronger support is located at 108.13 (17/04/2017 low). Other key supports lie at a distant 106.04 (11/11/2016 low). The road is now wide-open for further decline.

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).