Sample Category Title

Notes/Observations

Emerging Europe inflation moves off multi-year highs (Czech and Hungary CPI below forecasts)

Overnight:

Asia:

China Apr CPI YoY reading hits a 3-month high (Y/Y: 1.2% v 1.1%e); PPI misses (Y/Y: 6.4% v 6.7%e)

BoJ summary of opinions from April 26-27th meeting. Should pursue easing as Japan needs more time than US to hit inflation target. Risks are balanced to downside due to risks posed by EU politics and US economic policy and geopolitical risks

BoJ Gov Kuroda reiterated there's still distance to hit 2% inflation and continue current ‘powerful' monetary easing. Yield Control (YCC) is main focus of BoJ monetary policy. JGB purchase amount and monetary base are merely guidelines; pace of JGB buys is now around ¥60T (official target is around ¥80T)

Europe:

Germany Fin Min Schaeuble predicted that ECB policy normalization would begin shortly; could assume that based on recent remarks of the ECB

IMF reiterated view that wants Germany to increase capital spending and infrastructure spending to strengthen inclusive growth and fight inequalities (**Note: comments following Germany Current Account Balance which hit a fresh record high at €30.2B)

National Institute of Economic and Social Research (NIESR) maintains 2017 GDP growth forecast at 1.7%. Reiterated view of expecting the first BOE rate hike in mid-2019. BOE probably won't raise rates before Brexit negotiations were concluded

Americas:

President Trump fired FBI Director Comey

Fed's Kaplan (moderate, voter): reiterates baseline expectation is still for 3 rate hikes this year

Fed's Rosengren (moderate, non-voter): a drop below 4% in unemployment would overheat the economy and prompt higher rates

Fed's George (hawk, non-voter): supports gradual interest rate increases; Fed should start reducing balance sheet this yea

Energy:

Weekly API Oil Inventories: Crude: -5.8M v -4.2M prior; 2nd straight draw and largest draw since Jan 4th

Economic Data

(JP) Japan Mar Preliminary Leading Index: 105.5 v 105.5e ior; Coincident Index: 114.6 v 114.7e

(NO) Norway Apr CPI M/M: 0.2 v 0.5%e; Y/Y: 2.2% v 2.5%e

(NO) Norway Apr CPI Underlying M/M: 0.3% v 0.5%e; Y/Y: 1.7% v 1.9%e

(SE) Sweden Apr PES Unemployment Rate: 3.8% v 3.9% prior

(FR) France Mar Trade Balance: -€5.4B v -€6.0Be

(FR) France Mar Industrial Production M/M: 2.0% v 1.0%e; Y/Y: 2.0% v +0.6%e

(FR) France Mar Manufacturing Production M/M: 2.5% v 0.9%e; Y/Y: 3.5% v 1.2%e

(CZ) Czech Apr CPI M/M: 0.0% v 0.3%e; Y/Y: 2.0% v 2.3%e

(CZ) Czech Apr Unemployment Rate: 4.4% v 4.4%e (lowest Since 2008)

(HU) Hungary Apr CPI M/M: 0.4% v 0.4%e; Y/Y: 2.2% v 2.3%e

(DK) Denmark Apr CPI M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.1%e (highest annual pace since Feb 2013)

(IT) Italy Mar Industrial Production M/M: 0.4% v 0.3%e; Y/Y: +7.6% v -1.9% prior; Industrial Production WDA Y/Y: 2.8% v 2.5%e v 1.9% prior

Fixed Income Issuance:

(SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month bills; Avg Yield: % v -0.6795% prior; bid-to-cover: 2.17x v 2.75x prior

(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2026 bonds; Avg Yield: 1.56% v 1.36% prior; Bid-to-cover: 2.20x v 1.79x prior

(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg Yield: -0.304% v -0.239% prior; Bid-to-cover: 1.73x v 1.76x prior

(EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.41% vs $35M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.3% at 3640, FTSE +0.1% at 7347, DAX -0.1% at 12742, CAC-40 -0.2% at 5388, IBEX-35 -0.6% at 10985, FTSE MIB -0.4% at 21398, SMI -0.8% at 9047, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes European indices trade mixed this morning with notable weakness in the Swiss SMI and out-performance in the FTSE. Insurance heavyweight AXA reported inline revenue and potential IPO of US unit helping lift shares, Hannover Re reported results which came light of views and as a result shares are trading lower. TalkTalk is one of the leading decliners in Europe after missing on Rev and cutting dividend. Earnings look set to continue as we approach the US morning with notable earnings from Coty, Time and Norweigen Cruise line.

Equities

Consumer discretionary [Just Eat [JE.UK] -1.0% (Hungryhouse acquisition referred to phase to by CMA), ITV [ITV.UK] -1.6% (Earnings)]

Consumer Staples [Compass [CPG.UK] flat (Earnings, Special div), Ahold Delhaize [AD.NL] +1.3% (Earnings), Air France [AF.FR] +3.0% (April Metrics)]

Industrials: [Barratt Developments [BDEV.UK] +3.9% (trading update), HeidebergCement [HEI.DE] -2.5% (Earnings)]

Financials: [Axa [CS.FR] +0.8% (Earnings, Intention to IPO US Unit), ING [INGA.NL] +1.8% (Earnings)]

Telecom: [TalkTalk [TALK.UK] -10% (Earnings, cuts div)]

Healthcare: [Roche [ROG.CH] -2.0% (Tecentriq Cancer drug fails to meet primary endpoint), Ion Beam [IBAB.BE] -11% (Earnings)]

Energy: [EDF [EDF.FR] -0.7% (Earnings)]

Speakers

Sweden Central Bank (Riksbank) Apr Minutes: Board in agreement on outlook for inflation; agreed that expansionary policy was still needed

Sweden Central Bank Gov Ingves noted that it was too early to change direction of policy. Economic activity continued to strengthen, but the political situation abroad was creating risks to economic development going forward. Inflation in Sweden had shown a rising trend for a few years, but was now expected to take slightly longer before stabilizing around 2%. Would continue to monitor the SEK currency (Krona)

Riksbank member Jansson: Inflation picture has deteriorated since Feb; possible to make a further rate cut; will wait-and-see if needed

Riksbank member Skingsley saw no convincing arguments for extending QE

Riksbank member Floden was opposed to more bond buying as current monetary policy was working

Greece Parliamentary speaker Voutsis: To table bailout prior actions bill by Sat, May 13th

UAE Oil Min Mazrouei: Optimistic about next OPEC meeting. To review several options at next OPEC meeting

Currencies

The FX markets saw little volatility in the session. A slightly softer USD was attributed to President Trump's firing of his FBI director.

The EUR/USD was hovering just under the 1.09 area. Dealers noted that the Greek 10-year govt bond yield was at its lowest since 2012 debt restructuring

GBP was firmer in the session with dealers attributing the strength to potential M&A flows. GBP/USD was approaching the 1.30 level which was last tested back in late Sept.

Fixed Income

Bund futures trade at 160.53 up 13 ticks, after North Korea's stated they will move ahead with a 6th nuclear test. A break of 160.15 support level could see lows target 159.01 followed by 157.50. Resistance lies at 160.81 level followed by 162.10.

Gilt futures trade at 127.08 modestly higher by 10 ticks, after a late gains from Treasuries and North Korea's comment. A continuation of the pullback from the 129.14 April 18th high has price eyeing the 126.41 support level. An acceleration lower could test the 125.80 region. Resistance stands at 128.01 then 128.51 followed by 129.14.

Wednesday's liquidity report showed Tuesday's excess liquidity surged to €1.654T a gain of €11B from €1.643T prior. Use of the marginal lending facility rose to €342M from €291M prior.

Corporate issuance saw over $10.3B come to market via 6 issues headlined by Costco Wholesale Corp $3.8B in a 4-part senior unsecured note offering and CK Hutchison Holdings $1.0B subordinated perpetual non-call five. In Europe, General Electric announced a 4-part euro-denominated bond offering.

Looking Ahead

(MX) Mexico Apr ANTAD Same-Store Sales Y/Y: 3.2%e v 4.0% prior

(MX) Mexico May Nominal Wages: No est v 4.7% prior

(UR) Ukraine Apr CPI M/M: 0.7%e v 1.8% prior; Y/Y: 12.5%e v 15.1% prior

05:30 (DE) Germany to sell €3.0B in 0% Apr 2022 BOBL

05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2022 and 2027 OT bonds

06:00 (PT) Portugal Q1 Unemployment Rate: No est v 10.5% prior

06:00 (PT) Portugal Mar Trade Balance: No est v -€0.8B prior

06:00 (IE) Ireland Mar Property Prices M/M: No est v 1.5% prior; Y/Y: No est v 10.7% prior

06:45 (US) Daily Libor Fixing

07:00 (RU) Russia weekly OFZ bond auction

07:00 (US) MBA Mortgage Applications w/e May 5th: No est v -0.1% prior

07:00 (UK) PM May weekly question Time in House of Commons

07:30 (CL) Chile Central Bank's Traders Survey

07:30 (CL) Chile Central Bank Economist Survey

08:00 (BR) Brazil Apr IBGE Inflation IPCA M/M: 0.2%e v 0.3% prior; Y/Y: 4.1%e v 4.6% prior

08:00 (HU) Hungary Central Bank (NBH) Apr Minutes

08:00 (EU) ECB's Draghi in Dutch Parliament

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Apr Import Price Index M/M: +0.1%e v -0.2% prior; Y/Y: 3.6%e v 4.2% prior

08:30 (US) Apr Export Price Index M/M: 0.2%e v 0.2% prior; Y/Y: No est v 3.6% prior

09:00 (RU) Russia Apr Official Reserve Assets: $400.5Be v $397.9B prior

10:30 (US) Weekly DOE Crude Oil Inventories

12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report

12:00 (CA) Canada to sell 2-Year Bonds - 13:00 (US) Treasury to sell 10-Year Notes

14:00 (US) Apr Monthly Budget Statement: +$179.0Be v -$176.2B prior

15:00 (AR) Argentina Apr National CPI M/M: 2.0%e v 2.4% prior

17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate unchanged at 1.75%

• Equity rally stalling at record highs again;
• USD pares gains but rebounds again early in European session;
• EIA inventory numbers key after oil decline as API reports large decline.

Small losses in equity markets in Europe look like being replicated in the US ahead of the open on Wednesday, as indices continue to struggle at their highs.

The rally in US equity markets has stalled over the last couple of months as the Trump reflation trade began to run out of steam. The last few weeks though has seen the bullish momentum pick up, sending the S&P and Dow back towards their record highs but once again we seem to be stalling at these levels. As long as we stay above 20,850 in the Dow and 2,380 in the S&P 500, then momentum will appear to remain with the bulls but a break below would suggest the trading range of the last couple of months remains intact.

The US dollar pared gains overnight following two positive days at the start of the week but it has rebounded again at the start of the European session. The rebound came just as GBPUSD was testing 1.30, an important technical level for the pair. With the pair having now come off its highs and the dollar appearing to gain momentum, the next test may come from below, with 1.29 being a potentially important level.

Oil is trading around 1% higher today as we await inventory data from EIA. Brent and WTI sold off heavily towards the back end of last week, breaking below $50 and $47.50, respectively, in the process, in a sign that efforts by OPEC and non-OPEC producers to cut output are proving insufficient. With both having now stabilised just below these technically important levels, it will be interesting to see whether today’s EIA release will be the catalyst for a move back above or the trigger for further another move lower.

On Tuesday, API reported a larger than expected inventory drawdown of 5.78 million barrels, confirmation of which by EIA today would be well above the 1.786 million that markets are expecting. With the reaction to Tuesday’s API data being relatively mild, there is there potential for upside if EIA confirms the numbers but with markets showing a reluctance to do so on Tuesday, I wonder whether it would be enough to break $50 in Brent.

EUR/CHF : 1.0947






EUR/CHF: Major wave 5 trough ended at 0.8426 and correction has commenced from there for subsequent gain towards 1.1400-1.1500.


 

As the single currency has surged again after brief pullback to 1.0792 and broke above indicated previous resistance at 1.0899, adding credence to our view that low has been formed at 1.0631 (Feb low) and consolidation with upside bias remains for the rebound from 1.0631 to extend further gain to another previous resistance at 1.1001, break there would provide confirmation and extend the rise from 1.0622 low (2016 low) to 1.1018, then 1.1050 but reckon resistance at 1.1107 would limit upside and price should falter well below 2016 high at 1.1129. 

 

To recap our preferred count, the decline from 1.6828 (end wave (B)) is labeled as the beginning of wave (C) which should unfold as an impulsive move with 1: 1.5326, 2: 1.6377 and wave 3 is sub-divided into (i): 1.4300, (ii): 1.5880 and wave (iii) is still unfolding with (1): 1.4577, (2): 1.5448 and wave (3) is an extended 3rd with i: 1.5006, ii: 1.5383, wave iii: 1.3073, then wave iv ended at 1.3925 and wave v at 1.3073, wave (4) ended at 1.3925 and wave (5) has ended at 1.2765 which also marked the low of wave (iii) and wave (iv) has ended at 1.3835 and wave (v) as well as larger degree wave 3 has ended at 1.0075. The selloff from 1.2650 signals wave 4 has ended there and we are taking a view that the wave 5 could also have ended 0.8426, hence consolidation is seen with mild upside bias for rebound to 1.1000 first, then towards 1.1400.
 

 
On the downside, whilst initial pullback to 1.0900-05 cannot be ruled out, reckon downside would be limited to 1.0870-75 and bring another rise later. Below 1.0825-30 would defer and suggest top is possibly formed, bring weakness to said support at 1.0792 but only a daily close below there would add credence to this view, then further fall to 1.0780 and possibly previous minor resistance at 1.0720 would follow. Looking ahead, only a drop below 1.0720 would suggest top is formed instead, risk weakness towards said support at 1.0656 first.

Recommendation: Buy euro at 1.0905 for 1.1105 with stop below 1.0805.


The long-term downtrend started from 1.9626 (Apr 1985) to 1.4166 (Sep 1995) is treated as wave (A) with A:1.6285 (Dec 1987), B: 1.9342 (May 1992) and C: 1.4166, then wave (B) ended at 1.6828 with A: 1.7147 (Feb 1997), B: 1.4398 (Sep 2001), C: 1.6828 (Nov 2007), therefore, wave (C) is now in progress with the breakdown indicated as above. This wave (C) already met indicated downside target at 1.1455/60 and 1.1300, it could have ended at 0.8426, consolidation with mild upside bias is seen for gain to 1.1000 and later towards 1.2000.

The euro has ticked lower in the Wednesday session, as the pair trades at 1.0870. On the release front, French data was better than expected. Industrial production posted a gain of 2.0%, above the estimate of 1.2%. France’s trade deficit improved to EUR -5.4 billion, better than the forecast of EUR -5.9 billion. The markets are keeping a close eye on ECB President Mario Draghi, who will speak about monetary policy in the Dutch House of Representatives. There are no major releases out of the US. On Thursday, PPI is expected to show a slight gain of 0.2%, and unemployment claims is forecast to climb to 245 thousand.

Industrial production and manufacturing numbers have long been weak points in the eurozone economy, but first quarter data is showing considerable improvement in France and Germany. French industrial production jumped 2.0% in March, ending a streak of three consecutive declines. The Markit France Manufacturing PMI rose to 55.1 in April, its highest level since 2011. In Germany, industrial production in March declined 0.4%, but this was just a blip, as industrial production in the first quarter posted a respectable gain of 1.6%. German Factory Orders came in at 1.0%, above the forecast of 0.7%. An improvement in global economic conditions has revived the demand for eurozone exports, notably cars and machinery. A weak euro has made European exports more attractive and helped boost the manufacturing sector. Germany releases Preliminary GDP for the first quarter on Friday, with the markets predicting a gain of 0.6%. If the GDP report is stronger than expected, the euro could reverse directions and gain ground.

President Donald Trump has raised many eyebrows in his first 100 days in office, but political Washington is stunned after Trump abruptly fired FBI director James Comey on Tuesday. Comey had been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign. The White House has claimed that it fired Comey over his handling of a email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans are likely to express their opposition as well. If this political mayhem continues, it could unnerve investors and hurt the US dollar against other major currencies.

AUD/USD     –  0.7378




AUD/USD – Wave 5 of C and (B) has possibly ended at 1.1081




Aussie has fallen again after brief recovery, adding credence to our bearish view that fall from 0.7750 is still in progress, indicated downside target at 0.7390 was met (with 180 points profit), downside bias remains for this move to extend weakness to 0.7300-10, however, near term oversold condition should prevent sharp fall below 0.7280 and reckon 0.7200-10 would hold from here, price should stay well above previous chart support at 0.7158, bring rebound later. 


We are keeping our count that top has been formed at 1.1081 (wave 5 of V) and major correction (A-B-C-X-A-B-C) has commenced, indicated downside targets at 0.7945 (61.8% Fibonacci retracement of entire rise from 0.6007-1.1081) and 0.7750 had been met and downside bias is seen for further weakness to 0.6800, then 0.6700 but reckon 0.6500 would hold from here.



Our preferred count is that the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is wave B and the subsequent upmove is labeled as wave C with wave (iii) and wave (iv) ended at 0.8265 and 0.7700 respectively and wave (v) as well as 3 ended at 0.9407, then wave 4 ended at 0.8066 (instead of 0.8578). The wave 5 has met our indicated projection target of 1.1060 and could ended at 1.1081, this level is now treated as the peak of wave (C) as well as larger degree wave B, hence major fall in wave C has commenced, our initial downside target at psychological support at 0.7000 has just been met and further weakness to 0.6500 would be seen later.



On the upside, whilst initial recovery to 0.7420 cannot be ruled out, previous support at 0.7473 should turn into resistance and bring another decline later to aforesaid downside targets. Above 0.7500 would risk test of last week’s high at 0.7556 but only a daily close above there would signal a temporary low is formed, bring a stronger rebound to another previous resistance at 0.7592, break there would add credence to this view, bring correction of recent decline to strong resistance at 0.7611 first. 



Recommendation: Short entered at 0.7570 met target at 0.7390 with 180 points profit and would sell again at 0.7450 for 0.7250 with stop above 0.7550



Our alternate count on the daily chart treated the top formed in 2008 at 0.9851 could be a larger degree wave I and was followed by a deep and sharp correction in wave II to 0.6007 and wave III is unfolding from there.

The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.9851 (15 Jul 2008), wave II has ended at 0.6007 (Oct 2008) and wave III is still in progress which may extend further gain to 1.1265.

The pair bounces from Tuesday’s five-month low at 1.0827 after strong bearish acceleration on Tuesday met its target at 0.7329 (weekly Ichimoku cloud base).

Yesterday’s fall closed below important 0.7384 support (Fibo 61.8% of 0.7159/0.7747) that adds on bearish structure

Larger bears may pause and enter consolidative corrective phase as support is strong and daily studies are oversold.

Broken Fibo support at 0.7384 now acts as initial resistance, with extended correction expected to remain capped by falling 10SMA (currently at 0.7434, also former low of 27 Apr) to keep bears in play for fresh downside and attempts towards next support at 0.7298 (Fibo 76.4% of 0.7159/0.7747).

Res: 0.7384, 0.7313, 0.7434, 0.7467
Sup: 0.7329, 0.7398, 0.7286, 0.7250

EUR/JPY - 123.79

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term up

Original strategy:

Sold at 124.00, Target: 122.20, Stop: 124.60

Position: - Short at 124.00
Target: - 122.20
Stop: - 124.60

New strategy :

Hold short entered at 124.00, Target: 122.20, Stop: 124.55

Position: - Short at 124.00
Target:  - 122.20
Stop:- 124.55

Although the single currency rebounded yesterday, as euro has retreated after faltering below resistance at 124.55, retaining our view that further consolidation below this level would be seen and test of support at 122.92-98 is likely, break there would suggest a temporary top is possibly formed, bring further fall to 122.60 but break of 122.00-10 is needed to add credence to this view, bring retracement of recent upmove to 121.50 first.

In view of this, we are holding on to our short position entered at 124.00. Above said resistance at 124.55 would abort and signal recent upmove is still in progress and may extend further gain towards 125.00 level but loss of upward momentum should prevent sharp move beyond 125.40-50, risk from there is seen for another retreat later. 

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

During the early Asian session Thursday, the RBNZ will announce its rate decision. The forecast is for the officials to take no action again. The Bank kept the door for further easing open when it last met, mainly due to global uncertainties. As for inflation, the RBNZ noted that it expects it to reach the midpoint of its target range over the 'medium-term'. Nevertheless, inflation data for Q1 released shortly after that meeting showed that CPI inflation rose faster than the Bank anticipated, and now lies slightly above the target-range midpoint. Meanwhile, 2-year inflation expectations rose further, and the labor market continued to tighten in Q1.

Even though all of these encouraging domestic developments should normally see the RBNZ shifting to a somewhat more upbeat tune, we think that any optimistic message will be moderate. Concerns over global trade remain elevated, as we were reminded of recently by the US imposing tariffs on Canada. In addition, we doubt the Bank will risk a speculative surge in NZD by appearing too optimistic, as that could offset some of the economic progress achieved so far.

NZD/USD traded somewhat higher yesterday after it hit support near the 0.6880 (S1) key hurdle. In our view, the rate is likely to oscillate around current levels waiting for the RBNZ decision tonight. If indeed the Bank adopts a slightly more optimistic tone than previously, the rate may trade higher and challenge the 0.6940 (R1) resistance. A decisive break above that level could carry more upside extensions, perhaps towards our next obstacle of 0.6980 (R2). On the other hand, a message more dovish than what the market anticipates may be a reason for a decisive dip below 0.6880 (S1).

USD/JPY pares earlier gains after North Korea comments

The dollar gained notably against its major counterparts yesterday, especially against the yen. The surge in USD/JPY may have been fueled, at least partly, by the heightened expectations regarding a Fed rate hike in June. The other major catalyst behind the move may have been the increasing risk appetite of investors following the French election. This market euphoria is also evident by the fact that US stock indices continue to break record highs, as well as the recent sell-off in other safe haven assets such as gold. However, USD/JPY pared some of its earlier gains during the Asian morning Wednesday, after comments from North Korea that it will proceed with its nuclear tests.

USD/JPY surged yesterday, breaking above the resistance (now turned into support) barrier of 113.50 (S1) to stop near 114.35 (R1). Then, the rate pulled back. Despite the correction lower, we think that the path of least resistance for the pair is still to the upside, amid a general risk-on market environment.

Indeed, the price structure on the 4-hour chart suggests a short-term uptrend above a trend line drawn from the low of the 21st of April. Therefore, we expect the bulls to take charge again soon and aim for another test near the 114.35 (R1) area. A clear move above that level is possible to pave the way for the next resistance of 114.90 (R2). The case for another leg up is also supported by the fact that there are no real risk events on the economic calendar over the next few weeks.

As for the rest of today's highlights:

During the European day, the only economic indicator we get is Norway's CPI for April. The forecast is for both the headline and core rates to have risen somewhat. These are likely to be pleasant news for the Norges Bank, which at its latest two policy meetings appeared concerned with regards to inflation. As such, these data could diminish somewhat the likelihood for any further easing and thereby, reverse some of NOK's latest losses.

We have one speaker on the agenda: ECB President Mario Draghi will speak about the impact of ECB monetary policy before the Dutch Parliament. Following comments from the German Finance Minister yesterday that normalization of ECB policy will begin shortly, investors may once again look for clues as to whether the Bank is set to shift to a slightly more hawkish tone at its upcoming meeting in June.

NZD/USD

Support: 0.6880 (S1), 0.6840 (S2), 0.6780 (S3)

Resistance: 0.6940 (R1), 0.6980 (R2), 0.7020 (R3)

USD/JPY

Support: 113.50 (S1), 112.90 (S2), 112.35 (S3)

Resistance: 114.35 (R1), 114.90 (R2), 115.50 (R3)

AUD/USD – 0.7367

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term down

Original strategy :

Buy at 0.7300, Target: 0.7500, Stop: 0.7240

Position: -
Target:  -
Stop: -

New strategy :

Buy at 0.7300, Target: 0.7500, Stop: 0.7240

Position: -
Target:  -
Stop:-

Although aussie has recovered from 0.7329, reckon 0.7400 would limit upside and bring another decline later, below said support at 0.7329 would extend one more fall to 0.7295-00 (76.4% retracement of 0.7158-0.7750), however, loss of downward momentum should prevent sharp fall below there an bring rebound later, above 0.7425-30 would bring subsequent gain to 0.7490-00 but break of 0.7510 is needed to signal low is formed, then test of resistance at 0.7556 would follow.

In view of this, we are inclined to turn long on next decline. Below 0.7245-50 would risk weakness to 0.7200-10, however, reckon previous support 0.7158 would contain downside and aussie may stage another strong rebound from there later this week. 

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

EUR/USD

The American dollar advanced for a second consecutive day against its European rival, resulting in the pair setting a fresh 2-week low of 1.0863. The macroeconomic calendar was light in both economies, with minor reports still indicating steady growth in the Euro area, and slightly disappointing figures in the US. Nevertheless the greenback stood victorious, as speculative interest kept shifting its attention to Central Banks' imbalances, and soft US data were not enough to prevent the Fed from acting next month.

The IBD/TIPP Economic Optimism Index, showed that US consumer confidence retreated modestly in May, down to 51.3 after printing 51.7 in April. Wholesale inventories surged by 0.2% in March, against market´s hopes for a 0.1% decline. A couple of Fed speakers hit the wires, with Kansas George saying that the US economy is on track to grow at “a slightly above-trend rate,” and therefore gradual rate hikes are the right path. In a different event, Rosengren centered on employment stating that further falls in the unemployment rate below 4%, would overheat the economy, prompting higher rates.

The EUR/USD pair was unable to regain the 1.0900 level, even despite German finance minister Schaeuble state that the normalization of the ECB's monetary policy should start "shortly." The pair has broken below an ascendant trend line coming from April 24th low at 1.0820, and even completed a pullback to it before reaching the mentioned low, indicating that the slide is not over yet. Technical readings in the 4 hours chart also favor a new leg lower, as technical indicators maintain their strong bearish slopes near oversold territory, as the 20 SMA turns south well above the current level.

Support levels: 1.0850 1.0820 1.0770

Resistance levels: 1.0895 1.0930 1.0965

USD/JPY

The American dollar advanced for a second consecutive day against its European rival, resulting in the pair setting a fresh 2-week low of 1.0863. The macroeconomic calendar was light in both economies, with minor reports still indicating steady growth in the Euro area, and slightly disappointing figures in the US. Nevertheless the greenback stood victorious, as speculative interest kept shifting its attention to Central Banks' imbalances, and soft US data were not enough to prevent the Fed from acting next month.

The IBD/TIPP Economic Optimism Index, showed that US consumer confidence retreated modestly in May, down to 51.3 after printing 51.7 in April. Wholesale inventories surged by 0.2% in March, against market´s hopes for a 0.1% decline. A couple of Fed speakers hit the wires, with Kansas George saying that the US economy is on track to grow at “a slightly above-trend rate,” and therefore gradual rate hikes are the right path. In a different event, Rosengren centered on employment stating that further falls in the unemployment rate below 4%, would overheat the economy, prompting higher rates.

The EUR/USD pair was unable to regain the 1.0900 level, even despite German finance minister Schaeuble state that the normalization of the ECB's monetary policy should start "shortly." The pair has broken below an ascendant trend line coming from April 24th low at 1.0820, and even completed a pullback to it before reaching the mentioned low, indicating that the slide is not over yet. Technical readings in the 4 hours chart also favor a new leg lower, as technical indicators maintain their strong bearish slopes near oversold territory, as the 20 SMA turns south well above the current level.

Support levels: 1.0850 1.0820 1.0770

Resistance levels: 1.0895 1.0930 1.0965

GBP/USD

The GBP/USD pair closed the day flat around 1.2940, recovering from a fresh weekly low set at 1.2903 early London. There were no big news coming from the UK, although at the beginning of the day, the BRC report showed that retail sales jumped by 5.6% in April when compared to a year earlier, reverting the soft figures seen in the previous month. Investors are waiting for the upcoming BOE meeting, before making decisions on the pair. The Central Bank is expected to revise its inflation and growth forecasts, but also to maintain rates unchanged. Attention will therefore focus on how policy makers vote, as on the previous meeting 1 member voted for a hike. The technical picture is neutral-to-bearish, as despite bouncing from the mentioned low, the pair was unable to regain ground above its 20 SMA, whilst technical indicators have turned lower, but remain within neutral territory. Furthermore, the pair posted a lower low and a lower high daily basis, another sign of fading buying interest.

Support levels: 1.2900 1.2865 1.2830

Resistance levels: 1.2960 1.2995 1.3030

GOLD

As the dollar advanced gold prices extended their slide, with spot ending the day at a fresh 2-month low of $1,214.78 a troy ounce. The commodity closed the day barely $1 above that low, as coupling with dollar's strength was lower physical demand for the metal. Improved market's sentiment and chances of a Fed rate hike next month, will likely keep gold prices under pressure during the upcoming sessions. From a technical point of view, the daily chart shows that the price extended its slide below all of its moving averages, whilst technical indicators remain near oversold territory, with the RSI indicator accelerating its slide, anticipating a bearish continuation. In the shorter term, and according to the 4 hours chart, the commodity is also biased lower, given that the upside was contained by selling interest around a bearish 20 SMA, whilst the Momentum indicator holds well below its mid-line and the RSI indicator heads south around 24.

Support levels: 1,214.10 1,203.80 1,194.95

Resistance levels: 1,221.10 1,231.85 1,242.50

WTI CRUDE OIL

Oil prices were once again under pressure, with West Texas Intermediate futures ending the day at $45.90 a barrel, despite news headlines indicating that Saudi Arabia will reduce its crude oil exports to the Asian market by around 7 million barrels in June, as market participants still weigh more rising US production. Ahead of the US monthly stockpiles reports, expectations are of a 1.8 million barrels' decline. In the meantime, the technical picture keeps favoring the downside, given that daily indicators resumed their declines after a brief upward correction, whilst the price remains far below all of its moving averages. For the shorter term, technical readings in the 4 hours chart also support a bearish extension, as the price is back below a bearish 20 SMA, while technical indicators turned sharply lower, entering negative territory after the price topped for the day at 46.76.

Support levels: 45.30 44.70 44.10

Resistance levels: 46.70 47.20 47.75

DJIA

US equities closed mixed, with the DJIA settling at 20,975.78, down by 36 points, and the S&P losing 2 points and settling at 2,396.92. The Nasdaq Composite, on the other hand, added roughly 18 points to close at fresh record highs of 6,102.59. The energy sector was the worst performer, and within the DJIA, Chevron was the worst performer, shedding 1.56% followed by Cisco Systems that lost 1.24% and El du Pont that closed 1.12% lower. Nike led advancers by adding 1.05%, followed by Wall Mart that gained 0.83%. The Dow remained within its usual range, unable to find direction, and the daily chart shows that it holds above a bullish 20 SMA, whilst technical indicators extended their declines, but still holding above their mid-lines. The 20 DMA heads modestly higher around 20,840, limiting the downside. In the 4 hours chart, the index is currently breaking below its 20 SMA, whilst technical indicators are entering negative territory, leaning the scale towards the downside in the short term.

Support levels: 20,936 20,898 20,845

Resistance levels: 21,030 21,071 21,138

FTSE100

The FTSE 100 advanced 41 points to settle at 7,342.21 underpinned by a rally in mining equities, amid a rebound in copper prices. The London benchmark advanced for a fourth consecutive session, further helped by a softer Pound. Glencore added 2.27% and made it to the top 10 list, after the company cancelled its plans to close an Australian coal mine. Rolls-Royce was the best performer, adding 4.64%, while also up were Billiton, with a 2.22% gain and Fresnillo that gained 1.78%. Micro Focus led decliners, ending the day 5.65% lower, while the energy sector also edged lower, after PM Theresa May promised lower energy bills if she wins the General Election next June. The index stands at its highest in three weeks, and poised to extend its advance according to technical readings in the daily chart, as indicators accelerated their advances, now nearing overbought levels, whilst the benchmark moved further above its moving averages. In the 4 hours chart, the index is also biased higher after finally extending beyond its 200 SMA, and as technical indicators resumed their advances within positive territory.

Support levels: 7,327 7,284 7,247

Resistance levels: 7,360 7,402 7,447

DAX

The German DAX added 54 points or 0.43% this Tuesday to settle at 12,749.12, backed by solid local data, as despite the trade balance headline missed expectations, exports surged to a record of €118.2 billion, whilst imports surged by 2.4% to €92.9 billion. Factory orders in the country fell, but by less than anticipated in March. E.ON was the best performer, up 3.86%, followed by Merck, which added 1.28%. The worst performer was insurer Muenchener that lost 1.34%, followed by Deutsche Post that shed 0.88%. Despite closing in the green, the DAX trimmed most of its daily gains ahead of the close, but so far, the bullish tone persists, as in the daily chart, the Momentum indicator regained the upside, now heading north at fresh multi-month highs, whilst the RSI barely corrected extreme overbought conditions before settling around 70. In the 4 hours chart, however, technical indicators eased within positive territory before losing directional strength, somehow anticipating decreasing buying interest. In this last time frame, the 20 SMA keeps heading north below the current level, offering a strong dynamic support around 12,661, with a break below it favoring additional declines.

Support levels: 12.720 12,668 12,623

Resistance levels: 12,765 12,812 12,850