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Currency pair EUR/USD

The EUR/USD is building a rising wedge (RW) reversal chart pattern (red/blue) at the psychological round level of 1.10. Price has now reached the support line of the pattern which is a bounce or break zone. A bearish break could start a larger bearish correction whereas a bullish bounce could see price challenge the resistance (red) line.

The EUR/USD broke the mini support level (dotted blue) after bouncing at the 61.8% Fibonacci level of wave 2 (brown). The correction could be part of a 123 (brown) or ABC. The wave 4 (brown) is invalidated if price breaks above the 50% Fib of wave 4.

Currency pair GBP/USD

The GBP/USD has bounced at the resistance line (red) of the uptrend channel (red/green). A bullish break could see price move towards the Fibonacci targets of wave 5 (purple) whereas a bearish break could start a reversal.

The GBP/USD seems is building a bearish retracement within a potential wave 4 (grey), which would become invalidated if price manages to break below the top of wave 1 (green line).

Currency pair USD/JPY

The USD/JPY managed to break above the previous top and is now continuing with the uptrend channel towards the Fibonacci targets of wave 5 (brown).

The USD/JPY is extending the bullish 5th wave (brown/orange) after completing an ABC correction (grey) and breaking above the resistance trend lines (dotted orange).

Global Markets:

• Asian stock markets: Nikkei gained 2.40 %, Shanghai Composite lost 0.90 %, Hang Seng rose 0.30 %, ASX 200 up 0.50 %
• Commodities: Gold at $1230 (+0.30 %), Silver at $16.47 (+1.20 %), WTI Oil at $46.80 (+1.20 %), Brent Oil at $49.75 (+1.30 %)
• Rates: US 10-year yield at 2.36, UK 10-year yield at 1.12, German 10-year yield at 0.42

News & Data

• China Trade Balance (USD) Apr: 38.05B Est. (35.20B), Prior (23.92B)
• China Exports (YoY) Apr: 14.3% Est. (16.80%), Prior (22.30%)
• China Imports (YoY) Apr: 18.6% Est. (29.30%), Prior (26.30%)
• Australia NAB Business Confidence Apr:13, Prior (6)
• Australia NAB Business Conditions Apr: 14, (Prior 14, revised 12)
• Australia Building Approvals (MoM) Mar: -13.4%, Est. (-4.00%), Prior (8.3%)
• Australia Building Approvals (YoY) Mar: -19.9%, Est. (-10%), Prior (-4.90%)
• PBoC Fixes USDCNY Reference Rate At 6.8947 (prev fix: 6.8884)

CFTC Positioning Data:

• EUR short 2K vs 21K short last week. Shorts trimmed by 19K
• GBP short 81K vs 91K short last week. Shorts trimmed by 10K
• JPY short 30K vs 27K short last week. Shorts increased by 3K
• CHF short 18K vs 17K short last week. Shorts increased by 1K
• CAD short 48K vs 43K short. Shorts increased by 5K
• AUD long 43K vs 43K long. Unchanged
• NZD short 12K vs 15K short last week. Shorts trimmed by 3K

Markets Update:

Markets reacted positively to the outcome of the French election. While it was already expected that the centrist candidate Macron will win, stock markets in Asia extended gains. European equities are likely to open higher as well, and a gain of at least 1 % seems likely in the German DAX and French CAC index.

The Euro declined overnight, after starting the trading day above 1.10. The Macron win was already priced in, which is why the currency run out of momentum. EUR/USD fell back to 1.0955. Nevertheless, the technical outlook remains positive and the pair should find strong support at 1.09 and 1.0870.

The safe havens JPY and CHF fell in Asia. Demand for precious metals is likely to remain weak in the short-term too, unless a new risk-off theme emerges in the market. Key resistance in Gold is seen at $1235.

Upcoming Events:

• 07:00 BST – German Factory Orders
• 09:30 BST – UK Halifax House Price Index
• 13:35 BST – FOMC Member Bullard speaks

The Week Ahead:

Tuesday, May 9th

• 02:30 BST – Australian Retail Sales
• 06:45 BST – Swiss Unemployment Rate
• 07:00 BST – German Trade Balance
• 14:00 BST – FOMC Member Kashkari speaks
• 15:00 BST – US JOLTs Job Openings
• 18:00 BST – FOMC Member Rosengren speaks
• 21:15 BST – FOMC Member Kaplan speaks

Wednesday, May 10th

• 02:30 BST – Chinese CPI
• 02:30 BST – Chinese PPI
• 07:45 BST – French Trade Balance
• 13:00 BST – ECB President Draghi speaks
• 15:30 BST – US Crude Oil Inventories
• 22:00 BST – RBNZ Rate Decision
• 22:00 BST – RBNZ Statement
• 23:00 BST – RBNZ Governor Wheeler speaks

Thursday, May 11th

• 00:50 BST – Japanese Current Account
• 07:00 BST – German WPI
• 08:15 BST – Swiss CPI
• 08:30 BST – SNB Chairman Jordan speaks
• 09:30 BST – UK Industrial Production
• 09:30 BST – UK Manufacturing Production
• 09:30 BST – UK Trade Balance
• 12:00 BST – Bank of England Rate Decision
• 12:00 BST – Bank of England Meeting Minutes
• 12:00 BST – Bank of England Inflation Report
• 13:30 BST – US Initial Jobless Claims
• 13:30 BST – US PPI

Friday, May 12th

• 07:00 BST – German GDP
• 10:00 BST – Euro Zone Industrial Production
• 13:30 BST – US Retail Sales
• 13:30 BST – US CPI
• 15:00 BST – US Michigan Consumer Sentiment

For the 24 hours to 23:00 GMT, the AUD declined 0.11% against the USD and closed at 0.7383.

LME Copper prices declined 1.2% or $64.5/MT to $5466.0/MT. Aluminium prices declined 1.5% or $28.0/MT to $1879.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7361, with the AUD trading 0.3% lower against the USD from yesterday's close, on the back of disappointing retail sales data in Australia.

Early morning data showed that Australia's seasonally adjusted retail sales unexpectedly dropped 0.1% on a monthly basis in March, declining for the second consecutive month and confounding market consensus for a rise of 0.3%. In the prior month, retail sales had fallen by a revised 0.2%.

The pair is expected to find support at 0.7334, and a fall through could take it to the next support level of 0.7307. The pair is expected to find its first resistance at 0.7406, and a rise through could take it to the next resistance level of 0.7451.

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 0.46% against the USD and closed at 1.0923.

On the data front, the Euro-zone's Sentix investor confidence index rose more-than-expected to a level of 27.4 in May, notching its highest level since July 2007, as investors grew optimistic about the region's current economic outlook and as worries over political populism across the Euro bloc ebbed. The index had registered a reading of 23.9 in the prior month, while investors had envisaged for an advance to a level of 25.2.

Elsewhere, in Germany, the seasonally adjusted factory orders advanced 1.0% MoM in March, rising for second straight month and surpassing market expectations for a gain of 0.7%. Factory orders had registered a revised gain of 3.5% in the previous month.

In the US, data indicated that the labour market conditions index climbed to a level of 3.5 in April, after recording a revised rise of 3.6 in the previous month and compared to market expectations for an advance to a level of 1.0.

In the Asian session, at GMT0300, the pair is trading at 1.0926, with the EUR trading marginally higher against the USD from yesterday's close.

The pair is expected to find support at 1.0895, and a fall through could take it to the next support level of 1.0865. The pair is expected to find its first resistance at 1.0976, and a rise through could take it to the next resistance level of 1.1027.

Moving ahead, market participants focus on Germany's trade balance and industrial production data, both for March, slated to release in a few hours. Moreover, in the US, final wholesale inventories and JOLTS job openings, both for March along with the NFIB small business optimism index for April, will be eyed by investors.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP declined 0.16% against the USD and closed at 1.2937.

In economic news, UK's Halifax house prices unexpectedly dropped 0.1% in April, compared to market consensus for a rise of 0.1%. In the previous month, house prices had registered a flat reading.

In the Asian session, at GMT0300, the pair is trading at 1.294, with the GBP trading slightly higher against the USD from yesterday's close.

Overnight data revealed that the nation's BRC retail sales across all sectors advanced 5.6% YoY in April, compared to a drop of 1.0% in the prior month, while market participants were anticipating for a gain of 0.5%.

The pair is expected to find support at 1.2916, and a fall through could take it to the next support level of 1.2893. The pair is expected to find its first resistance at 1.2974, and a rise through could take it to the next resistance level of 1.3009.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.39% against the JPY and closed at 113.26.

In the Asian session, at GMT0300, the pair is trading at 113.18, with the USD trading 0.07% lower against the JPY from yesterday’s close.

Early this morning, data showed that Japan’s labour cash earnings surprisingly dropped 0.4% on an annual basis in March, after registering a 0.4% gain in the previous month.

The pair is expected to find support at 112.57, and a fall through could take it to the next support level of 111.95. The pair is expected to find its first resistance at 113.59, and a rise through could take it to the next resistance level of 113.99.

Moving ahead, investors await the Bank of Japan’s (BoJ) summary of opinions report, slated to release overnight.

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 0.94% against the CHF and closed at 0.9985.

On the data front, Switzerland's total sight deposits climbed to a level of CHF573.1 billion in the week ended 05 May, from CHF571.4 billion in the previous week.

In the Asian session, at GMT0300, the pair is trading at 0.9982, with the USD trading marginally lower against the CHF from yesterday's close.

The pair is expected to find support at 0.9912, and a fall through could take it to the next support level of 0.9841. The pair is expected to find its first resistance at 1.0022, and a rise through could take it to the next resistance level of 1.0061.

Ahead in the day, all eyes will be on Switzerland's unemployment rate data for April.

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 0.33% against the CAD and closed at 1.3695.

Macroeconomic data indicated that Canada's seasonally adjusted housing starts fell more-than-expected to a level of 214.1K in April, from a revised ten-year high level of 252.3K registered in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.3694, with the USD trading a tad lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3645, and a fall through could take it to the next support level of 1.3596. The pair is expected to find its first resistance at 1.3738, and a rise through could take it to the next resistance level of 1.3782.

Going ahead, Canada's building permits data for March, slated to release later in the day, will garner a lot of market attention.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

Daily Pivots: (S1) 1.0885; (P) 1.0953 (R1) 1.0991; More....

Intraday bias in EUR/USD remains neutral for consolidation below 1.1020 temporary top. Another rise will be expected as long as 1.0874 support holds. Above 1.1020 will extend current rally to 100% projection of 1.0339 to 1.0828 from 1.0569 at 1.1058. However, rise from 1.0339 is still seen as a corrective move. Hence we'd expect strong resistance from 1.1058 projection to limit upside and bring near term reversal. On the downside, break of 1.0874 support will turn bias back to the downside for 1.0569 support first.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate long term reversal.

Daily Pivots: (S1) 1.2917; (P) 1.2952; (R1) 1.2976; More...

With 1.2830 minor support intact, further rise is still expected in GBP/USD. Current rally would target 161.8% projection of 1.2108 to 1.2614 from 1.2365 at 1.3184. At this point, price actions from 1.1946 are still interpreted as a correction pattern. Therefore, we'd expect strong resistance below 1.3444 to bring larger down trend resumption. On the downside, break of 1.2830 support will indicate short term topping. In such case, intraday bias will be turned back to the downside for 1.2614 support.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.