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EUR/USD Bullish

EUR/USD is trading higher. Hourly support is given at 1.0852 (27/04/2017 low) then 1.0682 (21/04/2017 base). Stronger support can be found at 1.0494 (22/02/2017 low). Hourly resistance given at 1.0951 (26/04/2017 high) has been broken. Expected to show another leg higher towards 1.10.

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 Sideways price action.

GBP/USD is trading mixed. Hourly resistance can be found at 1.2966 (30/04/2017 high). Hourly support can be found at 1.2757 (21/04/2017 low). An unlikely break of this support would indicate further weakness.

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 above former resistance.

USD/JPY is now slowing down since the pair reached resistance given at 112.20 (31/03/2017 high). Hourly support can be found at 110.88 (26/04/2017 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). Expected to show continued bullish pressures.

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).

Spot Gold bounced from fresh lows at $1225 on Friday, taking a breather after steep fall this week that commenced from $1270. The move is seen as corrective on profit-taking after the price fell over 3% in past few sessions and positioning for fresh downside. The yellow metal maintains strong bearish sentiment on rising hopes for June US rate hike and may extend weakness through daily cloud base ($1222) and 100SMA support at $1220 towards $1209 (50% retracement of $1122/$1295 ascend). Recovery attempts were so far capped under daily cloud top (1236) which guards broken bull-trendline ($1240) and strong barrier at $1251 (200SMA / daily Tenkan-sen) where extended corrective upticks should be capped.

Res: 1236, 1240, 1247, 1251
Sup: 1225, 1222, 1220, 1209

EUR/JPY - 122.95

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:

Buy at 122.85, Target: 124.55, Stop: 122.25

Position: -
Target: -
Stop: -

New strategy :

Buy at 122.10, Target: 124.10, Stop: 121.50

Position: -
Target:  -
Stop:-

As the single currency has retreated after marginal rise to 123.68, suggesting minor consolidation below this level would be seen and pullback to 122.60 support is likely, however, reckon downside would be limited to 122.00-10 and bring another rise later, above said resistance at 123.68 would extend gain to previous chart resistance at 124.10 but break there is needed to retain upside bias for resumption of early upmove to 124.50-60, then towards 125.00 later. 

In view of this, we are looking to buy euro on further subsequent pullback as 122.00-10 should limit downside and bring another rise. Below previous resistance at 122.01 would defer and risk correction to 121.70 but break of 121.25-30 is needed to signal top is formed, bring retracement of recent rise to 120.85-90, however, support at 120.60 should remain intact.

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).

AUD/USD – 0.7399

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 :

Sell at 0.7455, Target: 0.7300, Stop: 0.7515

Position: -
Target:  -
Stop: -

New strategy :

Sell at 0.7470, Target: 0.7300, Stop: 0.7530

Position: -
Target:  -
Stop:-

As this week’s selloff has kept aussie under pressure, suggesting recent decline from 0.7750 top is still in progress for at least a retracement of early upmove, hence bearishness remains for further weakness to 0.7330-35 (100% projection of 0.7750-0.7473 measuring from 0.7611), then 0.7295-00 (76.4% retracement of 0.7158-0.7750),  however, near term oversold condition should prevent sharp fall below 0.7245-50, bring rebound later.

In view of this, we are looking to sell aussie on recovery as 0.7465-70 should limit upside, bring another decline. Above 0.7500-10 would defer and risk rebound to said resistance at 0.7556 but break there is needed to signal low is formed instead, bring further gain to 0.7580-85 but resistance at 0.7611 should hold from here.

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.

UK Local Elections: Stay Bullish on GBP

Noise around the UK local council elections highlights the fact that in today's lightning-fast media cycle not every election matters equally. Pundits are trying to make the case that a wide victory by PM Theresa May's Conservative Party suggests a sweeping victory in the General Election on June 8. But we suspect that this latest vote is more focused on local issues and less about Brexit. Making an extrapolation to broader voter sentiment is difficult, especially given a low turnout.

Yet in the short-term, why not trade in the sentiment. A solid showing by the Conservatives should equal a chance of a significant majority in the national vote next month. Should May receive such an electoral mandate, this should empower the UK's position heading into UK-EU Brexit negotiations. We would fade the hype and continue to believe the current harsh rhetoric (£100bn divorce bill) does not represent the probable end result.

UK fundamentals remain solid as composite PMI data suggests strong 2Q growth momentum (April rose to 56.2 from 54.8 above 54.5 expected) but we recognise that PMI did over predict 1Q growth performance. Predictions of a seizing up in consumption behavior by households and/or businesses have not occurred. Finally, devaluation of GBP continues to deliver dividends for exporters and manufacturing. We therefore remain bullish on GBP especially against the EU and JPY.

Crude oil hits 5-month low

After free falling to $43.76 during the Asian session, June West Texas Intermediate crude future contracts consolidated slightly below $45 a barrel, down 1.40% since Thursday close. The oil rout speeded up this week as cloud continued to gather on the horizon. Investors started to question the future of OPEC's output deal, while US inventories remain elevated (527.8mio barrels, excluding strategic reserve, as of April 28th). The market is currently looking for further weakness in crude oil prices and will almost surely find some. We actually see two main reasons for a lower oil. First, the OPEC strategy, which was aiming at squeezing out the US shale industry, was huge failure as US producers were able to lower their breakeven price and continue to pump. Secondly, the market is still positioned on the bullish side as net non-commercial positioning, reported by the CFTC, stands at around 19% of total open interest. This cannot be viewed as extreme positioning but it nevertheless indicates that the risk is biased to the downside.

The $42 support (low from mid-November last year) is the key level to monitor as break of the latter will accelerate the sell-off. In the short-term, we expect crude prices to stabilise but we remain positioned for further weakness.

French Elections: Almost a done deal!

While there was (small) uncertainties before the second round, the debate turned towards the advantage of Emmanuel Macron which remained very calm and detailed his program. Marine Le Pen was very expected to detail her economic plan as its feasibility is often questioned, and she failed to inspire confidence on that). The polls are still showing a strong Macron victory and after the debate, we don't really see how Marine Le Pen could win. The likelihood of a victory of the National Front candidate is very slight and the glass ceiling won't be broken.

The euro currency should not move much amid the French election. It is going to be the time to think about the third round the parliamentary election and there's one risk there. Under the “En Marche” banner will certainly be a lot of socialists for whom French people are now reluctant to vote. We remain suspicious that Macron will get a majority at the parliament.

We remain bullish on the single currency at least in the medium-term. A small relief rally may intervene on Monday. Attention will now shift back towards the ECB for the June Meeting.

The CAC has posted small gains in the Friday session. Currently, the index is trading at 5,368.00. On the release front, there is only one event in the eurozone. Retail PMI improved to 52.7, its highest level since July 2015. The stock markets will be keeping a close eye on US employment numbers, highlighted by nonfarm payrolls and wage growth. Nonfarm payrolls dropped to just 98 thousand in March, but is expected to rebound to 194 thousand in the April report.

All eyes are on the French presidential election, which will be held on Sunday. Despite a turbulent campaign with plenty of mud-slinging to go around, opinion polls continue to point to a decisive victory for centrist Emmanuel Macron over far-right candidate Marine Le Pen. The two squared off in a testy television debate on Wednesday, with Macron widely considered to have won the debate. Throughout the week, polls have shown Macron holding comfortable lead of 20 points over Le Pen, and the euro climbed to 6-month highs on Thursday, as the markets are clearly confident that the polls are on track and that Macron will win. Still, many voters don't like either candidate and remain undecided, which means that the polls may not be as accurate as they were in the first round. If Le Pen loses but does much better than predicted, we could see the euro lose ground.

French Election Timeline

May 3 – TV debate between the two remaining candidates

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande's mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

There were no surprises from the Federal Reserve, which stayed on the sidelines on Wednesday and held the benchmark rate at 0.75 percent. The Fed rate statement was hawkish, as policymakers emphasized the positives and downplayed a soft first quarter. The statement noted that consumer spending remains strong and that inflation was 'running close' to the Fed's 2 percent target. The Fed's message is clearly one of optimism, as the central bank remains on track to raise interest rates twice more in 2017. The Fed's bullish statement immediately raised the likelihood of a rate hike at June meeting, which jumped to 74 percent after the statement, up from 63% before meeting. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, and we could see another reference to the balance sheet in the April minutes.

The DAX has ticked higher in the Friday session, as the index trades at 12,610.50. On the release front, there was just one event out of the eurozone. Retail PMI improved to 52.7, its highest level since July 2015. In the US, the focus is on employment numbers, highlighted by nonfarm payrolls and wage growth. Nonfarm payrolls dropped to just 98 thousand in March, but is expected to rebound to 194 thousand in the April report.

All eyes are on the French presidential election, which will be held on Sunday. Despite a turbulent campaign with plenty of mud-slinging to go around, opinion polls continue to point to a decisive victory for centrist Emmanuel Macron over far-right candidate Marine Le Pen. The two squared off in a testy television debate on Wednesday, with Macron widely considered to have won the debate. Throughout the week, polls have shown Macron holding comfortable lead of 20 points over Le Pen, and the euro climbed to 6-month highs on Thursday, as the markets are clearly confident that the polls are on track and that Macron will win. Still, many voters don't like either candidate and remain undecided, which means that the polls may not be as accurate as they were in the first round. If Le Pen loses but does much better than predicted, we could see the euro lose ground.

The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.

Source – BBC

French Election Timeline

May 3 – TV debate between the two remaining candidates

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande's mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

As expected, the Federal Reserve stayed on the sidelines on Wednesday, holding the benchmark rate at 0.75 percent. The Fed rate statement was hawkish, as policymakers emphasized the positives and downplayed a soft first quarter. The statement noted that consumer spending remains strong and that inflation was 'running close' to the Fed's 2 percent target. The Fed's message is clearly one of optimism, as the central bank remains on track to raise interest rates twice more in 2017. The Fed's bullish statement immediately raised the likelihood of a rate hike at June meeting, which jumped to 74 percent after the statement, up from 63% before meeting. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, and we could see another reference to the balance sheet in the April minutes.

The Aussie remains under strong pressure and fell further on Friday after RBA indirectly suggested that record low interest rate at 1.5% would remain for some time. The pair dipped to fresh nearly five-month low at 0.7366 and cracked pivotal support at 0.7386 (Fibo 61.8% of 0.7163/0.7747 ascend) and is on track for the third consecutive weekly bearish close.

Close below 0.7386 pivot would increase downside risk for further weakness towards strong support at 0.7329 (weekly cloud base) and 0.7301 (Fibo 76.4%) in extension.

Bears may pause on end-of-week profit-taking and oversold daily studies, however, bias remains firmly with bears and limited upside action is expected.

Former key support at 0.7438 (27 Apr low) and falling daily Tenkan-sen / broken weekly Kijun-sen (0.7468) should keep the upside protected.

Res: 0.7413, 0.7438, 0.7468, 0.7518
Sup: 0.7386, 0.7366, 0.7329, 0.7301

'We expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses.' - Chris Williamson , IHS Markit

British services activity rose unexpectedly last month, suggesting that the economy recovered from a sluggish start. Marki/CIPS reported on Thursday that its Purchasing Managers' Index for the UK services sector came in at 55.8 in April, the second highest since mid-2015, following the preceding month's 55.0 and surpassing analysts' expectations for a decline to 54.6. The PMI surveys released this week are set to provide significant support to the current PM Theresa May and the Conservative Party ahead of the June 8 National Election. Thursday's data also showed that prices charged by service providers rose at the fastest pace since July 2008 amid the sharp fall in the value of the Pound after the Brexit vote. Moreover, more companies lowered their outlook for economic growth and business activity in the sector. Markit reported that according to its PMI surveys the British economy was expanding at a 0.6% pace in the Q2. Furthermore, Markit said that the economy would lose its positive momentum soon, as rising prices continued putting significant pressure on households.

'A strong first indicator on March GDP suggests there could be some decent momentum heading into the second quarter.' - Nick Exarhos, CIBC

Canada's trade deficit narrowed less than expected last month, official figures revealed on Thursday. Statistics Canada reported that the country's trade gap came in at C$0.1B in March, down from the prior month's deficit of C$1.1B. However, the reading missed expectations for a C$0.3B trade surplus. Exports rose 3.8% to C$46.98B, as export volumes and prices climbed 2.5% and 1.3%, respectively. The trade balance report suggested that the economy finished the Q2 of 2017with solid growth. Energy exports contributed most to the March rise, posting a 7.0% gain. Imports rose 1.7% to C$47.11B amid higher inflows of metal and non-metallic products from Japan. In volume terms, imports fell 0.2%, while import prices jumped 1.9%. Higher imports pointed to improvement in business investment and inventories, contributors to GDP growth. In April, the Bank of Canada revised down its export growth forecast to 2.5% over the next three-month period, compared to a 3.0% growth estimate in January due to the high degree of uncertainty in the US and weak global investment.