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Daily Pivots: (S1) 1.2921; (P) 1.2952; (R1) 1.3005; More...

Intraday bias in GBP/USD remains on the upside and current rise should 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.

Daily Pivots: (S1) 112.23; (P) 112.52; (R1) 112.95; More...

Consolidation from 113.04 temporary top is still in progress and intraday bias in USD/JPY remains neutral. We'd holding on to the view that corrective fall from 118.65 could be completed with three waves down to 108.12. Further rise is expected as long as 110.86 support holds. Above 113.04 will target 115.49 resistance. Firm break there will resume larger rally from 98.97 to 125.85 high. However, break of 110.86 support will keep USD/JPY inside near term falling channel and will turn bias back to the downside for 108.12 and below to extend the decline from 118.65.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Meanwhile, break of 115.49 resistance will extend the rise from 98.97 to retest 125.85. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

USD/CHF - 0.9952

New strategy  :

Buy at 0.9910, Target: 1.0005, Stop: 0.9875

Position : -

Target :  -

Stop : -

The greenback has staged another strong rebound in European session, suggesting a temporary low has been formed at 0.9859 and consolidation with mild upside bias remains for test of 0.9966-69 resistance, break there would add credence to this view and extend gain to indicated previous resistance at 1.0000-08 but only break there would signal recent decline from 1.0108 top has ended, then headway to 1.0025-30 would follow.

In view of this, we are looking to buy dollar on dips as 0.9900-05 should limit downside. Below 0.9880 would risk test of 0.9859, however, break there is needed to signal recent decline has resumed and extend weakness to support at 0.9831 and possibly towards 0.9800.

Daily Pivots: (S1) 1.0962; (P) 1.0981 (R1) 1.1015; More....

A temporary top is in place at 1.1030 with 4 hour MACD crossed below signal line. Intraday bias in EUR/USD is turned neutral for consolidation. 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.

After initial spike on news of French presidential election, Euro quickly retreated. While weakness in the common currency is limited so far, the price actions suggest that it's now in a near consolidation phase. And focus will move away from Euro to others. Two major focuses of the week are BoE Super Thursday and RBNZ rate decision. In particular, Sterling could ride on cross buying in EUR/GBP and a hawkish twist in BoE inflation report to extend recent rise. Meanwhile, Loonie and Aussie will look into development in energy and commodity markets. Canadian Dollar rebounds today with the help of recovery in oil price. However, WTI is starting to feel heavy again ahead of 47 handle. Overall, Dollar recovers broadly but the outlook is mixed so far as it's not in focus.

French parliamentary election in June watched

After the landslide victory, French President-elect Emmanuel Macron vowed to "fight with all my energy against the deepening divisions" in France. But now the focus will be quickly turned to parliamentary election in June. His EN Marche! movement basically has no experience with legislative election. And without a solid coalition, it would be very hard for Macron to push through his agenda. And Macron is also expected to push for reform in EU too. Talking about EU, German Chancellor Angela Merkel hailed that Macron "carries the hopes of millions of French people, and of many people in Germany and the whole of Europe". Belgian Prime Minister Charles Michel also failed that Macron's victory represented "a clear rejection of a dangerous project of European withdrawal."

More on French Election in Macron Becomes French President In Landslide Victory.

ECB Mersch: Risks almost back in balance

ECB Executive Board member Yves Mersch delivered an upbeat speech in Tokyo today. Mersch said that "the recovery in the euro area is gaining more and more traction." And, "the confirmation of a broadly balanced risk outlook for growth is within reach." He also noted that "political uncertainties and fragilities have consistently evolved in a positive fashion in Europe since the beginning of the year." And, if conditions continue to improve, "a discussion on policy normalization becomes warranted in the future." But for now, he emphasized that "the Governing Council is convinced of the need to continue an accommodative monetary policy stance without deviation from the announced measures under implementation to be expected."

Eurozone investor sentiment jumped to near 10 year high

Eurozone Sentix investor sentiment rose sharply to 27.4 in May, up from 23.9 and beat expectation of 25.2. That's also the highest level since July 2007. Current condition sub-index jumped to 34.5, up fro 28.8, highest since January 2008. Expectation sub-index rose to 20.5, up from 19.3, best since August 2015. Sentix noted that "before the decisive second round in the French presidential election, investors are once again assessing the economic situation in the euro zone improved. Investors are obviously expecting a decrease in political uncertainties in the euro zone." Separately, Germany factory orders rose 1.0% mom in March.

BoJ Kuroda: Faced challenging situation with inflation close to zero

In Japan, BoJ Governor Haruhiko Kuroda said during the weekend that inflation being close to zero for four years was "certainly a very challenging situation for central bank governors and central bankers in Japan." Nonetheless, he acknowledged that growth and price conditions have "greatly improved" and pledged to continue with "strong" monetary easing. Regarding exchange rate, Kuroda said that "in the case of Japan, exchange rates are affecting not much the trade balance but the corporate profit situation, through which domestic demand will fluctuate.

China exports and imports grew less than expected

China trade surplus widened to USD 38.1b in April, up from USD 23.9b and beat expectation of USD 35.3b. However, exports rose merely 8.0% yoy while imports rose 11.9% yoy. Both fell short of expectation of 10.4% yoy and 18.0% yoy respectively. In Yuan terms, trade surplus widened to CNY 262b, up from CNY 164b and beat expectation of CNY 197b. The data showed softening domestic demand that weighed down imports. There would likely be more downward pressure with the government's tightening policies.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0962; (P) 1.0981 (R1) 1.1015; More....

A temporary top is in place at 1.1030 with 4 hour MACD crossed below signal line. Intraday bias in EUR/USD is turned neutral for consolidation. 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.

Economic Indicators Update

GBP/USD - 1.2963

Original strategy :

Buy at 1.2905, Target: 1.3005, Stop: 1.2870

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2905, Target: 1.3005, Stop: 1.2870

Position : -

Target :  -

Stop : -

As cable has maintained a firm undertone after last week’s late rally above previous resistance at 1.2965, adding credence to our bullish view that recent upmove is still in progress and may extend further gain to 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance), then towards 1.3040-50 which is likely to hold from here due to near term overbought condition. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as 1.2900-05 should limit downside and bring another rise later. Below 1.2880 would defer and risk weakness to 1.860-65 but only a break of said support at 1.0831 would signal a temporary top has been formed.

EUR/USD - 1.0950

Original strategy  :

Sell at 1.0990, Target: 1.0890, Stop: 1.1025

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.0990, Target: 1.0890, Stop: 1.1025

Position : -

Target :  -

Stop : -

Although the single currency opened higher earlier today, lack of follow through buying and the subsequent retreat from 1.1025 suggest consolidation below this level would be seen and pullback to 1.0920 cannot be ruled out, break there would suggest a temporary top is possibly formed, bring correction to 1.0900 but support at 1.0875 should remain intact and bring rebound later.

In view of this, we are looking to sell euro on recovery as 1.0995-00 should limit upside and bring another retreat. Above said resistance at 1.1025 would abort and signal recent upmove from 1.0340 low has resumed for headway to 1.1050 but reckon upside would be limited to 1.1065-70 (61.8% projection of 1.0602-1.0951 measuring from 1.0851).

Summary:

• In the quarter ending March 2017, New Zealand's unemployment fell to 4.9%
• The decline in the unemployment suggested stronger than expected job growth
• It is estimated that over 29,000 workers entered the workforce in the quarter ending March 2017
• New Zealand's labor participation rate continued to rise to 70.6% marking a record high

New Zealand's quarterly unemployment rate fell to 4.9% in the March 2017 quarter which reversed the increase from the previous quarterly unemployment rate of 5.2%. The drop in the unemployment rate came on firm job growth.

Data released by Statistics New Zealand last week showed that the employment rose by 1.2% over the quarter, with 29k workers entering the workforce. This was a strong jobs growth, higher than what was anticipated.

The labor force increased by 23k during the quarter ending March 2017 which came as the growth in the economy attracted more workers into the labor market. Further adding weight to this was the strong levels of migration as well which continued to attract workers, strengthening the labor force as a result.

New Zealand unemployment rate: 4.9%, Q1 2017

Combined, the above factors led to a consistent increase in the labor participation rate which rose to 70.6% and marked a record increase, up 0.1 percentage points from the previous quarter.

Most of the job gains came from part-time jobs which rose 3.1% on the quarter whereas full time jobs rose only 0.6%. Industry-wise, job gains were seen coming from hospitality and services sectors including accommodation and good services. The construction sector was also seen contributing to the labor market growth.

Despite the strong numbers, surprisingly the average hours worked fell 0.6% in the quarter following a strong increase in the previous quarter. Alongside the decline in average hours worked, wage inflation was also absent.

The prospects of the labor market in New Zealand continued to remain strong, according to the Quarterly Survey of Employment. Data showed that firms expect to see a modest pace of employment growth. Full time employment is expected to rise 0.4% while the filled jobs rose 0.3% on the quarter.

While labour demand continued to strengthen, this has not yet translated into stronger nominal wage growth. The private sector LCI index rose 0.4% in the quarter, leaving annual inflation on this measure at 1.5% (in line with expectations). Similarly, the broader QES measure of average hourly earnings rose 0.3% over the quarter.

RBNZ expected to keep OCR unchanged

The unemployment report was indeed a surprising report especially for policy makers on the stronger than expected jobs growth, but still, there is strong evidence of broad softness in the data especially when it comes to wage growth and unemployment rate.

However, in a separate report, the New Zealand job ads showed a 2.8% jump in April as the monthly growth continued to accelerate. Job ads were up 18% from a year ago in April suggesting that the underlying factors in the labor market continued to build up.

The Reserve Bank of New Zealand will be meeting this week on Wednesday and policymakers are unlikely to make any changes to their statement while also leaving the overnight cash rate unchanged at 1.75%. The markets are expecting the first rate hike from the RBNZ to come only next year, in 2018 currently.

However, that could change should inflation continue to rise in the coming quarters while on the unemployment front; wage inflation will remain a key component in assessing the pace of future rate hikes. While no changes to the OCR is expected this week, the RBNZ could remain neutral which could bode well for the New Zealand dollar in the short term.

USD/JPY - 112.68

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although the greenback opened higher earlier today, as dollar has retreated after faltering below last week’s high at 113.05, suggesting further consolidation below this level would be seen and pullback t 112.40 cannot be ruled out, however, reckon support at 112.09 would limit downside and bring another rise later. Above said resistance at 113.05 would confirm recent upmove has resumed and extend gain to 113.10-15 (61.8% projection of 108.13-111.78 measuring from 110.87) and 113.30 but reckon upside would be limited to previous resistance at 113.54 and price should falter well below 113.90-00.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 112.09 support would bring test of 111.96 but break of this level is needed to signal a temporary top has been formed at 113.05, bring correction to 111.73-78 (38.2% Fibonacci retracement of 109.59-113.05 and previous resistance), however, reckon 111.21-32 (previous support and 50% Fibonacci retracement) would contain weakness.

The DAX has edged lower on Monday and is currently trading at 12,684.25. On Sunday, Emmanuel Macron easily defeated Marie Le Pen to win the French presidential election. On the release front, there are no major events out of the eurozone. There was some positive news in the eurozone, as German Factory Orders gained 1.0%, above the forecast of 0.7%. As well, Eurozone Sentix Investor Confidence climbed to 27.4, beating the estimate of 25.3 points. The indicator has now improved over four consecutive months, pointing to stronger confidence among investors and analysts. The improvement in confidence is linked to the stronger eurozone economy, as key numbers such as PMI reports continue to point to expansion in the manufacturing and expansion sectors.

There were no surprises in the French presidential election, as Emmanuel Macron cruised to victory. Macron won 64% of the popular vote, with Marie Le Pen taking 36%. Macron's margin of victory was larger than the polls predicted, and the DAX showed some gains immediately after the vote, but was unable to consolidate these gains. The markets had priced in a decisive Macron victory, so it's not surprising that the Sunday rally did not last. Although Macron certainly "won big", it should be noted that fully one third of French voters either abstained or voted a blank ballot as a protest vote. This means that Macron was viewed by many voters as a default choice, given that his opponent was the leader of the far-right and has been accused of being racist and xenophobic. The French elections now enter a new phase, with parliamentary elections slated for mid-June. Macron's En Marche! party is barely a year old and is unlikely to win a majority, which would mean a power-sharing setup in parliament, likely between Macron's party and the center-right. Similar to the presidential election, the parliamentary election promises to be full of uncertainty, and opinion polls during the election campaign will be important as fundamental releases and should be treated as market-movers.