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GOLD Going lower.

Gold continues its decline after the yellow metal has faded near the hourly resistance at 1295 (18/04/2017 high). Hourly support can be located at 1260 (26/04/2017 low). The road is wide-open for further decline.

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 Continued weakness.

Silver has broken strong support at 18.16 (rising trendline) indicating further downside risk. Strong support given at 16.82 (15/03/2017 low) has been broken. Strong resistance is given at a distance at 19.00 (09/11/2017 high). Expected to see continued bearish pressures.

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 Pushing towards $48.

Crude oil is trading mixed, breaking the support at 50.71, yet now has paused. Support now lies at 48.87 (25/04/2017 low). Resistance for a short-term bounce can be found at 50.71 (old support) and 53.70 (12/04/2017 high).

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).

EUR/JPY Pushing higher.

EUR/JPY's buying pressures are there. Key resistance area given around 122.00 has been broken and stronger resistance stands at 123.31 (27/01/0217 high). Major support is given at 114.90 (18/04/2017low). Expected to see shortterm consolidation before seeing another leg higher.

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 Slight increase.

EUR/GBP is getting higher. The technical structure is negative as long as the resistance at 0.8596 holds. Expected to show continued weakness until resistance given at 0.8304 (05/12/2017 low).

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 Targeting key resistance.

EUR/CHF is pushing higher. Despite the sharp increase and the recent bullish breakout which is 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).

USD/CHF Sideways price action.

USD/CHF is trading mixed. Yet, the volatility is getting higher. The short-term technical structure is turning positive as long as prices remain below the hourly resistance at 1.0171 (07/03/2017). Monitor strong support given at 0.9814 (27/03/2017 low).

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 2015

USD/CAD Targeting 1.3700.

USD/CAD has broken key resistance given at 1.3599 (28/12/206 high). The pair keeps on pushing higher. Hourly support can be found at 1.3411 (24/04/2017 high) then 1.3353 (20/01/2017 high). Expected to show continued bullish pressures as long as the pair remains above 1.3411.

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 Monitoring downtrend.

AUD/USD is pushing higher . As long as prices remain below the resistance at 0.7608 (17/04/2017 high), the short-term technical structure is negative. Key resistance stands at 0.7681 (30/03/2017 high). Expected to show further 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 Pausing above 1.0900.

EUR/USD is trading sideways. 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 is given at 1.0951 (26/04/2017 high). 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 Bearish consolidation.

GBP/USD keeps pushing higher despite ongoing consolidation. Hourly resistance can be found at 1.2966 (30/04/2017 high). The pair has exited the short-term bearish momentum. 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 Testing 112.20.

USD/JPY is consolidating. Strong resistance can be found at 112.20 (31/03/2017 high). Closest support can be 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).

EUR/USD

Current level - 10912

The bias here remains neutral, as the pair is caught in a tight trading range between 1.0950 and 1.0826. Intraday allow another swing to the lower boundary.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 112.07

The uptrend here is intact, heading towards 112.90 dynamic resistance. Crucial on the downside is 111.42 low.

GBP/USD

Current level - 1.2868

There is a reversal at 1.2965 peak and the intraday bias is bearish, currently struggling above 1.2860 support zone. A break through the latter will challenge 1.2770. Crucial on the upside is 1.2904.

The CAC is almost unchanged in the Tuesday session, after the Paris stock exchange was closed on Monday for a holiday. Currently, the index is trading at 5,283.00. On the economic front, there was positive news from the Eurozone and French manufacturing sectors, as Eurozone and French Manufacturing PMIs pointed to expansion. The Eurozone report came in at 56.8, edging above the forecast of 56.7, while the French release of 55.1 matched the estimate. The Eurozone unemployment rate remained unchanged at 9.5%, just above the estimate of 9.4%. On Wednesday, the Eurozone releases Preliminary Flash GDP,with an estimate of 0.5% for the first quarter. In the US, the Federal Reserve is expected to maintain the benchmark rate at 0.75%.

French voters will head back to the ballot box on Sunday, in the second round and final round of the presidential election. The two candidates, centrist Emmanuel Macron and far-right candidate Marie Le Pen have very different views of France’s role in Europe. Macron is pro-European Union, while Le Pen has pledged to take France out of the bloc and even revert back to the French franc, although she has toned down her anti-European rhetoric in the final stages of the campaign. Recent opinion polls show Macron with 60%-65% of the vote, so a Le Pen victory would be a huge upset and would shake up the French stock market, which is having an uneventful week. The markets have priced in a Macron victory, although a tighter finish than predicted could cause some volatility in the stock market.

Eurozone growth numbers have pointed upwards in 2017, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. In February, the rate dropped to 9.5%, and the March release is expected at 9.4%. Germany, the largest economy in Europe has led the way, with the unemployment rate dropping to 5.9% in February. A stronger Eurozone economy has buoyed European stock markets, and the CEC has jumped on the bandwagon, as the index continues to trade at levels last seen in February 2008.

President Donald Trump marked 100 days in office over the weekend, but his administration has been plagued by problems and has little to show for itself. Trump’s popularity is at record lows for a new president, but he managed to avoid the embarrassment of a government shutdown, as lawmakers reached an agreement on the weekend. The short-term spending deal, which has bipartisan support, provides funding for government services until September 30th. The deal does not include any funding for a border wall with Mexico, marking a clear concession on the part of Trump. The White House is hoping that this small victory will be the prelude to more cooperation between the Republicans and Democrats on Capitol Hill, as Trump will need some support from the Democrats in order to pass key legislation such as tax reform, one of Trump’s major campaign planks.

'Price pressures have meanwhile risen to a two-and-a-half year high, which is likely to feed through to final prices paid for goods consumers in coming months.' - Chris Williamson, IHS Markit

The Purchasing Managers' Index for the US manufacturing sector grew less than analysts estimated. According to the Institute for Supply Management, the PMI lost 2.4% compared to the previous month and tumbled to 54.8%, while experts anticipated only a slight decrease of 0.6%. Although in April the PMI rose at the slowest pace this year so far, it still remained above the 12-month average of 53.6%. The ISM report showed that the New Orders, Employment and Supplier Deliveries Indices dropped 7.0%, 6.9% and 0.8%, accordingly. Meanwhile, both Inventories and Prices Indices posted a 2% advance, which indicated that manufacturing companies stockpiled more raw materials than in the previous month and their costs increased. Nevertheless, all 18 manufacturing industries, excluding the apparel, leather and allied products industry, reported growth in April. In addition, all 15 commodities included in the report rose in price. Rising prices confirmed the view that inflation growth remained solid. Overall, all Indices remained above the 50% threshold and, thus, confirmed the general, long-term upward trend. Even though GDP figures released on Friday last week missed forecasts, analysts suggest that the US economy will likely regain momentum in the upcoming quarters.

AUD consolidates as RBA keeps a low profile

As broadly expected, the Reserve Bank of Australia held unchanged the official cash rate target at a record low 1.50%. The tone of the statement was slightly more positive than a month ago as Governor Lowe highlighted the positive trend in employment growth. Despite a pick-up in headline inflation in the first quarter (+2.1% y/y compared to 1.5% in the previous one), the central bank reiterated its cautious stance as core inflation is still running low and has shown little sign of improvement recently (core gauge printed at 1.5% y/y versus 1.3% in the previous quarter).

All in all, the RBA wants to avoid as much as possible to appear hawkish - mostly to prevent a sharp appreciation of the Aussie - even though it cannot turn a blind eye to the recent improvements, even minor ones. AUD/USD was treading water this morning at around 0.7530. The market is still heavily positioned for further appreciation of the Aussie. Indeed, net long speculative positioning, as reported by the CFTC, reached 39% of total open interest last week, suggesting that the risk is mostly to the downside.

Still bullish on the UK on Brexit

The market continues to make speculative negative bets on the eventual effect of Brexit on the UK economy. This has only heated up since PM May called for snap elections. We remain optimistic, based on Europe and UK mutual beneficial relationships, that the end-result will be significantly less severe than a “hard” Brexit. Within a historical context, the Europe-UK relationship has always had ups-and-downs but interactions have always been a constant. That will not change now. Secondly, both parties benefit from equality from the relationship (including bilateral trade), so threats are really meaningless.

UK domestic demand has slowed (annual retail sales ex auto fuel rose 2.6% vs. 3.8% exp from 4.1%) after a strong rally post-Brexit with many pointing to fears over punitive relocation in the financial sectors and its low productivity growth as the culprit. In addition, the rally in the GBP has removed some currency advantage for exporters and lure for foreign buyers.

We agree that uncertainty will clearly keep investment subdued yet the outright collapse or relocation of the UK's vital financial sectors is overblown. Also, other key fundamentals remain healthy. The UK economy rose faster than many G10 nations, as Q1 GDP expanded 0.3% (pessimists point to the fact that pace was the slowest since before the referendum) with the annual rate at 2.1%. The breakdown was still optimistic with manufacturing sectors rising 0.5%, construction grew by 0.2% and even the service sector increased by 0.3%. We remain optimists that the final outcome will be a “soft” Brexit and the effect to the UK economy will be manageable.

Strangeness in US Q1 GDP data

The recent US Q1 GDP taken at the headline level suggests a significant slowdown in the economy. However, for years now the Q1 datapoint has under reported the actual fundamental health. This fact is not lost on officials but does get diluted when filtered into the mainstream.

This anomaly has been acknowledged by the Bureau of Economic Analysis, the agency that constructs gross domestic product data. In 2016, BEA statisticians recognized that their efforts to prepare for seasonality had problems, particularly for Q1. We are ill equipped to measure the methodologies but we understand that the markets are seemingly under-pricing the steepness of the Fed's hiking cycle. This is partially due to the weak GDP read.

While leading data has been disappointing, we still see the US economy as healthy and warranting higher interest rates. Domestic consumption has fallen but after the very strong Q4 read. Perhaps most importantly, the Employment Cost Index (ECI), measuring wages and benefits, jumped 0.8% over the prior quarter. Friday's NFP is expected to support the rise by increasing by 225k. Given our views on the US economy, we anticipate the Fed will signal a rate hike in June. Until the Fed's announcement, expect the USD to stabilise around the current policy, but with a hawkish Fed anticipate USD buying on the under-positioning.

Pulpit Trump is making us dizzy

The machine gun-like frequency of US President Donald Trump's policy creation and reversing is making our head spin. Whether it is his administration's unbridled comments on currency, foreign affairs, healthcare, tax or trade policy, the lack of continuity is shocking but also extremely difficult to trade.

At this point we could not tell you if Trump favours a “strong” or “weak” US dollar. We remain consistent that fading the Trump hype and staying focused on fundamentals is the best FX trading strategy. In this regard, global fundamentals [despite China PMI falling to 50.3 for the 4th straight month of decline, it remains in expansion territory] and risk sentiments are supportive. US solid earnings, clearer US fiscal policy and lower European political risk only furthers our view to buy risky assets. We are bullish on Emerging Markets currencies, especially nations with solid domestic consumptions and commodity importers. The current weakness in commodity prices are a function of supply glut rather than demand issues. The breakdown of correlations with equities supports this thinking.

The low volatility environment should support INR, IDR, BRL and PLN despite some marginal idiosyncratic risk. For trades that embrace the volatility, KRW should have further upside but the trade might make your guts turn. The underperformance of high beta currencies in the last two weeks indicates additional upside. We suspect the JPY would provide to be a smarter funding currency due to its additional yields but also the expectation of yield steeping in the US driving JPY lower.

The euro continues to have a quiet week, as EUR/USD trades just above the 1.09 line. On the release front, Eurozone and German Manufacturing PMIs pointed to expansion. The Eurozone report came in at 56.8, edging above the forecast of 56.7, while the German reading of 58.2 matched the estimate. There are no major US events on the schedule. On Wednesday, we'll get a look at the German unemployment rate and Eurozone Preliminary Flash GDP. In the US, the Federal Reserve will release its policy statement. The other key releases are ADP Nonfarm Payrolls and ISM Non-Manufacturing PMI. 

The eurozone economy continues to expand, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. In February, the rate dropped to 9.5%, and the March release is expected at 9.4%. Germany has led the way, with the unemployment rate dropping to 5.9% in February. Unemployment rolls continue to shrink in Germany, and the decline of 30,000 unemployed persons in February easily beat expectations. The March reading is expected to show another decline of 10,000. The markets will also be monitoring US employment numbers, which kick off on Wednesday with the release of ADP Nonfarm Payrolls. The indicator is expected to drop sharply to 178 thousand in March compared to 263 thousand a month earlier.

It's been a rocky start for President Donald Trump, who just marked the 100-day milestone of his term in office. Trump's popularity is at record lows for a new president, but he managed to avoid the embarrassment of a government shutdown, as lawmakers reached an agreement on the weekend. The short-term spending deal, which has bipartisan support, provides funding for government services until September 30th. The deal does not include any funding for a border wall with Mexico, marking a clear concession on the part of Trump. The White House is hoping that this small victory will be the prelude to more cooperation between the Republicans and Democrats on Capitol Hill, as Trump will need some support from the Democrats in order to pass tax reform legislation, one of Trump's major campaign planks.

• Surprisingly, Russia's central bank (CBR) cut its key rate by 50bp to 9.25% on 28 April, as inflation is approaching its target faster than expected and RUB's excessive rally is a concern for economic authorities.
• We expect the CBR to cut to 8.00% by the end of 2017 (8.50% previously), while more aggressive cuts are possible if RUB's rally diverges further from the oil price.
• Aggressive monetary easing would add steam to economic growth in Russia, while the CBR's consistency in communication could be jeopardised

Assessment and outlook

The CBR cut its key rate by 50bp to 9.25% on 28 April. Consensus expected a 25bp cut as did we. However, in our preview prior to the decision, we did not exclude a 50bp cut to restrain the RUB's excessive strengthening. CBR governor Elvira Nabiullina signalled last week that rate cuts of 25bp and 50bp may be discussed at the meeting as inflation hit 4.1% y/y as of 17 April. While inflation is getting closer to the target (i.e. 4% y/y by the end of 2017) and inflation expectations are decreasing, in its newest statement the CBR pointed out that 'at the same time, inflation risks remain in place'.

We see that the current aggressive cut was fuelled by concerns of economic authorities that RUB has become overvalued given the crude price levels. Previously, neither the Ministry of Finance's (Minfin) nor the Ministry for Economic Development succeeded in convincing the markets with their vocal interventions. On Tuesday 25 April 2017, President Vladimir Putin made a RUB comment to the effect that the government is looking for 'market-based measures' to affect the RUB, monitoring what he called the 'key' issue of its stability 'practically on a daily basis'. Actually, Putin did not take any view on RUB's direction at all, it was purely the market's interpretation.

Given CBR's dovish tone and the fact that CBR's 'assessment of the overall potential of the key rate reduction before the end of 2017 is unchanged', we reduce our key rate projection for the end of 2017 to 8.00% from 8.50% previously. More aggressive monetary easing on rising crude price and RUB's excessive appreciation would encourage fixed investment expansion and private consumers supporting economic growth. We continue to see GDP growing 1.2% y/y in 2017 and 1.4% y/y in 2018.

The main reasons behind today's decision and the CBR's tone

'Annual inflation has moved close to the target level.' Annual inflation is hovering around 4.2% as steady oil and strong demand for RUB support disinflation. The CBR mentions 'persistent interest in investment in Russian assets among external investors, and a drop in the sovereign risk premium'. The inflation target looks very realistic and the next question on the agenda will be how well the target could be anchored

'Positive real interest rates are held at the level which ensures demand for loans without increasing inflationary pressure'. The assumption stayed unchanged since the last decision in December 2016, and the CBR did not mention Minfin's FX operations mechanism impact this time.

The CBR saw economic expansion in Q1 17. Many industrial sectors in Russia continue to see positive dynamics, while manufacturing and services PMIs were at their three-year highs in early 2017. The CBR has become more positive on economic growth in 2017-19 'even if the conservative oil price scenario materialises'. In March 2017 in its monetary policy report, the CBR mentioned that its 'conservative approach suggests a decreasing trend in the Urals price close to USD40/bbl by the end of 2017. CBR's 'risky' scenario sees the oil price dropping to USD25/bbl by the end of 2017. Our models show that in current conditions, an average annual oil price lower than USD47/bbl would send Russia's GDP into negative territory.

Inflation risks would come from oil price fluctuations caused 'by negotiations between oil exporting countries to extend agreements on limiting oil production.' The CBR highlights the importance of 'legislative consolidation of a budget rule' in mitigating medium-term inflation risks.

This time, the CBR has not mentioned risks it has linked previously to greater-thanexpected rate hikes by the Fed on the back of President Donald Trump's potentially expansive fiscal policy, nor a slowdown in China's economy towards end-2017.

We expect the CBR to cut the key rate by 25bp at its monetary policy meeting on 16 June 2017.

The RUB welcomes aggressive cut

First, the RUB reacted negatively to the CBR's 50bp cut, restarting an even stronger rally as demand for local bonds – OFZs – surged. It has been a tradition for the RUB market: as the economy has turned sluggish and real rates remain high, monetary easing has been interpreted as a 'buy' signal for a range of Russian assets on improving economic prospects as fixed investments and household lending are set to expand..

We keep our moderately bullish stance on the RUB based on our latest FX forecast update released in mid-April. See FX Forecast Update: Political risks in charge, 18 April 2017. We still expect the USD/RUB to hit 54.40 in 3M, 53.00 in 6M and 52.00 in 12M on a Brent crude price assumption of USD58/bl in Q4 17.

We remain bullish on OFZs, as surprisingly aggressive cuts to the key rate should not be excluded if the RUB rally seizes RUB's and oil correlation further.