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News

The S&P 500 lost 0.24% to 2,721.33 while the Dow Jones Industrial Average equally dropped 0.24% to 24,753.09. The Nasdaq Composite Index gained 0.13
  • The main theme of the week was the geopolitical fears related to US-China trade war and the US-North Korea summit canceled.
  • The main US stock indices end the week in the green despite geopolitical turmoil as markets focus on earnings. 
  • Gold broke above the $1,300/oz while crude oil WTI fell below the $68 per barrel on fears of rising production.


The S&P 500 lost 0.24% to 2,721.33 while the Dow Jones Industrial Average equally dropped 0.24% to 24,753.09. The Nasdaq Composite Index gained 0.13% to 7,433.85 on Friday. 

The week started with the news that the discussions between US and China were “put on hold”. The news broke out a few days before the second round of talks between the two biggest economies. Later in the week, US President Trump said that he was not satisfied with the trade talks. He later announced that he was planning on imposing 25% tariffs on imported vehicles to the US. 

What also spooked markets (on Thursday) was the news that Trump canceled the summit with the North Korean dictator Kim Jong Un which was planned on June 12 in Singapore. The news sent stocks lower and gold past the $1,300 a troy ounce level. 

However, analysts argue that the markets have priced in the geopolitical risk and investors are focusing on earnings instead.

Friday saw crude oil WTI melt more than 4% as the OPEC is contemplating the idea to increase production levels of up to 1 million barrels a day in order to compensate for the Venezuelan production drop. Indeed, the country is in deep crisis and its oil production is at a 70-year low. The news sent WTI below the $68 a barrel mark. 

Dow Jones: daily chart 

Crude oil West Texas Intermediate (WTI) melted down 4.24% on Friday (trading at around 67.88) as Saudi Arabia and Russia are considering ramping up
  • Saudi Arabia and Russia are considering adding 1 million barrels a day (mbd) to the market while the current cut is at 1.8 million mbd.
  • Saudi Arabia Energy Minister Al-Falih says he was targeting $80 a barrel “to support domestic initiatives”. 
  • "The moment is coming when we should consider assessing ways to exit the deal very seriously and gradually ease quotas on output cuts," said Russian Energy Minister Alexander Novak.

Crude oil West Texas Intermediate (WTI) melted down 4.24% on Friday (trading at around 67.88) as Saudi Arabia and Russia are considering ramping up production in order to compensate for the sharp decrease output from Venezuela and potentially also Iran which is at risk of sanctions from the United States. Investors are fearful that the production cut agreement between OPEC and non-OPEC members might come to an end. 

The agreement to cut production entered into effect on January 1, 2017, in order to raise oil prices artificially by cutting supply of up to 1.8 million barrels per day. The agreement has already been extended and is set to end at the end of 2018.

OPEC’s compliance surpassed 150% last month as Venezuela production is at a 70-year low. The group intends to bring back the compliance to 100% which entails for the members to produce more. It has been discussed that it could mean increase supply up to 1 million barrels per day to the market. 

Saudi Energy Minister Al-Falih said he is concerned to see “oil prices above $80 a barrel on consumer nations like China and India,” according to Reuters as “Saudi Arabia was roughly targeting $80 a barrel to support domestic initiatives.”

"The moment is coming when we should consider assessing ways to exit the deal very seriously and gradually ease quotas on output cuts," said Russian Energy Minister Alexander Novak.

Meanwhile, it has been reported that large industrial consumers have increased their hedges as they are concerned that prices push higher. “Consumers are hedging, which is supporting the back end of the Brent curve,” said Thibaut Remoundos, founder of Commodities Trading Corp.

Crude oil WTI daily chart 

The bears are in control and support is seen at 67.30 supply zone and at 65.42 swing low. To the upside, resistance is seen at 69.00 figure and 69.55 swing high followed by 70.00 figure. 

This week has been dominated by safe-haven flows. Investors rushed to the Swiss franc, the Yen and gold. News of the trade war being ?put on hold? and
  • CHF strength this week was due to safe-haven flows stemming from an ever-increasing complicated geopolitical context particularly with North Korea and China. 
  • The US Non-Farm Payroll, Gross Domestic Product and the Personal Consumption Expenditure are all expected next week and can give a boost to the greenback. 

This week has been dominated by safe-haven flows. Investors rushed to the Swiss franc, the Yen and gold. News of the trade war being “put on hold” and the new plan of the Trump administration to slap 25% tariffs on imported vehicles made investors rather agitated. Moreover, the convoluted Italian political situation saw the main European stock indices trade to weekly lows benefitting to the Swiss franc. 

The Swiss franc is currently trading at around 0.9930 up 0.10% on Friday. 

On the US macroeconomic picture, next week’s salient event will be the Non-Farm Payroll data for the month of May and the Average Hourly Earnings (wage’s growth). 

Investors will also closely watch the Core Personal Consumption Expenditure (PCE), which is the favorite gauge of inflation used by the Federal Reserve Bank. It is expected to rise to 2% according to estimates. Fed officials have made rather upbeat comments of late and a drop in the PCE indicator would be surprising. The Gross Domestic Product (GDP) on Wednesday will equally be closely followed by investors as they expect the US economy to expand. The Swiss GDP is also scheduled next week but will likely provide less volatility than the American one. 

USD/CHF daily chart 

The main bull trend is losing momentum has it formed a double top with the highs of one year ago in the 1.0050 region. Bulls see the current move down as a correction or a bull flag while bears think that the market has topped out and see the move lower as the start of a bear trend. The next likely support to the downside is seen at the 0.9860 level which is the 23.6% Fibonacci retracement level from mid-February to early May. If the level is broken to the downside the next scaling point is located in the 0.9700 region close to the 38.2% Fibonacci retracement. To the upside, bulls will likely meet resistance at the parity level, 1.0000 and then at the 2018 high at the 1.0057 level. The Swissy looks rather weak at this point and if bulls do not manage to gather any momentum it looks like the slide is set to continue further.   

The EUR/USD is in a strong bear leg. It is currently trading in the 1.1670 region on Friday. The Relative Strength Index (RSI), the Stochastics and th
  • EUR/USD is trading below its 50-period simple moving average on the weekly chart. 
  • The RSI, Stochastics and MACD indicators are all bearishly configured suggesting an extension of the bear trend.

The EUR/USD is in a strong bear leg. It is currently trading in the 1.1670 region on Friday. The Relative Strength Index (RSI), the Stochastics and the Moving Average Confluence/Divergence indicators are in bearish mode. The market is trading below the 50-period simple moving average (weekly) suggesting that the previous bull trend has lost momentum. 

The next scaling point is likely going to be the 1.1553 swing low established in November 2017. Further down the 1.1450 level can be the next support as it is the 50% Fibonacci retracement level from the January 2017-February 2018 bull trend. Further down, the 1.1200 level should also provide support as it is the 61.8% Fibonacci retracement from the period mentioned above. The 100 and 200-period simple moving averages (weekly) are also located close to the 1.1500 area which should bring some support.

To the upside, resistances are seen at the 1.1928 level which is the 50-period SMA (weekly), the 1.2000 figure and the 1.2154 swing low established in early March. 

EUR/USD weekly chart 

The kiwi is trading in a tight range for the third consecutive day. NZD/USD is currently at around 0.6920 down 0.10% on Friday as the market is creati
  • NZD supported by the jump in gold. The dismal geopolitical picture is prompting precious metal bulls to rush to gold in a flight to safe-haven assets.
  • The US Dollar remains strong as investors expect a rate hike at the next Federal Reserve Bank meeting in June. 

The kiwi is trading in a tight range for the third consecutive day. NZD/USD is currently at around 0.6920 down 0.10% on Friday as the market is creating a bearish head-and-shoulder formation.

NZD is mimicking its big brother, commodity-linked currency AUD, which has been supported by stronger gold prices this week. In fact, traders rushed to the metal as the geopolitical picture worsened progressively as the week went on. 

It started with the news that the US-China trade war was “put on hold” and this put a floor on gold. After which the news of 25% tariffs on imported vehicles to the US and finally the cancellation of the Trump-Kim meeting saw gold jump above $1,300 a troy ounce. 

On the NZD macroeconomic front, the data has been rather poor and “the Reserve Bank of New Zealand (RBNZ) is widely expected to hold off on any rate increases until well into 2020, with some market participants believing there are even chances of a further rate cut,” wrote FXStreet’s own Joshua Gibson.

On the other hand, the US Dollar is relentlessly creeping higher as investors widely expect the Federal Reserve Bank to raise interest rates in June and at least another time this year. 

NZD/USD 4-hour chart 

NZD/USD is trading below its 100 and 200-period simple moving averages (SMA) on the 4-hour time frame suggesting a downward bias. The 0.6900 handle is acting as support and resistance as the market has used the level as main pivot in recent days. A break below the 0.6900 level should bring the market to 0.6851 swing low followed by the 0.6800 figure. To the upside, bulls should meet resistances at 0.6940 supply level and at 0.6975 swing high. Additionally, the bearish head-and-shoulder formation might send Kiwi lower but bears will need to overcome the rather strong 0.6900 handle. 

CAD/JPY is falling for the fourth day in a row and the currency cross is currently trading at around 84.30 down 0.60% on the last trading day of the w
  • Negative geopolitical climate, cancellation of the Trump-Kim summit, no progress on US-China trade talks, plans of 25% tariffs on vehicles to US, all bolster safe-haven Yen.
  • Oil-commodity-linked CAD, negatively affected by talks between Saudi Arabia and Russia to raise output to make up for the drop in production from Venezuela and potentially also Iran.

CAD/JPY is falling for the fourth day in a row and the currency cross is currently trading at around 84.30 down 0.60% on the last trading day of the week. 

On the one hand, Yen has seen robust demand from risk-averse trade as traders bought the currency as a safe-haven. US President Trump wrote a letter on Thursday to Kim Jong Un, the North Korean dictator announcing that he was canceling the summit which was meant to take place on June 12 in Singapore; JPY, CHF and gold soared on the news which was perceived as very detrimental for global security.

In the early part of the week, news of the US-China trade war being put “on hold” was also a very bearish news for markets. Additionally, the recent move by the Trump administration, which plans to impose 25% tariffs on imported vehicles, only compound the negative sentiment around equities and therefore bolster the safe-haven Yen. 

On the other hand, the Canadian Dollar, the oil-commodity linked currency, finds little support as the black gold retreated almost $5 from its highs of 2018. In fact, Saudi Arabia and Russia are discussing options to raise targets in the supply-cut agreement in order to compensate for the falling production from crisis-stricken Venezuela and impending sanctions on Iran.

CAD/JPY 4-hour chart 

The pair is trading below its 50, 100 and 200-period simple moving averages (SMA) on the 4-hour chart suggesting a strong downward bias. Immediate support is seen in the 83.89-84.00 region as the previous swing low and the psychological figure should offer a scaling point for both bulls and bears. Further down, traders will likely set their eyes on the 82.56 level previous swing low of April 4. To the upside, bulls will likely meet resistance at the 84.50 and 85.15 previous swing levels. 

Tracked by the US Dollar Index (DXY), the greenback remains on a firm note and is now recording fresh yearly peaks further north of 94.00 the figure.
  • The index climbs to fresh YTD peaks above 94.20.
  • DXY advances further amidst declining US 10-year yields.
  • US final Consumer Sentiment came in at 98.0 for the current month.

Tracked by the US Dollar Index (DXY), the greenback remains on a firm note and is now recording fresh yearly peaks further north of 94.00 the figure.

US Dollar up despite US data

The greenback keeps the upbeat sentiment for yet another week and is now pushing the index to new cycle highs in the 94.20/30 band, levels last traded in November 2017.

The rally in DXY remains healthy despite yields of the key US 10-year reference keep correcting lower from recent multi-year tops and are now threatening to re-test the critical 2.90% level.

Data wise today, the buck stayed apathetic following mixed results from Durable Goods Orders during last month, while the final print of US Consumer Sentiment came in below initial estimates at 98.8.

Furthermore, USD gained extra steam after US Defence Chief Mattis said there is still the chance for the Trump-Kim Jong-un summit.

In the meantime, DXY is on the way to close its second consecutive week with gains, while it advanced in five out of the last six weeks from mid-April’s lows in the 89.20 region.

US Dollar relevant levels

As of writing the index is gaining 0.43% at 94.19 facing the immediate hurdle at 94.24 (2018 high May 25) followed by 94.27 (high Oct.5 2017) and finally 95.17 (monthly highs Oct/Nov. 2017). On the downside, a break below 93.54 (10-day sma) would target 93.30 (low May 21) en route to 92.99 (21-day sma).

Following its strong advance from Thursday, the yellow metal found sellers at the 1,307 level in early American trade as US stock indices futures are
  • Gold is struggling to continue its recent advance above $1,308  troy ounce as the US stock indices futures are trying to reverse the overnight losses.
  • Gold rose significantly throughout the week as the US-China trade war is "put on hold" and Trump canceled the meeting with Kim Jong Un. 

Following its strong advance from Thursday, the yellow metal found sellers at the 1,307 level in early American trade as US stock indices futures are trying to reverse the overnight losses. It is now trading at round 1,303.60 slightly down on Friday.

Gold rose more than $25 since Monday as the climate of fear in the markets favored the safe-haven metal. What sent gold above the 1,300 mark is US President Donald Trump canceling the summit with the North Korean dictator, Kim Jong Un. Adding fuel to the fire to the already fragile geopolitical context, Trump plans to impose 25% tariffs on imported vehicles to the US. Moreover, the trade talks between Washington and Bejing are not yielding any agreement so far on the second round of discussions.

Meanwhile, also benefitting gold is the 10-year Treasury yield benchmark which is falling for the 6th consecutive trading session. 

Gold 4-hour chart

The metal is now trading above its 50-period simple moving average (SMA) on the 4-hour time-frame but the market is challenging an important descending trend-line which can provide strong resistance in the short-term. Bulls will likely meet strong resistance at the 1,307.77 (high of Friday) and at the 1,310.00 psychological level. To the downside, bears will likely meet support at the 1,291.40 swing high followed by the 1,287.55 swing low.  

In opinion of FX Strategist at Scotiabank, the pair is expected to meet support in the 1.2880 region in the short-term horizon. Key Quotes ?USDCAD i

In opinion of FX Strategist at Scotiabank, the pair is expected to meet support in the 1.2880 region in the short-term horizon.

Key Quotes

USDCAD is testing fresh multiweek high at levels last seen in early May”.

“Trend and momentum indicators are modestly bullish and resistance appears relatively limited between 1.2920 and 1.2950, however we note the potential for some congestion ahead of 1.3000”.

“Nearterm support is expected below 1.2880”.

   ?  Resurgent USD demand prompts some fresh selling during the European session.    ?  Weaker commodities further dent sentiment around commodity-l

   •  Resurgent USD demand prompts some fresh selling during the European session.
   •  Weaker commodities further dent sentiment around commodity-linked currencies.

The AUD/USD pair faded a mid-European session bullish spike to an intraday high level of 0.7590 level and tumbled to fresh session lows in the last hour.

The pair came under some renewed selling pressure since the European session and was being weighed down by a resumption of the greenback's strong bullish run. In fact, the key US Dollar Index jumped to fresh six-month tops, beyond the 0.7400 handle despite mixed US durable goods orders data, and was seen as one of the key factors weighing on the major.

This coupled with a bearish sentiment around commodity space, especially copper and oil, exerted some additional pressure on the commodity-linked Australian Dollar and further collaborated to the pair's sharp intraday fall, back to mid-0.7500s.

Meanwhile, traders seemed to have largely ignored the ongoing slump in the US Treasury bond yields, with the prevalent strong bullish sentiment surrounding the buck acting as an exclusive driver of the momentum on the last trading day of the week. 

Despite a good two-way price-action, the pair remains within a familiar trading range, held over the past four trading session. Hence, traders are likely to wait for a decisive break in either direction before positioning for the pair's near-term trajectory. 

Technical levels to watch

Immediate support is pegged near 0.7540 horizontal level, below which the pair is likely to accelerate the slide back towards the key 0.7500 psychological mark. On the upside, any meaningful up-move might continue to confront fresh supply near the 0.7600 handle, which if cleared is likely to trigger a short-covering bounce and lift the pair towards 0.7645-50 supply zone.
 

Prices of the American benchmark for the sweet light crude oil are sharply lower at the end of the week, taking the barrel to the mid-$68.00s area, or
  • Prices of the WTI lose momentum to the mid-$68.00s.
  • Higher US supplies, news on increasing OPEC output weigh on oil.
  • Later in the session, Baker Hughes will publish US oil rig count.

Prices of the American benchmark for the sweet light crude oil are sharply lower at the end of the week, taking the barrel to the mid-$68.00s area, or 2-week lows.

WTI weaker on OPEC, US supplies

Prices of the barrel of West Texas Intermediate came under renewed and strong selling pressure on Friday, giving away part of the recent gains and retreating to levels seen earlier in the month around $68.60/50.

WTI is shedding further ground today after the EIA reported on Wednesday that US crude oil supplies unexpectedly rose by almost 5.8 mbpd during the week ended on May 18, while US oil production stayed at all-time highs beyond 10.70 mbpd.

Further downside pressure on WTI came after the US government expressed concerns over the high prices of crude and OPEC and Russia said they could announce an increment of their production at the next meeting of the carte next month.

Later in the NA session, Baker Hughes will publish its weekly report on the US drilling activity.

WTI significant levels

At the moment the barrel of WTI is losing 2.73% at $68.62 facing the next down barrier at $67.65 (low May 8) seconded by $66.94 (55-day sma) and finally $66.86 (low May 1). On the flip side, a breakout of  $70.27 (21-day sma) would aim for $71.20 (10-day sma) and then $72.80 (2018 high May 22).

Mexico Accumulated Current Account/GDP: 2.3% (1Q) vs 1.1%
Mexico Current Account, $ (QoQ) came in at $-6.941M, below expectations ($-5.515M) in 1Q
United States Michigan Consumer Sentiment Index below forecasts (98.8) in May: Actual (98)
Major US equity indices opened mostly lower on Friday amid a sell-off in energy stocks, led by the latest slump in oil prices. News that OPEC and non

Major US equity indices opened mostly lower on Friday amid a sell-off in energy stocks, led by the latest slump in oil prices.

News that OPEC and non-OPEC were considering to increase oil output by 1 million bpd triggered a steep decline in crude oil prices, which pressured the energy sector and weighed on the broader markets. 

Meanwhile, easing geopolitical tensions, following North Korea's measured response to the US President Donald Trump's announcement to call off a June 12 summit, did little to lift the sentiment, albeit helped limit deeper losses. 

Investors seemed to have found some reassurance after the isolated nation said that it was still willing to talk with the US and resolve the standoff over its nuclear weapons program. 

On the economic data front, US durable goods orders fell 1.7% in April but the weaker reading was largely offset by a better-than-expected growth in orders minus transportation, which rose 0.9% to mark the third straight month of gains.

During the opening hour of trade, the Dow Jones Industrial Average was down over 80-points to 24,730 and the broader S&P 500 Index lost nearly 9-points to 2,719. Meanwhile, tech-heavy Nasdaq Composite Index outperformed the markets and climbed around 6-points to 7,430.

The Guppy is breaking fresh 10-week lows as stocks on Wall Street open deeply in negative territories. The currency cross is trading at around 145.60
  • Stock market indices worldwide are on the backfoot reflecting the climate of tension on the geopolitical scene. 
  • The UK Gross Domestic Product fails to impress GBP bulls who would need strong data in order to regain faith in Sterling.

The Guppy is breaking fresh 10-week lows as stocks on Wall Street open deeply in negative territories. The currency cross is trading at around 145.60 down 0.40% on Friday.

The yen is among the best-performing currencies in the last few days as investors are worried about the deteriorating geopolitical context. US President Trump wrote a letter to Kim Jong UN on Thursday, saying that he was canceling the summit scheduled on June 12 in Singapore. Additionally, recent news of 25% tariffs on imported vehicles to the US along with the stalemate in the trade war negotiations between the US and China are keeping investors worldwide rather edgy. 

Earlier the UK Gross Domestic Product came in line with expectations. Lukewarm data from the UK is rather bad news for GBP as the Bank of England is data-dependant for any rate hike down the road. 

GBP/JPY 4-hour chart 

The pair is trading below its 50, 100 and 200-period simple moving averages (SMA) on the 4-hour chart suggesting a strong downward bias. Supports are seen at the 145.00 handle followed by the 144.00 swing low. To the upside, the 146.00 swing low and 147.00 supply level should provide resistance. 

Carsten Brzeski, Chief Economist at ING, suggests that even though we still have three more weeks to go before the next ECB meeting, recent developmen

Carsten Brzeski, Chief Economist at ING, suggests that even though we still have three more weeks to go before the next ECB meeting, recent developments clearly signal doing nothing and buying time in June is the best and most risk-free option.

Key Quotes

“With a fresh update of staff projections, the ECB could have sufficient substantial input to unveil first details of the next QE steps at the June meeting or so many market participants at least say. The reality, however, could look differently. In our view, new uncertainty on the back of weaker economic data, higher oil prices and Italian politics argue in favour of buying more time.”

“A quick look at the three main economic challenges the ECB will be facing at the June meeting.

  1. Soft patch vs downswing

At face value, the growth slowdown in the first quarter was mild enough to be filed away as a “soft patch” instead of a “downswing”. Economic fundamentals have also not changed over the last few months. However, soft indicators have not yet recovered, the fading eu(ro)phoria could dent further optimism, and the external environment has become a risk rather than an opportunity.

The problem ECB forecasters are currently facing is that very little new hard data will become available between now and the cut-off date of the forecasts or the June meeting. In fact, except for soft indicators for May and hard data for a couple of Eurozone countries for April, no other guidance will be available. Probably too little for the ECB to take a clear position in the soft patch versus downswing discussion. Consequently, we expect the ECB to stick to its positive take on the Eurozone recovery, but at the same time stressing increased uncertainty and the need for more evidence.

  1. The double-edged sword called oil

The surge in oil prices since the beginning of the year is probably the single biggest problem for the ECB. Since February, oil prices have increased by more than 20%. Add the effect of the weaker euro exchange rate, oil prices denominated in euro have increased by almost 30%. As so often in the past, higher oil prices are a double-edged sword for the ECB.

On the one hand, higher oil prices could dent the recovery (according to our back-of-the-envelope estimates, higher oil prices could allow one-third of the wage increases in Germany evaporate in thin air). On the other hand, they should push up the ECB’s inflation projections.

At the same time, GDP growth forecast could be revised downwards by some 0.2 percentage points. All of this means that only due to changes in the technical assumptions, a benign outlook for headline inflation could quickly become a close-to-target forecast.

  1. Italian politics

Obviously, Italian politics is the new kid on the block when it comes to challenges for the ECB so don't expect ECB president Mario Draghi to comment on this. At best, he could give some very general remarks on how the ECB looks at the idea of mini-BoTs.”

Buying time in June looks like the most risk-free option

In our view, the unconcluded debate on soft patch versus downswing, the surge in oil prices and recent political developments in Italy clearly suggest doing nothing at the June meeting is the best and most risk-free option for the ECB. The only thing Draghi could do is to reconfirm his earlier statement that he does not expect an abrupt end to QE in September, opening the door for an extension.”

The sentiment around the shared currency remains subdued at the end of the week, dragging EUR/USD to the area of multi-month lows in the 1.1660 region
  • The pair remains depressed near 1.1660.
  • The greenback picks up pace above the 94.00 handle.
  • US Durable Goods Orders surprised to the upside in April.

The sentiment around the shared currency remains subdued at the end of the week, dragging EUR/USD to the area of multi-month lows in the 1.1660 region.

EUR/USD weaker on USD-bid tone, US data

The pair deepened its leg lower today following a wave of buying orders around the greenback, while results from the US docket have also lent support to the buck. In fact, US headline Durable Goods Orders contracted at a monthly 1.7%, while Core orders expanded 0.9% inter-month.

Later in the session Chief Powell is due to speak in Stockholm, while the U-Mich final reading for the  month of May is also expected.

In the meantime, the pair’s downside pressure remains well and sound today, always keeping an eye on Italian politics and USD-dynamics and despite US 10-year yields keep losing momentum.

EUR/USD levels to watch

At the moment, the pair is losing 0.49% at 1.1660 and a break below 1.1655 (2018 low May 25) would target 1.1600 (psychological level) en route to1.1553 (monthly low Nov.7). On the flip side, the initial hurdle lines up at 1.1786 (10-day sma) seconded by 1.1829 (high May 22) and finally 1.1879 (21-day sma).

Mexico Trade Balance s/a, $ climbed from previous $-0.719B to $-0.64B in April
Mexico Trade Balance, $ below forecasts ($0.931B) in April: Actual ($-0.289B)
According to the latest headlines flashing on the wires, via Reuters, citing four sources close to the matter, sluggish growth has not weakened the Eu

According to the latest headlines flashing on the wires, via Reuters, citing four sources close to the matter, sluggish growth has not weakened the European Central Bank’s resolve to end a bond-buying scheme later this year but could make it more cautious about signalling interest rate hikes.

Key points:

   •  There was unusual unity among ECB rate-setters about ending the bond purchase scheme after a short taper, and that the real debate would be about the future path of interest rates.

   •  Recent soft indicators suggest growth is levelling off — settling into a lower gear but still performing above potential, which will continue to generate inflation.

   •  Higher oil prices and a weaker euro are likely to mean an increase in some of the ECB’s headline inflation projections next month. 

   •  Core inflation projections will not change significantly when the new estimates are released, however, and some growth forecasts are likely to be cut.

   •  Expected timing of the first rate hike, roughly six months after the ECB ends bond buys, could be challenged if the growth environment weakens further.

As the main us stock indices worldwide are in risk-off mode, the Yen has been benefitting from the risk-averse trade as a safe-haven currency. Trump?s
  • Stock market indices globally stay in the red following Trump’s decision to cancel the summit with Kim Jong Un, the North Korean leader. 
  • USD/JPY is currently supported at the 109.30 level but remains vulnerable to safe-haven flows stemming from the overall delicate geopolitical context. 

As the main stock market indices worldwide are in risk-off mode, the Japanese Yen has been benefitting from the risk-averse trade as a safe-haven currency. Trump’s cancellation of the historic meeting with Kim Jong Un along with the new US plan to impose 25% tariffs on imported vehicles increased the uncertainty among investors. Additionally, the lack of progress in the second round of the US-China trade talks saga keeps also investors on the edge.

Freshly released the US durable goods orders in April came below expectations at -1.7% versus -1.4% expected while core durable goods orders excluding transportation came above estimates at 0.9% against 0.5% forecast. The USD/JPY had a mild reaction to the upside but no follow-through. The pair is consolidating in the 109.50 area after three days of decline currently up 0.12% on Friday.

George Powell, Chairman of the Federal Reserve Bank is due to speak at 13:20 GMT. The policymaker will take part in a panel discussion on "Financial Stability and Central Bank Transparency" at Sveriges Riksbank’s 350th-anniversary celebration in Stockholm. As the speech is more likely ceremonial in nature, it is unlikely that Powell will reveal new information on monetary policy, especially after the release of the FOMC’s minutes this last Wednesday. 

USD/JPY 4-hour chart

The pair is trading below its 50 and 100-period simple moving averages (SMA) but above the 200-period SMA on the 4-hour chart. The main trend remains bullish but bulls will need to create a base in the 108.50-109.00 region to keep the market from falling further. Key supports are seen at the 108.64 swing low and at the 107.79 swing high while resistances are seen at the 109.50 swing low and the 110.00 handle. 

   ?  USD bullish run uninterrupted after mixed durable goods orders.     ?  Investors? now eye speeches by BoE Carney and Fed Powell.  The GBP/USD

   •  USD bullish run uninterrupted after mixed durable goods orders. 
   •  Investors’ now eye speeches by BoE Carney and Fed Powell. 

The GBP/USD pair held on to its weaker tone, albeit managed to rebound around 15-20 pips from lows following the release of US durable goods orders data. 

The pair ticked higher after the latest report, released by the US Census Bureau this Friday, showed new orders for manufactured durable goods contracted 1.7% in April, worse than a decline of 1.4% anticipated. 

The negative reading, to some extent, was negated by better-than-expected growth in orders excluding transportations, which recorded a growth of 0.9% and remained supportive of the strong bid tone surrounding the US Dollar

Currently holding with losses below mid-1.3300s, closer to yearly lows set on Wednesday, investors' now look forward to scheduled speeches by the BoE Governor Mark Carney and the Fed Chair Jerome Powell for some meaningful impetus.

Technical levels to watch

The 1.3300 handle might continue to act as an immediate support, which if broken is likely to accelerate the fall towards 1.3280-75 intermediate support before the pair eventually drops to test the 1.3200 handle. 

On the flip side, any meaningful recovery now seems to confront fresh supply near the 1.3380 region, above which a bout of short-covering could lift the pair back towards the 1.3420-30 supply zone.
 

The increasing selling bias continues to hurt the shared currency at the end of the week and is now relegating EUR/JPY to the area of fresh 2018 lows
  • The cross collapses to the 127.60 region amidst EUR-selling.
  • EUR accelerates the downside on increasing USD-buying.
  • German IFO came in on the soft side earlier in the session.

The increasing selling bias continues to hurt the shared currency at the end of the week and is now relegating EUR/JPY to the area of fresh 2018 lows in the vicinity of 127.50.

EUR/JPY in YTD troughs

The cross is coming under intense downside pressure following another bout of weakness hurting the European currency, while some bias towards the risk aversion also lend support to a higher Japanese Yen, all collaborating with the downside to levels last seen in August 2017.

In addition, poor releases in Germany today has been also weighing on EUR and at the same time undermining any attempt of recovery in the cross.

Looking ahead, the rally in the greenback is expected to keep the pressure on EUR for the time being and therefore opening the door to extra pullbacks.

EUR/JPY relevant levels

At the moment the cross is losing 0.27% at 127.69 facing the next support at 127.56 (monthly low Aug. 7 2017) followed by 127.00 (psychological level) and then 122.34 (monthly low Jun.15 2017). On the upside, a breakout of 129.88 (10-day sma) would expose 130.39 (21-day sma) and finally 131.41 (high May 14).

According to Greg Gibbs, Analyst at Amplifying Global FX, part of the market impact of the various trade policy actions by the USA may depend on the d

According to Greg Gibbs, Analyst at Amplifying Global FX, part of the market impact of the various trade policy actions by the USA may depend on the degree of political stability of the Trump administration. 

Key Quotes

“When Trump’s approval rating was at its weakest, the trade rhetoric appeared to have a more negative impact on the USD, tending towards notions of US isolation and views that Trump's opponents might use global and industry backlash to undermine Trump’s hold on power.”

“However, over recent months, Trump has been more effective in throwing a smokescreen over the Mueller investigation, and may be gaining traction with widening frustration over the investigation that has dragged on for over a year.  He also senses that he is shoring up his voter base and broadening his appeal to the left by pursuing a tougher trade policy.  As such he appears to be in a stronger political position and market reaction to trade-protectionist rhetoric is working more in favour of the USD.”

 

The US Census Bureau announced the April advance report on manufacturers? shipments, inventories and orders and the key highlights could be found belo

The US Census Bureau announced the April advance report on manufacturers’ shipments, inventories and orders and the key highlights could be found below:

   •  New orders for manufactured durable goods in April decreased $4.2 billion or 1.7% to $248.5 billion. 
   •  Excluding transportation, new orders increased 0.9%. 
   •  Excluding defense, new orders decreased 1.9%. 
   •  Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $5.6 billion or 6.1% to $87.1 billion.

United States Durable Goods Orders ex Transportation came in at 0.9%, above forecasts (0.5%) in April
United States Durable Goods Orders registered at -1.7%, below expectations (-1.4%) in April
Here are some of the key highlights from the Spanish Prime Minister Mariano Rajoy's televised statement made this Friday.    ?  No-confidence motion

Here are some of the key highlights from the Spanish Prime Minister Mariano Rajoy's televised statement made this Friday.

   •  No-confidence motion is only in Socialists' interest.
   •  Confidence motion would hurt economic recovery.
   •  No government member was among corruption convictions.
   •  Budget approval this week gives Spain stability.
   •  Will not call for a snap election.
   •  Wants his government to complete the four-year mandate.

It is worth reporting that Spain’s socialist party on Friday had said that it would put forward a motion of no confidence against Prime Minister Mariano Rajoy over a graft case involving members of his People’s Party.

Dallas Fed President Robert Kaplan, speaking to Bloomberg TV this Friday, was noted saying that his base case is for three rate hikes for 2018 and wou

Dallas Fed President Robert Kaplan, speaking to Bloomberg TV this Friday, was noted saying that his base case is for three rate hikes for 2018 and would need to see sustained GDP growth in order to back four rate hikes this year.

Key quotes:

   •  Cautions that growth next year is to be somewhat weaker.
   •  Will tolerate some moves above 2% inflation.
   •  Trade is an opportunity, concerned if NAFTA is scrapped.
   •  Big threats to US are slower workforce growth and debt.
   •  Doesn't see corporate debt to GDP as a 'red flag'.
   •  Oil prices is not a danger to the US economy.
   •  There's spike risk to upside with oil prices.
   •  Worried about sustainable economic growth.

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