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Gold rose from $1,272.91oz to a high of $1,287.30oz overnight, ending the NY session around $1,284oz. Trade risks intensify among investor sentiment.

 

  • Gold rose from $1,272.91oz to a high of $1,287.30oz overnight, ending the NY session around $1,284oz.
  • Trade risks intensify among investor sentiment.

An intensifying US-China trade dispute presents a potential downside risk for commodities but gold could continue to shine on. It was a risk-off session overnight that made for sharp losses in the U.S. benchmarks as follows, and gold attracted a safe haven bid as investors seek protection from the losses in other asset classes and rose from $1,272.91oz to a high of $1,287.30oz overnight, ending the NY session around $1,284oz:

The S&P 500 down 1.2% to end around 2,822.
The tech-heavy Nasdaq Composite dropped 1.6% to end near 7,628.
The Dow Jones Industrial Average (DJIA), -1.11% lost 286 points, or 1.1%, to end around 25,490.

The US 10yr treasury yield also fell from 2.38% to 2.29% (the lowest since Oct 2017), steadying at 2.32% which helped gold to correct from recent lows.

"China is prepared to hunker down and support its private enterprises rather than yield to the financial pressures being applied by the US. As both sides will only negotiate on their own terms, it could be years before the two powers can find sufficient common ground. Nomura is pricing in a 65% probability of the US imposing tariffs on all Chinese goods before year-end," analysts at ANZ explained. 

Gold levels

Gold prices have held at the long term support line taking on the 20-D EMA on Thursday en route towards channel resistance with RSI turning up from the daily resistance as well. That mid-August 2018 major-uptrend’s support line seems sold enough for bulls to rely upon ahead of the double bottom lows at 1266 as a cushion in case of another test of the downside.  However, a break of this support will open 1262 and S1. The 200 DMA is located at 1257 while 1251 marks the 10th Dec swing highs (William's fractal point and target). On the flipside, a mean reversion of the recent swing highs to lows has taken place 1286.50 and bulls can target the 61.8% at 1290 ahead of 1297 as the trend line resistance. 1303 is recent swing fractal high.

With its another ounce off the horizontal support-line, the USD/IDR pair is on the bids near 14,460 during early Friday.
  • Multiple horizontal-lines can limit the quote’s immediate downside.
  • RSI raises a question for buyers.

With its another ounce off the horizontal support-line, the USD/IDR pair is on the bids near 14,460 during early Friday.

Latest U-turn from a weeklong support signal brighter chances of the quote’s recovery to 14,500 and 14,590 numbers to the north.

Additionally, pair’s sustained rise beyond 14,590, even if likely being challenged by the relative strength index (RSI), can aim for 14,660 and 14,720 to entertain buyers then after.

On the contrary, declines beneath 14,440 can avail a bit longer horizontal-line, at 14,385, ahead of visiting 50% Fibonacci retracement of April month upside that stands near 14,345.

Should there be further weakness in prices under 14,345, 14,285 and 61.8% Fibonacci retracement near 14,255 may reappear on the chart.

USD/IDR 4-Hour chart

Trend: Pullback expected

 

Japan National CPI ex-Fresh Food (YoY) in line with expectations (0.9%) in April
Japan National Consumer Price Index (YoY) registered at 0.9% above expectations (0.4%) in April
Greenback wallows on poor economic data following yesterday's FOMC minutes below bull's sweet spot. Safe havens bid on deteriorating US-China trade de
  • Greenback wallows on poor economic data following yesterday's FOMC minutes below bull's sweet spot. 

  • Safe havens bid on deteriorating US-China trade deal sentiment, equities drop but bounce towards close. 

Weak U.S. PMIs and housing data hurt the greenback and US yields overnight while renewed concerns about a prolonged trade stand-off between the U.S. China sent risk packing and the yen on a tear, hurting commodities and commodity-FX.

Firstly, the Manufacturing PMI fell 2 points to 50.6 which was the lowest level since 2009 while US Services PMI fell 2.1pts to 50.9, a three-year low. US new home sales lost -6.9% in April while US jobless claims offered some solace for the greenback, coming at 211k last week. 

Bleeding out from yesterday's FOMC minutes that failed to appease the bulls on lack of a hawkish tilt, the DXY dropped back from 98.37 to a low of 97.81 while the US 10yr treasury yield dropped to the lowest level since Oct 2017 from 2.38% to 2.29%, ending the day around at 2.32%. In the same vein, it is worth noting that the odds of a Fed rate cut by December, implied by Fed fund futures, rose from 100% to 130%. 

As for U.S. Chinese relations and sentiment, investor-herds fled the tech, industrials and energy stocks expecting a prolonged stalemate between Beijing and Washington.

 

There were sharp losses in the U.S. benchmarks although there as a late session spike that took the indexes off their lowest points of the day.

  • The S&P 500 down 1.2% to end around 2,822.
  •  The tech-heavy Nasdaq Composite dropped 1.6% to end near 7,628.
  • The Dow Jones Industrial Average (DJIA), -1.11% lost 286 points, or 1.1%, to end around 25,490.

"China is prepared to hunker down and support its private enterprises rather than yield to the financial pressures being applied by the US. As both sides will only negotiate on their own terms, it could be years before the two powers can find sufficient common ground. Nomura is pricing in a 65% probability of the US imposing tariffs on all Chinese goods before year-end," analysts at ANZ explained. 

An intensifying US-China trade dispute presents a potential downside risk for commodities and related FX such as the Aussie which was heavy in Europe, trading below 0.6865, but somehow managed to recover some ground in the U.S. in the face of weak US data, climbing back through into the 0.6900 handle.

Currency action

Analysts at Westpac summed up the price action elsewhere:

EUR/USD initially fell from 1.1150 to 1.1107 – a two-year low, but then rose to 1.1187 following the US data and fall in US interest rates. 

USD/JPY fell from 110.40 to 109.46, the safe-haven yen outperforming as usual as US equities and yields tumbled. US and Chinese officials exchanged insults over Huawei and trade in general.

NZD similarly bounced from 0.6482 – a seven-month low – to 0.6525. 

AUD/NZD did capture the risk-off theme, falling from 1.0600 to 1.0570/80. 

CAD underperformed as oil prices slumped.

 

 

Despite April month trade data, the NZD/USD pair remains little changed at 0.6525 during early Friday with short-term resistances keep limiting upside.
  • Traders gave little importance to mixed trade data from New Zealand.
  • Immediate resistance-lines continue pleasing bears.

Despite April month trade data, the NZD/USD pair remains little changed at 0.6525 during early Friday.

April month trade data from the Statistics New Zealand flashed mixed readings and couldn’t entertain the Kiwi traders much.

The headline trade balance declined to $-5.480 billion versus $-5.465 billion forecast and $-5.710 billion (revised) prior on a yearly basis whereas growing to $433 million against $4 million MoM forecast and $922 million previous readouts.

Further, the exports rose beyond $5.35 billion expected to $5.55 billion and against $5.60 billion previous (revised) while the imports increased to $5.11 billion versus $4.90 billion expected and $4.78 billion upwardly revised prior.

The horizontal-line connecting May 20 low to May 23 high around 0.6530 seems immediate resistance for the pair, a break of which can escalate the pair’s recovery to a downward sloping trend-line since May 10, at 0.6545 now.

In a case prices rally beyond 0.6545, 61.8% Fibonacci retracement of its current-month decline at 0.6565 and 0.6700 could lure buyers.

On the downside, 23.6% Fibonacci retracement around 0.6515 and 0.6500 seem nearby support for the quote before it can revisit 0.6480 marks.

During the pair’s further declines under 0.6480, October 2018 low near 0.6425 could become bear’s favorite.

It should also be noted that 14-bar relative strength index (RSI) is near to overbought region and also favor the sellers.

NZD/USD hourly chart

Trend: Bearish

 

There are reports that the U.S. will be moving to impose duties on countries undervaluing their currency. More to come...

There are reports that the U.S. will be moving to impose duties on countries undervaluing their currency.

More to come...

  • US Commerce Department says it had proposed a rule to impose countervailing duties on countries that undervalue their currency relative to dollar - Reuters
New Zealand Exports came in at $5.55B, above expectations ($5.35B) in April
New Zealand Imports above expectations ($4.9B) in April: Actual ($5.11B)
New Zealand Trade Balance (MoM) came in at $433M, above expectations ($4M) in April
New Zealand Trade Balance (YoY) below forecasts ($-5.465B) in April: Actual ($-5.48B)
Even if the UK PM May?s future leadership status is in limbo, the GBP/USD pair is on the road to recovery as it trades near 1.2665 at initial Friday.
  • Political drama at the UK couldn’t weaken the Cable amid US Dollar (USD) decline.
  • Economic data can join macro to provide near-term direction.

Even if the UK PM May’s future leadership status is in limbo, the GBP/USD pair is on the road to recovery as it trades near 1.2665 at initial Asian session on Friday.

British political drama offered another busy day to global watchers after the coup against the Prime Minister Theresa May is finally playing its role towards her likely offering of the departure date on Friday as per the Mirror report.

However, investors were more concerned about the US Dollar (USD) weakness as disappointing purchasing manager index (PMI) and new home sales data joined negative vibes from the trade spat with China.

With the PM May has already postponed putting her Brexit plan on the discussion today, political plays surrounding her leave timetable will be on the spotlight.

At the economic front, investors may now concentrate on the UK retail sales and the UK durable goods orders for April. None of these readings are bearing upbeat expectations and may keep pushing market players in the direction to follow macros for fresh positive impulse.

Technical Analysis

While a break of 1.2600 could open the door for the quote’s slump to 1.2480 and then to January lows near 1.2430, an upside clearance of 1.2710 highlights February bottom around 1.2770 and 1.2800 as next resistances to watch during the recovery.

WTI dropped below the golden cross (50/200 DMA cross-over) overnight. This was a key level that was coinciding with the 23.6% Fibo, late Dec-late Apr

 

  • WTI dropped below the golden cross (50/200 DMA cross-over) overnight.
  • This was a key level that was coinciding with the 23.6% Fibo, late Dec-late April range, and ascending channel support.
  • Bears are now in control below the 60 handle with a touch-down at 57.36 the overnight low, to the 61.8% Fibo, (late Dec 2018 to April highs).
  • 54.50 and the 50% retracement of 2019 range come in next ahead of the 200-W MA down at 52.40.
  • Below there, we have and the 38.2% Fibo and Feb lows at 52.50/51.40 respectively.

  • Stochastics are oversold, so a move higher is likely. 
  • On a break of 60.02, 60.50 comes in as the 50% mean reversion of the 20th May weekly stick's range and a double top target area ahead of 60.80.
  • Higher up, the 17th May low of 62.51 and 26th April lows comes in at 62.26.

 

The AUD/USD pair has the ability to disappoint bears as soon as it hits near 0.6860 levels off-late as it marks 0.6900 during early Friday.
  • Near-term strong support played its role at the time of greenback weakness.
  • Global risk sentiment remains under pressure.
  • Fewer economic data on hand highlights qualitative catalysts.

The AUD/USD pair has the ability to disappoint bears as soon as it hits near 0.6860 levels off-late. The quote is on the road to recovery by taking rounds near 0.6900 during the early Asian session on Friday.

Aussie has often been considered as a global risk barometer and uses to rise in times of market optimism. However, the quote took advantage of the US Dollar (USD) weakness on Thursday and registered a U-turn from the latest lows marked since last one week. The greenback couldn’t withstand disappointment front the economic calendar while its trade rift with China is in the spotlight.

Global risk sentiment was challenged yesterday as not only the trade rift between the US and China but disappointing stats of purchasing manager index (PMI) from leading economies also spread macro disappointment.

The US 10-year treasury yield, another risk gauge, recently slipped to a multi-year low of 2.322%.

Looking forward, the economic calendar at Australia offers no major data/event to follow while the US durable goods orders for April could become important to watch.

The forecast suggests another hit to the US Dollar via headline data as durable goods orders bear the consensus to dive into contraction region to the tune of -2.0% whereas non-defense capital goods orders ex-aircraft might also decline to -0.3%.

Technical Analysis

Even if the 14-day relative strength index (RSI) and repeated reversals from 0.6860 signal brighter chances of the pair’s U-turn, a five-week-old descending trend-line at 0.6910 can question near-term buyers targeting 0.6930 and 0.7000 numbers to the north.

Should prices sneak below 0.6860, January 2016 low surrounding 0.6830 and 0.6800 round-figure could become bears’ favorite.

With the US Dollar (USD) weakness helping the Kiwi to register a bounce off-late, the NZD/USD pair trades near 0.6520 ahead of NZ trade balance data on Friday.
  • The greenback weakness paid off to the Kiwi without much to cheer at home.
  • New Zealand trade balance is in the spotlight with the US-China trade spat being on the radar.

With the US Dollar (USD) weakness helping the Kiwi to register a bounce off-late, the NZD/USD pair trades near 0.6520 at the start of the Asian session on Friday.

The US-China trade tensions grab the spotlight as neither party wants to give up on their demands. Nomura gives 65% probabilities that the US will levy tariffs on all Chinese goods by this year-end.

In addition to the trade war with China, sluggish new home sales and purchasing manager index (PMI) data also weighed on the US Dollar (USD) on Thursday. New home sales fell 6.9% while manufacturing PMI revisited September 2009 levels.

There were fewer positives from the domestic end of New Zealand.

Recent comments from the US President Donald Trump show his positive outlook towards meeting the Chinese leader Xi Jinping on the sidelines G20. Though, Mr. Trump doesn’t want to give up on his MAGA (make America great again) dream and is firm to keep Huawei on the check.

Immediate attention of the Kiwi traders will be on April month trade balance data, to be out at 22:45 GMT. Forecasts suggest $-5.465 billion trade balance (YoY) versus $-5.620 billion prior. Further, exports may flash $5.35 billion against $5.70 billion earlier whereas imports can rise to $4.90 billion compared to $4.77 billion earlier.

Ahead of the release, TD Securities said, “Apr trade balance is seasonally a surplus month, but follows a blockbuster +$NZ922m for March, led by record exports. We pencil in a surplus of +$NZ700m (mkt $NZ450m) as exports remain elevated ($NZ5.5b) but fuel imports ($NZ4.8b) eat into the surplus somewhat.”

Technical Analysis

A downward sloping trend-line since March 26 at 0.6530 gains immediate attention as a break of which could open the door for the quote’s extended recovery to 0.6580 and then to 0.6600 round-figure.

In a case of further weakness beneath 0.6480 support, October 2018 low near 0.6425 should gain bears’ attention.

Trump wss crossing the wires earlier saying that he was looking forward to seeing Xi at G20 meeting. He has recently added the following: Very concern

Trump wss crossing the wires earlier saying that he was looking forward to seeing Xi at G20 meeting.

He has recently added the following:

  • Very concerned about Huawei security risks;
  • Huawei could be included in China trade deal;
  • Good possibility of China trade deal.

Key comments from earlier:

  • He remains hopeful at some point U.S. will get together with China;
  • If a trade deal happens with China, that would be great; if not, that’s fine.
  • Thinks, things probably are going to happen with China fast.
S&P500 daily chart The S&P500 Index is in a bull trend above its 100 and 200-period simple moving averages (SMAs). S&P500 4-hour chart The market is
  • The Markit preliminary PMI (May) for both the EU and the US missed expectations increasing fears of a global economic slowdown led by the Sino-US trade war.
  • The S&P500 takes a dive but remain above the 2,800.00 mark.

 

S&P500 daily chart
 
The S&P500 Index is in a bull trend above its 100 and 200-period simple moving averages (SMAs).

S&P500 4-hour chart


The market is trading below its main SMAs as the index almost reached the 2,800.00 level.


S&P500 30-minute chart


The S&P500 is trading below its main SMAs suggesting bearish momentum in the near term. Bears can still have another leg down to 2,800.00 and 2,790.00 support. Resistances are seen at 2,835 and 2,845.00 levels.


Additional key levels

 

Trump is crossing the wires and says he appreciates bipartisan support for tariffs on Chinese imports. Key comments: He remains hopeful at some point

Trump is crossing the wires and says he appreciates bipartisan support for tariffs on Chinese imports.

Key comments:

  • He remains hopeful at some point U.S. will get together with China;
  • If a trade deal happens with China, that would be great; if not, that’s fine.
  • Thinks, things probably are going to happen with China fast.
Gold daily chart Gold is having positive action this Thursday as the market broke above the 1,280.00 mark. Gold 4-hour chart Gold pushed into its main

Gold daily chart
 
Gold is having positive action this Thursday as the market broke above the 1,280.00 mark.

Gold 4-hour chart


Gold pushed into its main simple moving averages (SMAs) near the 1,285.00 level.

Gold 30-minute chart


The market is trading above1,280.00 and its main SMAs suggesting bullish momentum in the near term. If bulls break 1,288.00 resistance the market can continue to rise towards 1,290.00 and potentially to 1,294.00 if the bulls gather enough steam. Supports are at 1,280.00 and 1,277.50 levels.


Additional key levels

 

According to analysts from TDS, the USD/CAD pair remains a ?buy on dip? and they expect it to hold well above 1.30 for the foreseeable future. Key Quo

According to analysts from TDS, the USD/CAD pair remains a “buy on dip” and they expect it to hold well above 1.30 for the foreseeable future. 

Key Quotes: 

“The CAD has entered the crossfire amidst a shift in tone by Governor Poloz and the recent breakdown in US-China trade talks. While the Governor has taken a positive stance on Canadian employment, we are reluctant to rely on this metric as a reason for optimism on the currency. We think markets have been too complacent on trade frictions between the US and China. Relaxing constraints on US trading partners outside of China suggest that the frictions between the two major economies will be prolonged. We think the primary transmission will be through equity markets. As a result, USDCAD shorts will be tough to maintain.”

“The CAD has attracted some attention since Poloz's comments in a recent media interview that emphasized labor markets were a more accurate reflection of the economy – despite the data unambiguously showing the opposite. In March, we took a comprehensive look at the CAD's prospects and promptly concluded that the strategic outlook is bearish. We do not think the CAD's adjustment will be impulsive, but rather a slow bleed. While cyclical drags are ebbing, USDCAD remains a buy on dip.”

“The currency will struggle to find a durable bid from a rate differential point of view. This will be almost explicitly the case with USDCAD, where it would likely be incredibly difficult for the Bank of Canada to move towards hikes in isolation of the Fed. This narrative alone has us expecting USDCAD to remain well north of 1.30 for the foreseeable future.”
 

The FT reports that PM May will be giving a firm exit date on Friday to the 1922 Committee Chief, Brady.
  • The FT reports that PM May will be giving a firm exit date on Friday to the 1922 Committee Chief, Brady.
  • May plans for UK conservative leadership race to start June 10th.

According to the Research Department at BBVA, economic growth gained momentum in early 2019 across the world, but they point out that protectionism is

According to the Research Department at BBVA, economic growth gained momentum in early 2019 across the world, but they point out that protectionism is a threat and also signal some worries about the factors behind Q1 growth. 

Key Quotes: 

“Growth in the Eurozone, China and US surprised on the upside in 1Q19, but with some worrying signs stemming from its composition as it was supported by building inventories and declining imports, likely related with trade concerns and slowing domestic demand. In Europe, the positive surprise could also be linked to fading negative one-off effects in previous quarters and the positive effect of mild winter.”

“Up to March hard data was mixed: retail sales are still strong across the board, suggesting that domestic demand remains as the main driver of growth across regions, but contrast with the weakness of industrial sector and global trade.”

“But soft indicators slid again in April: Global manufacturing confidence remains gloomy, while services PMIs fell in developed and emerging economics and increased concerns about contagion effect from trade and manufacturing to services.”

“The escalation of US-China trade war (tariff increases and technological disputes) could weigh markedly on China’s GDP growth if they are not reversed, and would also the US and the EZ, eventually could negatively affect the good growth performance so far this year. However, this negative impact could be offset in the short-term by further expansionary fiscal and monetary policies (mostly in China).”
 

The US Dollar reversed sharply during the American session against European and commodities currencies buy it remained strong versus most Latin Americ
  • Mexican peso ends 3-day streak against US Dollar with a significant loss. 
  • Greenback strengthens against Latin American currencies amid risk aversion. 

The US Dollar reversed sharply during the American session against European and commodities currencies buy it remained strong versus most Latin American currencies. The Mexican peso did not befit from the USD reversal and near the end of the day is consolidating heavy losses. 

The USD/MXN pair is trading at 2-day highs at 19.09, erasing two days of losses and back above the 20-day moving average. From a technical perspective, the critical resistance seems to be located around 19.15. A break higher could signal more gains ahead and a test of 19.30. It was yesterday when the pair approached the crucial support seen around 18.90. What has changed? 

Equity markets around the globe fell sharply weakening the demand from Latin American currencies. “Equity markets declined sharply across the board, led by the cyclical sectors, while implied market volatility bounced back. The falls across commodity prices, especially oil and industry metal commodities, underscored market concerns about the impact of the ongoing trade friction on global growth”, wrote BBVA analysts. The global growth outlook, US-China trade frictions, Brexit and weak economic data contributed to the negative sentiment on Thursday. 

The greenback turned lower during the American session against European currencies and  AUD and NZD. The Mexican Peso recovered but only momentarily. Risk aversion and a 6% decline in crude oil prices push USD/MXN to fresh highs. 

Mexico: Inflation cames slightly below expectations 

While in the US, housing data and the PMIs came in below expectations, in Mexico the half-month CPI of May showed lower-than-expected numbers. From a year ago, inflation rose by 4.43% (against expectations of a reading of 4.46%). On a monthly basis, it fell 0.3%. The core index was up 3.77% from a year ago. The CPI remains above Banxico’s target. 

Fed's Kaplan, who is a non-voting member, has said that the Fed can be patient on rates Key comments: Fed can the Ford to be patient for the time bein

Fed's Kaplan, who is a non-voting member, has said that the Fed can be patient on rates

Key comments:

  • Fed can the Ford to be patient for the time being.
  • They are watching very carefully held trade tensions unfold.
  • rate setting for the moment is at the right point.
  • lack of pricing power is pressuring business margins.
  • agnostic about whether the next Fed move is up or down.
On July 12, Court will be hearing Appeal over Pres. Trump accountant Subpoena. More to come...

On July 12, Court will be hearing Appeal over Pres. Trump accountant Subpoena.

More to come...

Argentina Trade Balance (MoM) fell from previous $1183M to $1131M in April
"It would be wrong to attribute the rise in euroscepticism entirely to national issues or the rejection of the European project," argued ING analysts.

"It would be wrong to attribute the rise in euroscepticism entirely to national issues or the rejection of the European project," argued ING analysts. "While this may be the case when national and European electoral campaigns are very similar, surveys suggest people are able to differentiate between them."

Key quotes

"The problem is that these fears are secondary compared to their main concerns which include things like purchasing power and growing old. This distance logically breeds disinterest, seen in the high abstention rates which, in turn, have an impact on the share of traditional parties in parliament."

"On the other hand, putting transnational topics back at the heart of discussions at the European level such as agreements to fight climate change, border security and Schengen reform) could lower the abstention rate and limit the rise of euroscepticism. The challenge, often voiced, of ensuring that citizens feel closer to Brussels, requires highly publicised successes in these areas."

"These numbers also remind us that support for Europe continues to be strong and that citizens know where it can have an impact. This doesn't mean that there aren't times when there is confusion between national and European election campaigns, but it would be wrong to assume that the majority of citizens confuse the challenges. Even though the rise of eurosceptic parties could change the dynamics of the European parliament, the European project itself is certain to have a bright future."

The GBP/USD bottomed earlier today slightly above 1.2600, the lowest since early January. During the American session rebounded supported by a US Doll
  • Cable managed to avoid so far another daily loss supported by a slide of the greenback. 
  • DXY reversed sharply from monthly highs as US data triggered a correction. 

The GBP/USD bottomed earlier today slightly above 1.2600, the lowest since early January. During the American session rebounded supported by a US Dollar sell-off and even reach a daily high at 1.2683. Over the last hours, it has remained steady moving between 1.2655 and 1.2680, marginally higher for the day. 

Despite being able to post a daily gain after a rebound of more than 50 pips that could signal some stabilization ahead, the Pound shows no strength amid UK political uncertainty and also on the back of risk aversion. 

British Prime Minister Theresa May is under pressure and markets are not expecting to remain in her position. The Withdrawal Agreement Bill has no support. Developments around Brexit and politics are likely to keep crossing wires. On Friday, the UK's Office for National Statistics will publish the retail sales data while in the US the preliminary April durable and capital goods orders are due. 

The correction of the greenback started on Thursday after the release of weaker than-executed US data. Housing numbers and the PMIs came in significantly below expectations. Despite the reversal in the US dollar equity and crude oil prices kept falling. 

The events on Thursday around the US Dollar offset Brexit and Pound’s soft tone. The rebound from the 1.2600 could offer some relief for the next sessions to the GBP/USD. The key short-term support now might be seen at 1.2650 and 1.2600. 
 

 

The bearish pressure surrounding the USD/JPY pair gathered strength in the American trading hours and dragged the USD/JPY pair to a weekly low of 109.
  • Wall Street extends slide as risk-aversion continues to dominate.
  • 10-year US T-bond yield drops below 2.3% for the first time since October 2017.
  • US Dollar Index drops below 98.

The bearish pressure surrounding the USD/JPY pair gathered strength in the American trading hours and dragged the USD/JPY pair to a weekly low of 109.50. As of writing, the pair was down 0.7% on the day at 109.55.

Heightened geopolitical tensions after U.S. Secretary of State Mike Pompeo said the Chinese tech-giant Huawei was deeply tied to the Communist Party and added that he believed more U.S. companies would cut ties with them weighed on the market sentiment in the second half of the day. 

Major equity indexes in the U.S. started the day sharply lower and continued to push lower while the 10-year US Treasury bond yield dropped below 2.3% to touch its lowest level since October of 2017 to reaffirm the intense flight-to-safety in the markets, which ramps up the demand for the JPY. Additionally, the fall in the bond yields also seem to be hurting the greenback. After rallying to its highest level in two years at 98.37 earlier today, the US Dollar Index lost its traction and erased all of the gains it posted this week. At the moment, the index is down 0.25% on a daily basis at 97.85.

Earlier today, the preliminary report published by the IHS Markit showed that the service sector and the manufacturing sector are both expected to expand at a much slower pace than expected in May to put additional weight on the dollar's shoulders.

In the early trading hours of the Asian session on Friday, inflation data from Japan will be looked upon for fresh impetus.

Technical levels to watch for

The pair could face the next support at 109.35 (May 16 low) ahead of 109 (psychological level/May 13 low) and 108.50 (Jan. 31 low). On the upside, resistances are located at 110 (psychological level), 110.30 (20-DMA) and 110.80 (100-DMA).

Oil daily chart On the daily chart, WTI (West Texas Intermediate) is currently having the worst daily decline since December 2018. Bears broke below 5

Oil daily chart

On the daily chart, WTI (West Texas Intermediate) is currently having the worst daily decline since December 2018. Bears broke below 58.00 a barrel along with the 200 and 100 simple moving averages (SMAs).


Oil 4-hour chart

WTI is trading below its main SMAs suggesting bearish momentum in the medium term. The market already reached the 58.00 level. Further down lies 56.50 support and the 55.00 figure.

Oil 30-minute chart

Immediate resistances are seen at 58.00, 59.00 and the 59.50 levels.

Additional key levels

 

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