eFXplus DATA

USD/JPY has been tumbling since Tuesday, and today's news that U.S. President Trump called off planned North Korea summit nW1N1QW01B could help open the way for deeper losses if key support breaks.
Rising trade and geopolitical risks and slightly reduced Fed hike expectations had already been dogging USD/JPY, which

has broken important support at 109.20/27.
A much broader slide looms if May's low and 38.2 percent of the March-May rise at 108.65/78 break.
Risk-off repatriation flows also spiked on word late Wednesday that the U.S. is considering 25 percent tariffs on auto imports nNen6xZ4MB.
Markets were always somewhat dubious about the North Korea summit, so the reaction has only dragged USD/JPY down to 108.95 thus far.
The slide in 10-year Treasury yields back below 3 percent and falling Fed rate hike expectations over the next year, plus overbought USD/JPY sell signals, will put the bulk of the 104.56-111.39 uptrend at risk if 108.78 is closed below, with 107.85 and 117.17 props in prospect.

NAB Research discusses NZD/USD technical outlook and notes that the cross is approaching key resistance level at 0.6966, where a weekly close above would trigger a bullish reversal signal on the weekly charts.

"This week we note that the weekly close must remain below 0.6966 to avoid a bullish weekly reversal pattern being completed. 

0.7030/80 stands out as a resistance level that must hold to maintain the MT downtrend," NAB argues. 

• Yen bought after Trump calls off NoKo summit nW1N1QW01B
• USD/JPY breaks Kijun & 38.2% props at 109.29/20, close key
• Treasury yields and stocks under pressure as risk goes off
• Sub-109.20 close eyes 38.2% of Mar-May rise @108.78, then 107.50
• Summit end may have negative feedback into US-China trade talks

BTMU Research discusses the JPY outlook and notes that it has rebounded sharply this week with USD/JPY falling back below the 110.00-level after recently hitting an intra-day high of 111.40.

"The yen has derived support from more risk averse trading reflecting a combination of heightened concerns over Italian political risks, more uncertainty over upcoming talks between North Korea and the US, and some renewed concerns over downside risks posed to the global growth outlook from a shift to more protectionist US trade policies. 

...The developments have highlighted that the risk of a global trade war remains real even if market participants remain optimistic that it is more likely to result in better trade deals. The yen remains a key barometer of global trade war risk," BTMU argues. 

Nordea Research discusses its reaction to today's FOMC minutes from the May policy meeting.

"With slightly more than two further hikes priced in already for 2018 (the FOMC is divided between two and three more hikes this year, with the median voter expecting two more), it is hard to see much more being priced in in the short end for now.

Our view is still that three more hikes will be delivered this year (a total of four hikes in 2018) and think there is a good chance that the rate path in June will signal this as well. Only one member needs to change his/her view for that to happen. In that case, the current pace of one hike per quarter will be continued," Nordea argues.

Upbeat UK April retail sales data Wednesday provided a bit of relief for cable and with bullish divergence creeping into the daily chart it might be time to trim shorts and look to offer again at better levels.
Slow stochastic and a slowing in negative 14-day momentum has taken some heat out of bear crosses on 21-200DMA and 55DMA-100DMA.
A tight doji star Tuesday warned that supply might be fading and an acceleration lower Wednesday would fit with a possible near-term adjustment.
Daily tenkan and 10-DMA lines at 1.3460-70 could be reached on a corrective rebound and provide a fade level to join the underlying bear trend.
Downside targets remain at 1.3206, weekly Ichimoku cloud top, and 1.3140 30-DMA lower Bollinger line.
A close below the 55-WMA, currently 1.3401, could open up the cloud top and also the converging 100-WMA and 30-WMA lower Bollinger line at 1.3065-70.
Fibonacci retrace levels off the October 2017 1.1491 low and April 1.4377 high are at 1.3275 38.2% and 1.2934 50%.

• Long legged doji candle Wed smacks of market indecision
• Price is beginning to look lost mid-cloud, 0.8722-0.8795
• Converging-flattening DMAs, tenkan-kijun suggest n/t consolidation
• Risk of range trade before next directional impulse
• While 100DMA caps at 0.8798 the bear side is favoured for 0.8713 May 17 low
• Weeklies continue to bump along sideways just below the ichimoku cloud base

• Modest rebound late Wed out of a new 2018 low, 1.3305: now initial support
• Early Thurs and price holding tight at marginally better levels
• A fade in daily bear momentum and slow stochs are flat lining
• A hint that supply might be getting thin
• Look to fade 10DMA, 1.3466, if a larger adj. within the bear trend take off
• Weeklies still looking to the 1.3206 cloud top on a sub-55DMA 1.3400 close

• Maintaining a short from 1.1780 with our stop just above entry
• Two day decline from 1.1830 based at 1.1676 and a modest adjustment underway
• A slight decline in daily bearish momentum and stochs are now flat
• Consolidation the likely Thurs theme with minor intraday res. at 1.1720
• 10DMA at 1.1804 and Tues high at 1.1830 seen pivotal
• Weekly action challenging a cloud top at 1.1681

• USD/JPY continuing to slide, to 109.34 in afternoon Asia trade.
• Test of ascending daily Ichi kijun at 109.29 maybe only matter of time.
• Support below at 109.00, stops eyed below.
• Weak JPY crosses, long liquidation, soggy US yields combo weighs.
• Also market risk off, Nikkei -1.4%, Trump auto tariff threat looms big.
• Fibo 38.2% retracement of 104.56-111.39 3/26-5/21 at 108.78, 50% 107.97.

• +0.2% in Asia - JPY led USD lower - WTI -0.3%, Nikkei -1.2% & E-Minis -0.2%
• Momentum studies flat line, 5, 10 & 20 DMAs edge lower - negative setup
• 1.3300, Dec range low held in NY, break targets 1.3180, 50% 2017/18 rise
• Close above 1.3467 10 DMA would undermine trend, above 1.3534 20 DMA ends it
• Interest once Tokyo fully opened - Click here

• Retail sales lead data - polls - Click here

SEB Research discusses its reaction to today's FOMC minutes from the May policy meeting.

"The minutes confirm that the Fed has become more confident that inflation will remain close to or above target but provide no clear indication that the Fed is about to step up the pace from three to four rate hikes in 2018.

We stick to our view that rising inflation pressure will force the Fed to deliver three additional hikes in 2018 (June, September and December) and expect the Fed’s median forecast to indicate a total of four hikes in 2018 when revised forecasts are presented in June. There is more uncertainty about monetary policy in 2019 but we predict two hikes (March and June)," SEB argues. 

The Aussie dollar's ability to bounce back from a sharp bout of risk aversion Wednesday is an encouraging sign for bulls.
Market positioning should be supportive, with IMM data as of May 15 showing the largest net AUD/USD short since early February 2016.
A widening divergence between commodity markets and the AUD, plus Wednesday's FOMC minutes that suggested the Fed will continue with their gentle pace of rate rises , also create room for a significant AUD/USD recovery.
From a technical standpoint, this view will be negated if the AUD/USD closes back below the 21 DMA, which is at 0.7526 today, so there's relatively good risk-reward in being long at this level.
If the moving average holds, the Aussie should take out the recent high and 50% retracement of the April-May drop at 0.7605/13 and move higher to test the 61.8 Fibo at 0.7660.
A break there would put the 200 DMA at 0.7770 back in play over the next few weeks.

• USD/JPY through 109.56 low yesterday, 109.49 trades in Asia, still soggy.
• Long liquidation, soggy US yields to blame, US Treasury 10s to @2.985%.
• Stocks not helping, more dumping of Japanese stocks, Nikkei -1.1%.
• USD/JPY moving towards ascending daily Ichi kijun at 109.29.
• 100-WMA at 109.66 pierced overnight, flat weekly kijun 109.15 below.
• Current correction down may have more legs, US yields/risk sentiment eyed.

• +0.1% - UK Times - PM to seek new Brexit transition to 2023 nL3N1SU6L8
• Fresh transition to cover customs & trade, but EU unlikely to accept
• Momentum studies flat line, 5, 10 & 20 DMAs edge lower - negative setup
• 1.3300, Dec range low held in NY, break targets 1.3180, 50% 2017/18 rise
• Close above 1.3467 10 DMA would undermine trend, above 1.3534 20 DMA ends it
• 1.3305 NY low & 1.3376, 38.2% this week's fall initial support/resistance

• -0.1% pre Tokyo, after closing -0.7% with broad JPY strength, EUR/JPY -1.5%
• Lower UST yields, global uncertainty & weak European data all weighed
• RTRS Tankan, last 21 & foreign investment flow lead data - little impact
• Close below 110.19 200 DMA suggests uptrend in a consolidation phase
• Sustained break of rising 109.29 Kijun line would be bearish
• London 109.56 low & 110.33 NY high initial support/resistance

CIBC Research discusses its reaction to today's FOMC minutes from the May policy meeting.

"See you soon, was the message from the Fed at the minutes of a meeting in which they agreed to keep rates on hold. The Fed feels comfortable with having unemployment rates run below their long run estimates of the full-employment rate, and are willing to tolerate a temporary overshoot on inflation.  

Perhaps a tad more dovish than what markets had started to build in, given the lack of real concern about overheating and a tolerance for a bit of overshooting on the inflation front," CIBC argues. 

CIBC maintains its call for expecting two more Fed rate hikes this year (with the next one coming in June), and three in 2019.

• USD/JPY's US PMI beat-driven rebound capped by Tenkan @110.27
• 110.26 is also 38.2% of this week's 111.39-109.56 pullback
• O/B daily RSIs have fallen to neutral readings, but still falling
• Close below 110.27 after Fed Minutes argues for 109.20 next
• Daily Kijun & 38.2% of the Mar-May rise there, 108.78 key below
• Italy President's Conte PM OK hurts EUR/JPY and USD/JPY

• USD/JPY's risk-off slide rebounds off 109.56 after US PMI
• April composite Markit PMI 55.7 vs 54.9 last nN9N1OC00G
• Homes up to 110 expiry, 200-DMA & Tenkan at 110.19/27
• Kijun & 38.2% of Mar-May 104.56-111.39 rise at 109.20 eyed
• JP Market PMI weakest in 9 mos nS7N16202O; BOJ YCC endures
• Assuming current derisking subsides, 112+ targets to attract

Credit Agricole Research discusses the EUR outlook in light of the today's soft EZ PMIs.

One of the main reasons for the sharp deterioration in EUR sentiment in recent months was the significant slowdown of the Eurozone economy in Q118. The weak economic data dashed hopes for pacier ECB policy normalisation despite the fact that various Governing Council members seem to think that the slowdown is only temporary. More recently, concerns about Italy and possible contagion to other Eurozone members added to the recent EUR gloom.

We further suspect that negative data surprises out of the Eurozone may also undermine the broader market risk sentiment. This is why EUR-shorts vs safe havens like CHF and JPY may be preferable under this scenario," CACIB argues.