· The dollar advanced against the yen on Monday, after U.S. Treasury Secretary Steven Mnuchin said the U.S. trade war with China is “on hold”, boosting risk sentiment amid hopes for an easing of trade tensions between the world’s two biggest economies.
The dollar rose 0.5 percent to 111.245 yen, hitting a fresh four-month high in Asian trade.
The dollar’s index against a basket of six major currencies set a fresh five-month high on Monday, touching a peak of 93.860 at one point.
The euro slipped to $1.1744 at one point, touching its lowest level in five months, and was last down 0.2 percent on the day at $1.1746.
· The Euro has been smashed down to five-month lows against the US Dollar, with investors looking nervously to the probable confirmation of a euroskeptic government in Italy on Monday.
The rightist League party and anti-establishment 5-Star Movement have agreed a governing accord which would cut taxes and accelerate welfare spending. This could hack at the heart of the Stability and Growth Pact- the chief document underpinning fiscal responsibility within the Eurozone in the absence of full political union. Coalition members have also been vocal in the past in their opposition to the Euro, although that rhetoric seems to have cooled somewhat in recent days. There are strong doubts that any move to leave the single currency - or even to edge away from it- would get past the Presiden't constitutional veto.
The single currency has been caught in an accelerating downtrend against the US Dollar since late April on its daily chart. The fall involved has just taken it down through the 76.4% Fibonacci retracement of the rise up from November 2017’s lows to the highs of this year.
If Euro bulls can’t regain that level (1.1789), then full retracedment at 1.1553 will remain in focus.
· Last week, we were looking for the euro to find a bit more of a bounce, but said risk was still in favor of lower prices. Follow-through lasted a whole half-a-day Monday before carving out a bearish key reversal bar shy of the 200-day MA and trading off for the remainder of the week.
Looking ahead to next week, there is a good amount of support in the vicinity of 11725/670 which could put a larger rebound in place, or at least pause downward momentum for more than a couple of days. Since breaking down last month, wow price reacts to the first big test of sizable support will be critical to the outlook moving forward.
So, while this next week may not hold a big move, price action could be telling moving beyond the next few days. A strong reversal off support will shine light on the notion we could have a tradable low at hand, while a failure to garner any buying interest will suggest another leg lower will be in store.
Tactically, it’s a tough spot given the extended trend and support close by (fresh shorts hold poor risk/reward), while longs will be of the counter-trend variety for now and require some type of sharp
Mnuchin and U.S. President Donald Trump's top economic adviser, Larry Kudlow, said the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.
· Italy must present the European Commission with a plan for its exit from lender Monte dei Paschi (BMPS.MI) by 2019, Chief Executive Marco Morelli told daily Corriere della Sera.
Last year, the Commission and Italy reached a pact on a state bailout for Monte dei Paschi that included heavy cost cuts, losses for some investors and a pay cap for executives.
Monte dei Paschi, the country’s fourth largest bank, is now 68 percent owned by the government and under the bailout deal, Italy is due to exit the troubled lender in 2021 at the latest.
· Japan’s exports accelerated in April on increased shipments of cars and machines used to make semiconductors, with rising volumes suggesting healthy overseas demand could help the economy recover quickly from a dip in the first quarter.
Exports grew 7.8 percent in April from the same period a year ago, below the median estimate for an 8.1 percent annual increase expected by economists in a Reuters poll. In March, exports grew an annual 2.1 percent.
· China will “actively and steadily” deleverage and tackle financial risks, sources said on Monday, citing the country’s five-year plan (2016-2020) for the financial sector.
China will boost the role of price-based monetary policy targets with interest rates as core, according to two sources with knowledge of the matter and a document seen by Reuters.
· Thailand’s economic growth surged to a five-year high last quarter, beating all economists’ estimates as rebounding farm output added to gains from exports and private consumption.
Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT
The break above $80/bbl was the highest price per barrel of Brent since 2014. The technical picture when looking at the price chart shows that the market may be overheating per the Relative Strength Index or RSI. Traders should not confuse overheating with topping.
Short-term support can be found at the price range of the 9- & 26-day midpoint at $76.53-75.66/bbl. These are Ichimoku levels applied to daily trading data that have provided a clear view of bullishness since mid-March.
· Oil prices rose on Monday as markets reacted to news that China and the United States have put a looming trade war between the world’s two biggest economies “on hold”.
Brent crude futures were at $79.06 per barrel at 0650 GMT, up 55 cents, or 0.7 percent, from their last close. Brent broke through $80 for the first time since November 2014 last week.
U.S. West Texas Intermediate (WTI) crude futures were at $71.71 a barrel, up 43 cents, or 0.6 percent, from their last settlement.
Reference: Reuters, CNBC,Bloomberg,DailyFx
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