•The dollar hovered near a six-week low versus the yen on Thursday, weighed down against the safe-haven Japanese peer as risk aversion gripped broader markets amid concerns the U.S.-China trade conflict could escalate.
Markets were nervously awaiting the start of two-day trade talks in Washington later in the global day to see if Chinese negotiators can convince the White House to back down on a threatened tariff hike on Friday.
The U.S. currency stood at 109.910 yen after going as low as 109.70 overnight, its weakest since March 25.
Against the dollar, the euro was flat at $1.1190, having spent the week in a tight $1.1218-$1.1155 range.
The dollar index against a basket of six major currencies was little changed at 97.612.
•EUR/USD clings to 1.1200 as high-stakes trade talks are awaited
EUR/USD is trading around 1.1200, in familiar ranges. A Chinese delegation is on its way to Washington for high-level talks on trade as tensions mount. President Trump said, "China broke the deal."
From a technical perspective, nothing seems to have changed much for the pair except that the 1.1215-20 region now seems to have emerged as an immediate strong resistance, also nearing a short-term descending trend-line. A convincing break through the mentioned hurdle, the pair is likely to aim towards reclaiming the 1.1300 round figure mark before eventually darting to test the top end of a four-month-old descending trend-channel resistance, currently near the 1.1330-35 region.
On the flip side, the 1.1170-65 region might continue to protect the immediate downside, which if broken might turn the pair vulnerable to accelerate the slide further towards challenging the 1.1100 mark en-route the trend-channel support near the 1.1080 region. A follow-through weakness would mark a fresh near-term bearish breakdown and open the room for further near-term depreciating move, towards testing sub-1.1000 level.
•USD/JPY technical analysis: Approaching support at 109.70 with lower highs on 1H chart
USD/JPY could soon test the support at 109.70 (March 25 low), having created another bearish lower high at the former support-turned-resistance of 110.28 over the last 15 hours, as seen in the hourly chart.
The hourly chart relative strength index (RSI) of 33.00 is also biased bearish. That said, a break below 109.70 may not happen today, as 4-hour chart RSI is reporting oversold conditions. The RSI on the daily chart has also dropped below 30.00 for the first time since early January.
However, with the descending 50-hour moving average (MA), currently at 110.25, corrective rallies, if any, could be short-lived.
•U.S. President Donald Trump's negotiators are set to meet Chinese trade officials this week in an attempt to hash out a trade deal.
However, according to former Australian Prime Minister Kevin Rudd, any assumption in Washington that Beijing is "economically desperate" for a deal is not "well placed."
"The Chinese have applied a whole bunch of stimulus measures, growth has been restored, including some tax advantages for the private sector. China is approaching these negotiations as of May 2019 in a considerably stronger economic position" than it had six months ago, said Rudd, who is now the president of the New York-based Asia Society Policy Institute.
•China’s factory-gate inflation in April quickened at its fastest pace in four months, buoyed by higher commodity prices and a sign demand may be starting to perk up as Beijing rolls out more stimulus.
Consumer inflation also accelerated, jumping to the highest pace in six months, official data showed on Thursday, as pork price remained elevated due to supply issues from a growing swine fever epidemic.
China’s producer price index (PPI) in April rose 0.9 percent from a year earlier, the quickest pace since December, driven largely by rapid rises in oil and gas prices, and advancing from a 0.4 percent increase in March, the National Bureau of Statistics (NBS) said. Analysts polled by Reuters had expected factory gate inflation would nudge up to 0.6 percent in April.
•Venezuelan intelligence agents detained opposition leader Juan Guaido’s congressional deputy on Wednesday, using a tow truck to drag his vehicle away with him inside, prompting the U.S. government to warn of “consequences” if he was not released.
The SEBIN intelligence agency seized Edgar Zambrano, vice president of the opposition-controlled National Assembly, which Guaido heads, in the first arrest of a lawmaker since Guaido tried to spark a military uprising last week to bring down President Nicolas Maduro’s government.
•How could Theresa May be forced out?
No confidence vote of Tory MPs: Theresa May won a leadership ballot by 200 to 117 votes on 12 December 2018. Under current party rules, there can't be another vote for a further year so the PM is technically safe until 12 December this year. Many MPs want to change the rules to allow an earlier contest but this would need to be agreed by the 1922 Committee.
No confidence vote in Parliament: The PM would have to resign if she lost a confidence vote in Parliament. Labour tried this manoeuvre in December but Tory MPs and their DUP allies backed the PM. Might some Tories now withhold their support if they think it will usher in a new leader rather than a general election?
Grassroots Tory revolt: Local Conservative associations seem to be turning against the PM, with one - Clwyd South - already passing a motion of no confidence in her. The National Conservative Convention's vote on 15 June is non-binding, though, so the PM could ignore it.
Cabinet revolt: Margaret Thatcher quit in 1990 after a number of ministers told her it was time to go. Could history repeat itself? There has been no sign of that so far and colleagues who want to succeed her - and there are many - may not want to be seen to be the ones wielding the knife or to risk sacrificing their own careers.
Quits of her own accord: The BBC's Norman Smith says there is no way the PM will "walk away" right now, but this could change in the aftermath of a "catastrophic" result in European elections.
•Oil prices dropped on Thursday amid concerns over the escalating trade battle between the United States and China, despite a surprise fall in U.S. crude stockpiles.
Brent crude oil futures were at $69.91 a barrel by 0600 GMT, down 46 cents, or 0.7 percent, from their previous settlement. They earlier fell more than 1 percent. U.S. West Texas Intermediate (WTI) crude futures were at $61.76 per barrel, down 36 cents, or 0.6 percent, having also declined more than 1 percent earlier. “The inventory numbers from the U.S. only gave oil a transitory boost. It is going to be all about whether the trade talks today can stop Friday’s tariff-geddon,” said Jeffrey Halley, senior market analyst at OANDA in Singapore.
The Sino-U.S. trade war has weighed on oil prices this week as heightened tensions between the world’s two biggest economies cloud the global economic outlook. U.S. President Donald Trump said on Wednesday that China “broke the deal” in trade talks with Washington and would face stiff tariffs if no agreement is reached. Higher tariffs are set to take effect on Friday, during Chinese Vice Premier Liu He’s two-day visit to Washington from Thursday.
•CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are sitting under the rising support line from late December, struggling to find momentum in either direction. A narrow falling channel from the middle from April seems to be keeping the downside bias though. Immediate support appears to be at 60.26, the former highs in March. Climbing higher places 64.54 as the next psychological barrier.
Reference: Reuters, CNBC, FX Street
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