The PMI data out of the EU were much weaker than expexted and the EURUSD raced lower.  Looking at the 1 minute chart below, the pair raced below the 100 hour and 100 day MA and the 200 hour MA in the first minute after the report (the run was about 43 pips in the first minute). The fall continued for another 40 pips over the 30 minutes or so to the low of 1.1287. Total move was about 83 pips. Since that low, the pair has had higher lows at 1.1292-94. A move below that intraday floor would be more bearish intraday. The corrective high has reached 1.1319 – that is below the 38.2% of the trend move down (at 1.13266). Sellers are still in control.

Looking at the hourly chart below, the pairs steep fall has also taken the price below the 50% midpoint of the move up from the March low. That comes in at 1.13105. The corrective high has moved above that level, but the last two bars are trying to put a lid near that level.

On the downside, the low today did stall in an area defined by swing levels (at 1.12836-89).  The 61.8% is at 1.12784. Those are the next targets on more weakness today.  Get below opens up the downside even more.

The data today was shocking and it is reflective in the price action.  There is some minor support and traders are taking a breather over the last 5 or so hours. However, the corrective highs have been modest so far. It owuld take a move above the 38.2% of the move down at 1.13266 to likely put a little scare in intraday shorts, but a move above the 200 hour MA at 1.1335 currently (green line in the chart above), to really put some fear in the shorts.

It’s all about the bond market today. US 10-year yields are down 6.4 basis points to 2.47%. That’s important because the Fed funds rate is 2.25%-2.50% with the effective rate at 2.41%.

The two year and five year have already inverted and are down 4-6 basis points today.

Now markets are faced with a tough choice about whether to pay attention to US economic data, which has been solid. Or to a signal from the bond market that’s one of the best market-based predictors of trouble (but certainly not infallible).

Technically, USD/JPY is down 62 pips to 110.21 in a break of the weekly low and mid-February low.

S&P 500 futures are down 12 points.

Looking ahead to the June meeting on OPEC:

USD/JPY is now flat on the day in a rebound to 110.75 from a low of 110.30. The rally puts it back to where it was immediately after the FOMC decision.

The bounce coincides with a better tone in equity markets. The S&P 500 is up 9 points after a 6 point loss at the open was erased.

At the lows, USD/JPY was at the lowest since Feb 14 but the low hit some stops.

Analysts at Westpac suggest selling USD/JPY if it rises to 111.90 from the current 111.33 level. They target 110.10 with a stop at 112.55.

“FOMC patience and [an] early shift in balance sheet reduction to weigh on US rates,” they write.

They believe Brexit will weight on risk assets until month end and that resistance at 112.00/50 will cap any rallies.

Risks include a Brexit deal, a less-dovish Fed, better economic data including global PMIs and a dovish shift from Kuroda in the day ahead.

Despite buyers staying in near-term control, the 1.3300 handle remains a key resistance level at this point as Brexit developments go silent today with the government talking with the DUP to convince them to vote for May’s deal in a potential third meaningful vote tomorrow or Wednesday.

The DUP’s support is key to sway other voters at this point and euroskeptic parliament members remain adamant that things won’t change and May will eventually pull tomorrow’s vote from being tabled. The risk of that is likely weighing on the pound for the time being as headlines are currently few and far between.

That said, there is still some support for the pound and cable close to the 50.0 retracement level as we saw last week around 1.3216. The 100-hour MA (red line) also resides at 1.3220 now so that will offer additional support for buyers. Light bids are then noted around 1.3200.

Those will be the key levels to eye for in the sessions to come if you’re looking for any extension towards the upside or downside for cable.