Global trade war in sight?

1. According to media, after the US decision to impose tariffs on steel and aluminium, EU, Mexico and Canada decided to retaliate. The US decision to deny exemptions and proceed with the tariffs was cited as necessary to protect US domestic industry and national security. Considering that China is in a similar status, we could be seeing the ignition of a global trade war for the US. Should there be further escalation on the situation we could see safe havens strengthen.
2. USD/JPY after trading in a sideways manner yesterday, rose during the Asian morning today, breaking the 108.95 (S1) resistance line, now turned to support. We could be seeing the pair moving in a sideways movement, however it could be the case for USD/JPY to be sensitive to any fundamental news regarding trade wars as well as the release of the US employment report. Should the bulls take over, the pair could aim for the 109.75 (R1) resistance level. Should the bears take the reins, we could see the pair breaking the 108.95 (S1) support line and aim for the 108.50 (S2) support barrier.

Italy about to end political drama

1. In other headlines, Italy’s parties M5S and Lega, seem to surge to power, ending Italy’s political drama for the past months. The PM candidate, Giuseppe Conte is expected to be sworn in today by president Mattarella according to media reports. The new government could challenge Eurozone fiscal rules, should it follow the program agreed by the two parties. The new cabinet will face a vote of confidence by the two houses of parliament, on Monday and on Tuesday. At the current stage, any new headlines about the stabilization in Italy and the Eurozone, could support the EUR.
2. EUR/USD traded in a sideways manner with some bullish tendencies yesterday, breaking the downward trend-line incepted since the 20th of April and testing the 1.1715 (R1) resistance line. We see the case for the pair to trade in a sideways manner however with some bearish tendencies as the USD side could strengthen at the release of the US employment report. Should the pair come under selling interest we could see it breaking the 1.1640 (S1) support line and aim for the 1.1550 (S2) support barrier. If the pair finds buying orders along its path we could see it breaking the 1.1715 (R1) resistance line and aim for the 1.1620 (R2) resistance hurdle.

In today’s other economic highlights:

In the European session, we get Germany’s and Eurozone’s final manufacturing PMIs for May and the UK manufacturing PMI for May.

The most important financial releases of the week is the US employment report for May which is due out today (at 12:30, GMT) and is expected to move the markets.

The figures read as follows

Non-Farm Payrolls, are forecasted at 188K compared to prior figure of 164K, the unemployment rate is forecasted to remain unchanged at 3.9% compared to previous month’s reading and the average earnings growth rate are forecasted to tick up to +2.7% yoy compared to prior reading of +2.6% yoy.

The data show a rather strong employment report which implies a tight labour market that could increase inflationary pressures.

Overall, should the actual figures meet the forecast we could see the USD strengthening.

Also in the American session we get the ISM manufacturing PMI for May.

As for speakers, Minneapolis Fed President Neel Kashkari (12:55, GMT) and BoE’s Andy Haldane (13:10, GMT) speak.