SONIA: Medium-Term Dovish Catalyst Likely Needed To Push SFIZ5/Z6 Notably Lower

Crude oil futures are little changed on the day, with the crude-supportive developments in the EU-U.S. trade talks, in addition to geopolitical risks in the form of the potential for a further intensification in the Israel-Hamas conflict and the latest Russian missile launches on Ukraine, neutralised by some ongoing fundamental headwinds.

• That leaves WTI & Brent futures little changed, with medium-term bearish technical themes intact despite the recent bounce.
• Bulls need to break the 50-day EMA’s in the contracts ($62.75 & $66.24, respectively), to turn the tide more in their favour.
• Meanwhile, the respective April 9 lows present key support and the technical bear triggers.
• Our commodity team notes that fundamental pressure remains evident amid general economic headwinds, coupled with expectations for a more meaningful OPEC+ production increase from July.
• BBG have warned that OPEC+’s seemingly hardline approach to punishing its overproducing members risks plunging crude into a full-blow price war.
• Elsewhere, some downward pressure seemingly came from U.S. President Trump noting that he was “optimistic” following the last round of talks with Iran on limiting their nuclear programme in exchange for sanctions relief.
• Also, note that the Trump administration is preparing to use a narrowly tailored license for Chevron to allow it to perform minimal maintenance of essential operations in Venezuela.

• A key medium-term support has been defined at the 140.00, in USDJPY.
• A clear break of this level is required to highlight a stronger reversal.
• Moving average studies on the daily and weekly frequencies are - for now - in a bear-mode position.
• The monthly set-up however, is bullish.
• This does suggest that weakness since last year’s July high, is a correction.
• A clear break of the 140.00 pivot support, if seen, would undermine this argument and signal scope for a deeper retracement  
• Initial key resistance to watch is the 148.65, the May 12 high. 

"*ECB's Lagarde: Global Trade Fracturing Can Cause Risks for Europe" DJ

As noted earlier, Lagarde is speaking on "Europe's Role in a Fragmented World" at the Hertie School. We don't expect any meaningful monetary policy signals here.

Bundesbank President Nagel is also scheduled at 1430BST to speak on "Europe's prospects in the global trade dispute". Nagel has not given any explicit policy signals in recent comments, generally sticking to a familiar cautious tone. On May 22, he noted:

• “We will reach our inflation target of 2% in the euro zone this year,”….Given the continuing high level of uncertainty, we should therefore remain cautious in our monetary policy.”
• "After seven interest rate cuts, our deposit rate stands at 2.25%, a level that can certainly no longer be described as restrictive"...'“I don’t believe in predetermining whether there might be further interest-rate cuts,”...“I will not make a decision on monetary policy until our next meeting.”