Daily Report: Sterling Tumbles ahead of Data

Sterling dives sharply today after the release of Nationwide survey consumer confidence that fell to 70, the lowest on record. Technically speaking GBP/USD's break of April's low of 1.9599 suggests that the pair is finally breaking out a month long consolidation is is resuming the fall from 2.0391. Market's focus is turning to another batch of UK data today, including industrial production and manufacturing production which are both expected to slow from 1.3% yoy to 0.8% yoy and 1.9% yoy to 1.2% yoy respectively. Nevertheless, tomorrow's BoE rate decision will be a key focus from UK this week.

Euro gives back some gain against the greenback after recovery from 1.5360 was limited by 4 hours 55 EMA. Eurozone retail sales will catch some attention today and is expected to contract further by -0.6% yoy in Mar. Germany factory orders is expected to show sharply from 9.0% to 5.7% yoy. Though, main focus remains on tomorrow's ECB rate decision and press conference.

Dollar is mildly firmer today but after all it's still bounded in consolidation against most currencies. The greenback is supported by hawkish comments from fed Hoenig that "inflation psychology" is gaining to an extent above those in 70s and 80s. And significant monetary policy tightening may be requited to reduce the embedded risk of inflation in the economy. Q1 labor costs and productivity in US will be released today, as well as March pending home sales.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.9656; (P) 1.9713; (R1) 1.9794; More

Cable dives further to as low as 1.9591 today and break of 1.9599 low dampened our original short term bullish view. Instead, it suggests that the decline from 2.0391 might have resumed. At this point, further decline is in favor to retest 0.9337 low as long as 1.9972 resistance holds. Above 1.9772 will turn outlook mixed again.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. While the rebound from 1.9337 might have completed at 2.0391 already, choppy price actions from there is still arguing that consolidation from 1.9337 is not finished yet. Firm break of 1.9337 low is needed to confirm whole down trend from 2.1161 has resumed. Otherwise, consolidation might continue to extend further. Above 1.9908 will flip bias back to the upside for t 61.8% retracement of 2.1161 to 1.9337 at 2.0464.

Also, note that, prior break of medium term rising channel at least indicate that rise from 1.8090 has already completed at 2.1161, so is the medium term up trend from 1.7047 probably. Hence, sustained break of 2.1161 is needed to confirm the whole up trend has resumed. Otherwise, another fall is still expected towards 61.8% retracement of 1.7047 to 2.1161 at 1.8619 after finishing the current consolidation from 1.9337.

Forex News Digest

• Closing Market Recap: Canadian Dollar Catches Bid as Oil Spikes to $122
• Market Recap: Treasury Curve Steepens and Stocks Hit Session High
• The Day Ahead Europe & UK: Euro Zone Retail Sales, UK Industrial Production
• The Day Ahead Canada & U.S.: U.S. Pending Home Sales and Q1 Productivity
• U.S. Preview: Preliminary Labour Costs to Advance More than Previous Quarter
• U.S. Preview: No End in Sight for Pending Home Sales Decline, Economists Say
• U.S. WashPost/ABC Consumer Comfort Slides to -46, Nears 16-Year Low
• RBA's Tightening Bias Remains, Now in "Watch and Worry" Mode, Economists Say
• Canadian Dollar Could Spike on a Break Through Parity, Strategist Says
• Dollar Gains as Fed's Hoenig Says Inflation Pressure May Spur Rate Rise
• U.S. Pending Home Sales Probably Fell for Second Month as Prices Declined
• Hoenig Says `Serious' Inflation Pressures May Compel Fed to Increase Rates
• Pound Falls Against Dollar as Consumer Confidence Drops to Four-Year Low
• Euro Enters Ichimoku Cloud, May Decline to $1.5172 Next Week, Shinko Says

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