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Draghi took a small step away from the ECB's dovish stance but it wasn't enough for EUR/USD traders. The pound was the top performer while the euro lagged. New Zealand trade balance and a heavy slate of Japanese data are due next. 2 new Premium trades have been opened, one in the euro the other in a major index.

Mario Draghi said the ECB was moving towards “a more balanced configuration” after holding rates unchanged on Thursday. There was speculation about a more pronounced shift but the ECB will likely wait for new forecasts in June.

The euro initially jumped to 1.0930 from 1.0885 but quickly reversed down to 1.0851. Despite the disappointment, that's still above the Dec-March range, the 200-DMA and the previous cluster resistance.

The pound also broke above a shorter-term range as the period of consolidation after the election call ended. The rise to 1.2917 was the highest since October.

The Canadian dollar remained the most volatile currency this week. USD/CAD sank more than 100 pips in Asia after Trump had a change of heart on NAFTA but it was all erased and more in a steady rise to a 14-month high of 1.3671. The high came as oil fell on a restart to Libyan oil production but even as crude recovered, USD/CAD remained well-above 1.36. One story that's weighing is an implosion at mortgage lender Home Capital in what could be the first sign of trouble in Canada's runaway housing market.

The highlight on the economic data calendar was US durable goods for March. The core category rose 0.2% compared to 0.5% expected but that was largely mitigated by a revision higher to the prior. Better shipments added a slight upward bias to Friday's first look at GDP but analysts are generally pessimistic and the Atlanta Fed sees just 0.2% growth.

USD/JPY continues to chop in the 111.20 to 111.70 range. It could get a jolt when CPI, retail sales and employment numbers are released at 2330 GMT. The national CPI is the main line to watch, it's forecast up just 0.3% y/y.

The other release comes at 2245 GMT when New Zealand is expected to report exports at $4.66B in March and imports at $4.30B. That's a trade surplus of just under $370m. Note that the kiwi sank below the March low on Thursday and is the worst performing major since Trump took office.

The ECB kept policy rates, the QE programme and its forward guidance unchanged at today's meeting - in line with our expectations. It still expects policy rates 'to remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases'. Additionally, regarding QE purchases, the ECB continues to have an easing bias, as it communicated that it stands ready to increase QE in terms of size and/or duration.

According to Mario Draghi, the ECB Governing Council did not discuss changing its forward guidance or the sequencing of the exit from the very accommodative monetary policy. Both of these topics have received a lot of attention following the latest ECB meeting in early March but the focus on hiking policy rates in order to support the banking sector could fade somewhat as Draghi described the potential side effects of accommodative monetary policy as being limited.

The introductory statement had a minor hawkish twist, as the ECB described the risks surrounding the euro area growth outlook as moving towards a more balanced configuration but still being skewed on the downside. However, during the Q&A session, Draghi communicated that the ECB did not discuss a better or more balance inflation outlook and made it clear that there was an important difference between these two measures.

Regarding the inflation outlook, the ECB still argued that measures of underlying inflation remain subdued. Related to this, the introductory statement also included 'the ongoing volatility in headline inflation underlines the need to look through transient developments in HICP inflation'.

The ECB could change its forward guidance on policy rates at the meeting in June when it will have updated macroeconomic projections but, as we have previously argued, there is a risk that it will stick to a more cautious approach. This should follow as Draghi has recently said 'Before making any alterations to the components of our stance - interest rates, asset purchases and forward guidance - we still need to build sufficient confidence that inflation will indeed converge to our aim'. We still believe the ECB will announce an extension of its EUR60bn monthly QE purchases at the September meeting and continue the programme in 2018.

In fixed income markets, 2Y German yields declined, mainly reflecting Draghi's comment that the ECB did not discuss better securities lending. He stated that these facilities were primarily a task for national central banks and, although they are following central guidelines, the market is for now set to downplay expectations of any near-term changes to the repo facility. Note that this somewhat backtracks the signals from the March meeting, when Draghi said that they were monitoring the repo situation closely and would come 'back on this next time'.

EUR/USD moved up one step up (on 'downside risks diminishing') and then one step down again (on rate hikes off the table for now). EUR/USD still looks like a 1.06-1.10 range near term, as the Fed will be there to keep some downside potential intact but, in our view, there is clearly a risk that we could stand at the June meeting with an ECB that changes its forward guidance in a more hawkish direction provided the cyclical situation looks good still and provided the inflation outlook has not deteriorated markedly (beyond base effects falling out) - and EUR/USD would be more sensitive to a signal on rates than to a possible extension of QE.

Gold has edged lower in the Thursday session, after recording considerable losses on Tuesday. In North American trade, spot gold is trading at $1265.53 per ounce. On the release front, key indicators were dismal. Core Durable Goods, Unemployment Claims, and Pending Home Sales all missed their estimates. On Friday, the US will publish Advance GDP, which is expected to gain 1.3%. We'll also get a look at UoM Consumer Sentiment.

One of President Trump's most important campaign platforms was overhauling the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals' overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump's proposal should be viewed as a blueprint that is a long way off from becoming law. Trump's proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn't been much reaction from the currency markets, with the dollar showing limited movement against the pound and other major currencies in Thursday trading.

The French presidential election may be in the daily headlines, but gold prices have been generally steady this week. Voters will be back at the ballot boxes on Sunday, and the markets have priced in a victory by Emmanuel Macron over Marie Le Pen. A major reason for the market's calmness is that opinion polls before the first round were fairly accurate, and correctly forecast that Macron would win 24% of the vote and Le Pen 22%, with both advancing to the May 7 runoff. With polls showing Macron with a comfortable lead of 60-40, it would be a huge upset if Le Pen came in first. She faces an uphill fight, compounded by the fact that some candidates from the first round as well as former President Francois Hollande have publicly called for voters to support Macron. Still, a strong showing by Le Pen on Sunday would show that her strident anti-EU stance has wide popularity, and this could sour investor sentiment and send gold prices higher. Bottom line? If Macron wins by a large margin on Sunday, gold is unlikely to show much movement.

USD/JPY is showing little movement on Thursday, as the pair trades just above the 111 line. On the release front, the BoJ maintained interest rates at -0.10%. Later in the day, consumer indicators will be in the spotlight, with the release of Household Spending and a host of inflation indicators, led by Tokyo Core CPI. In the US, key indicators all disappointed, as Core Durable Goods, Unemployment Claims, and Pending Home Sales missed their estimates. On Friday, the US will publish Advance GDP, which is expected to gain 1.3%. We'll also get a look at UoM Consumer Sentiment.

The Bank of Japan held course and maintained interest rates at -0.10%. The negative rates are part of the BoJ's ultra-loose monetary policy, which is expected to continue until inflation levels move closer to the central bank's target of around 2 percent. The BoJ sounded optimistic about the economy, but acknowledged that monetary policy was unlikely to change in the near future. The BoJ is maintaining its asset-purchase program at 80 trillion yen annually, dampening hopes that the central bank might taper the purchases in response to an improving economy. Analysts noted that the BOJ's quarterly outlook report said that the economy was moving towards "economic expansion", the first time the report has used the word "expansion" since 2008. The BoJ is clearly in no rush to change its monetary stance, and will likely hold course unless inflation levels move closer to the BoJ's target of about 2%.

President Trump has repeatedly promised a major reform of the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals' overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump's proposal should be viewed as a blueprint that is a long way off from becoming law. Trump's proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn't been much reaction from the currency markets, with the dollar showing limited movement against the Japanese yen and other major currencies in Thursday trading.

USD/CHF - 0.9948

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9942

Kijun-Sen level                    : 0.9945

Ichimoku cloud top                 : 0.9945

Ichimoku cloud bottom              : 0.9939

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As dollar has rebounded again after holding above indicated support at 0.9918, retaining our view that further consolidation above this week’s low at 0.9893 would be seen and another bounce to 0.9980-85 cannot be ruled out, however, break of 1.0000-08 resistance is needed to signal low is formed at 0.9893, bring rebound to 1.0025-30 (61.8% Fibonacci retracement of 1.0108-0.9893) but price should falter below resistance at 1.0067.

On the downside, only a drop below said support at 0.9918 would signal the rebound from 0.9893 (this week’s low) has ended, bring retest of this level, break there would confirm recent decline from 1.0108 has resumed and extend weakness to 0.9865-70 (2 times extension of 1.0108-1.0008 measuring from 1.0067), however, reckon support at 0.9831 would hold from here, bring rebound later. As near term outlook is still mixed, would be prudent to stand aside for now. 

GBP/USD - 1.2886

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2888

Kijun-Sen level                    : 1.2869

Ichimoku cloud top              : 1.2834

Ichimoku cloud bottom        : 1.2818

Original strategy :

Buy at 1.2845, Target: 1.2945, Stop: 1.2810

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2830, Target: 1.2945, Stop: 1.2795

Position : -

Target :  -

Stop : -

As cable has risen again after finding renewed buying interest at 1.2805, signaling the pullback from 1.2906 has ended at 1.2757 earlier and retest of this level would be seen, break there would confirm recent upmove has resumed for headway o 1.2920-30 (2 times extension of 1.2365-1.2575 measuring from 1.2500), then 1.2950 but reckon 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance) would hold on first testing. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as downside should be limited to 1.2825-30. Below said support at 1.2805 would abort and prolong consolidation, then risk another corrective fall to indicated previous support at 1.2757 but price should stay well above 1.2710 (50% Fibonacci retracement of 1.2515-1.2906), bring another rise.

EUR/USD - 1.0861

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0892

Kijun-Sen level                  : 1.0892

Ichimoku cloud top             : 1.0912

Ichimoku cloud bottom      : 1.0893

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the single currency met renewed selling interest at 1.0933 and has slipped again in NY morning, retaining our view that further consolidation below yesterday’s high of 1.0951 would be seen and test of support at 1.0821 cannot be ruled out, however, still reckon downside would be limited to 1.0800 and previous resistance at 1.0778 should hold from here, bring another rise later.

On the upside, above 1.0895-00 would bring test of said intra-day resistance at 1.0933 but break there is needed to signal the pullback from 1.0951 has ended, bring retest of this level later. Once this level is penetrated, this would extend recent upmove from 1.0340 low to 1.0975-80 and possibly towards 1.1000 which is likely to hold on first testing due to loss of momentum.

USD/JPY - 111.49

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 111.34

Kijun-Sen level                  : 111.33

Ichimoku cloud top             : 111.27

Ichimoku cloud bottom      : 110.67

Original strategy  :

Buy at 110.70, Target: 111.70, Stop: 110.35

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 110.45, Target: 111.55, Stop: 110.10

Position :  -

Target :  -

Stop : -

As the greenback retreated after rising to 111.78 yesterday, suggesting consolidation below this level would be seen and pullback to 110.60-69 (previous resistance and 50% Fibonacci retracement of 109.59-111.78) cannot be ruled out, however, reckon downside would be limited and 110.40-45 (61.8% Fibonacci retracement) should hold, bring another rise later, above said resistance at 111.78 would signal recent rise from 108.13 low has resumed and extend further gain to 111.90-00 but overbought condition should prevent sharp move beyond another previous resistance at 112.20.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 110.40-45 (61.8% Fibonacci retracement of 109.59-111.78) should limit downside. Only break of 110.05-10 (50% Fibonacci retracement of 108.32-111.78) would defer and suggest top is possibly formed, risk weakness to 109.80 but break of support at 109.59 is needed to provide confirmation.

EUR/GBP - 0.8424

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

 
Although the single currency broke above previous resistance at 0.8512, lack of follow through buying and the subsequent retreat from 0.8531 suggest consolidation with mild downside bias would be seen and weakness to 0.8400 cannot be ruled out, however, reckon downside would be limited to 0.8370-75 and as long as support at 0.8351 holds, prospect of another rebound remains. 

On the upside, expect recovery to be limited to 0.8470-75 and 0.8500 should hold, bring further consolidation later. Only break of said resistance at 0.8531 would add credence to our view that a temporary low has been formed at 0.8312 and extend the rebound from there for retracement of recent decline to 0.8550, however, reckon resistance at 0.8580 would limit upside and 0.8600-10 would hold from here. As near term outlook is mixed, would be prudent to stand aside in the meantime. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3663

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term up

 
Original strategy       :

Buy at 1.3500, Target: 1.3650, Stop: 1.3440

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3600, Target: 1.3750, Stop: 1.3540

Position: -

Target:  -

Stop:-

As the greenback has surged again after finding renewed buying interest at 1.3530 yesterday, adding credence to our view that recent upmove is still in progress and bullishness remains for further gain to 1.3700-10, however, near term overbought condition should prevent sharp move beyond 1.3750-60 and reckon 1.3790-00 would hold on first testing, risk from there is seen for a retreat to take place later. 

In view of this, would not chase this rise here and would be prudent to buy again on pullback as 1.3600 should limit downside. Only below said support at 1.3530 would abort and signal a temporary top is formed instead, risk correction to 1.3500 and later towards 1.3450-60 but support at 1.3411 should remain intact, bring another upmove later.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.