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Wednesday March 29: Five things the markets are talking about

U.K PM Theresa May has written a letter that will be delivered by hand to E.U Council President Donald Tusk at around 07:30 EST – only when notification is received in Brussels will Article 50 finally be triggered.

Yesterday, U.K Brexit Minister David Davis stated that he was not targeting a "no-deal" Brexit, but insisted that the government has a "huge contingency plan" for the U.K leaving the E.U without a deal, and that the country would abide by its obligations when settling outstanding liabilities with the E.U.

The triggering of Article 50 is expected to spark long-term volatility for the pound. Current sentiment remains firmly 'bearish' towards sterling moving forward, and the potential resurgence of hard-Brexit fears could ensure price weakness would become a recurring theme.

It will likely take a couple of months for negotiations to start in earnest, with the E.U's 27 other members needing to agree formally how they will approach the talks. Further delaying matters, both sides will need to see the outcome of German elections in September.

Note: GBP has slid more than -1% (£1.2420) within the past 24-hours ahead of today's move by PM May.

Now that Scottish lawmakers voted 69-59 in favour of an "independence referendum" yesterday, sets Edinburgh on a collision course with the U.K government. Messy or what?

Let the gamesmanships "formally" begin!

1. Global stocks get a U.S confidence boost

Stocks in Europe and Asia climbed for a second day amid rising optimism over the strength of the U.S economy and are on course for their fifth consecutive month of gains.

Down-under overnight, Australia's ASX 200 Index and New Zealand's NZX 50 both added at least +0.9%. Singapore's Straits Times Index gained +0.8% and Jakarta's benchmark jumped +0.7%, while Hong Kong's Hang Seng was little changed.

In Japan, the Nikkei (+0.1%) share average produced small gains in choppy trade, but any advances were limited as ex-dividend share price adjustments pressured the market and offset positive U.S sentiment. The broader Topix shed -0.2% – more than three-quarters of its member companies traded ex-dividend.

In Europe, equity indices are trading higher as official Brexit negotiations are scheduled to begin. Banking stocks are leading the gains in the Eurostoxx, while energy, commodity and mining stocks are trading notably higher in the FTSE 100.

U.S stocks are set to open in the black (+0.1%).

Indices: Stoxx50 +0.3% at 3,475, FTSE flat at 7,343, DAX +0.5% at 12,210, CAC-40 +0.3% at 5,061, IBEX-35 flat at 10,384, FTSE MIB flat at 20,327, SMI +0.2% at 8,615, S&P 500 Futures +0.1%

2. Oil rises on Libyan supply disruptions, gold lower

Crude oil prices have extended their gains from yesterday's close, lifted by supply disruptions in Libya and on market expectations that an OPEC-led output reduction will be extended into H2.

Brent crude futures have rallied +29c, or +0.6% to +$51.62 per barrel from Tuesday's close. West Texas Intermediate (WTI) crude futures are up +34c, or +0.7%, at +$48.71 a barrel.

Note: Armed protesters, reducing output by -252k bpd, have blocked oil production from the western Libyan fields of Sharara and Wafa.

Despite OPEC and non-OPEC members agreeing to cut production by almost -1.8m bpd during H1 in order to rein in a global fuel supply overhang and prop up prices, U.S shale oil drillers continue to ramp up their output and exports.

And reason why the market continues to expect another build on weekly crude inventories when EIA release their figures at 10:30 am EST this morning (+1.2m e).

Ahead of the U.S open, gold has slid -0.1% ($1,250.19), paring its Q1 gain to +9%. Some investors believe the 'yellow' metal may be in the early stages of a new "bull" run, and is poised to rally to levels last seen four-years ago as rising inflation and negative real interest rates combine to boost demand.

3. Global yield curves have the confidence to back up

U.S Treasury yields backed up yesterday after consumer confidence (125.6 vs. 113 e) hit its highest level in 17-years and while the Richmond Fed manufacturing data posted a big beat (22 vs. 17).

Yields on U.S 10-year notes are little changed at +2.41%, after yesterday's advance of +4 bps.

In the U.K, the "official" triggering of Article 50 could still generate further market jitters in fixed income if there is any evidence of disagreements about 'how to negotiate' before negotiations even begin.

Note: U.K 10-year gilt yields (+1.19%) dropped right after the U.K. gave notice of triggering Article 50, even though PM May was expected to do so by the end of Q1.

While on mainland Europe, a strengthening eurozone economy and higher inflation expectations are the main cause for rising yields. German 10-year bunds have backed up +2bps to +0.38%.

Note: On the day after the Brexit vote (June 24, 2016), German 10's saw the yield drop to a low of -0.17%.

4. Dollar pulls away from multi month lows

The 'mighty' dollar is a tad firmer overnight; pulling away from its four and half month lows as impressive U.S economic strength has kept the door ajar for continued 'gradual' rate hikes by the Fed. A number of Fed officials (Powell, Kaplan and George) this week have reiterated their views for steady pace in 'normalization.' For now, rate differentials remain the dollars biggest supporter, especially as other central banks (BoC and SNB) have hinted that it was too premature to consider tightening at this time.

GBP/USD (£1.2420) remains under pressure as the Brexit process is set in motion. The pair was off -0.5% in early trading. The trick now is to figure out if the market has already priced a 'hard Brexit'?

Ahead of the U.S open, EUR/USD is trading atop of its O/N lows at €1.0791, USD/JPY is at ¥111.00.

Elsewhere, Thailand's CB kept their overnight benchmark (+1.5%) rates steady. Officials noted that the THB currency strength ($34.38) was not good for the economy. Investors should expect THB to face higher short-term volatility.

5. German import prices rise

On a light day on the economic front, data this morning showed that German import prices increased at the fastest pace in nearly six-years last month.

Import prices climbed by +7.4% year-on-year in the month, the highest rise since April 2011, when prices surged +7.6%.

At the same time, export prices climbed +2.5%, faster than January's +1.8% increase.

On Monday, German Ifo Business Climate in March, rose to 112.3 points and marked its highest level since July 2011 and supports high optimism in the business sector, despite rumblings of protectionism from the U.S and the uncertainty in Europe over the imminent Brexit negotiations.

Note: The German economy has enjoyed a robust Q1. Later this week, Germany releases key consumer and employment numbers, including CPI, retail sales and unemployment claims.

The DAX Index has ticked lower in the Wednesday session, as the DAX trades at 12,194.25. On the release front, it's another light day. The sole eurozone event is German Import Prices, which gained 0.7%. This beat the estimate of 0.4%. On Thursday, Germany releases Preliminary CPI and the US publishes Final GDP.

The DAX has moved higher this week, bolstered by a sparkling reading from German Ifo Business Climate in March. The indicator climbed to 112.3 points, its highest level since July 2011. The excellent release underscores high optimism in the business sector, despite rumblings of protectionism from the US and the uncertainty in Europe over the imminent Brexit negotiations. Stronger global demand has led to increased German exports, notably cars and machinery. Germany's GDP expanded 1.6% in 2016, its highest rate since 2012. The economy has enjoyed a robust first quarter, and this has helped boost growth in the eurozone. Later this week, Germany releases key consumer and employment numbers, including CPI, retail sales and unemployment claims. Any unexpected readings could have a strong impact on the movement of EUR/USD.

President Donald Trump was on the wrong end of the rough-and tumble politics in Washington, as his bill to replace the Affordable Care Act was pulled before it even went to a vote. This was a humiliating setback for Trump, given that the Republicans enjoying a majority in Congress. The bruising defeat has sent the US dollar sharply lower and market jitters higher. Trump's administration has stumbled out of the starting gate, and after more than two months in office, he has yet to provide any details over even an outline of economic policy. The inquiry into the Trump administration's links with Russia is gathering steam, and is another cause for concern for nervous investors. Trump has said he will now focus on tax reform, but he has his work cut out, trying to convince a skeptical Congress and general public that he can deliver the goods and push his tax legislation through Congress.

US consumer confidence rose significantly in March. At 125.6, it is the highest level since December 2000 and well above any forecasts. Add to that the annual rise in house prices of 5.7% – also above expectation – and there is every reason to see US Dollar strength. That strength may also come from the triggering of Article 50 by the UK.

Sir Tim Barrow, Britain's permanent representative to the European Union, will deliver the letter notifying Donald Tusk, the president of the European Council, that Britain is to leave the EU in two years. Let the negotiations begin! Sterling had been rising ahead of this event, but slipped overnight as it dawned on traders that the big day had arrived. The confirmation of the event could well return some strength in the Pound but uncertainty is still a nerve racking experience for investors, so volatile trading conditions are kind of inevitable over the next 48 hours.

If you have a currency requirement, placing an automated order trying to target rates above or below the current market level is an eminently sensible thing to do at a time when volatility is so widely expected.

I should mention that we will get UK mortgage lending data this morning and that is expected to be positive, but it'll be lost in the melee of traders setting themselves up to take advantage of or protect against today's announcement.

Sadly, that is about all of the tier one data we expect today. We will get a couple of speeches from Federal Reserve members in the US and a speech from a member of the European Central Bank, but these are unlikely to be market moving. By way of contrast, Thursday offers a swathe of data from across the globe – and that will be influential as we approach the end of the month, the quarter and the financial year in many corporates.

Thought for the day

You'll never know how many people you dislike until you have to choose your baby's name.

Brexit divorce process set to begin

Notes/Observations

Brexit process begins and formally sets off two years of negotiations

European confidence data mixed (France in-line, Sweden misses, Italy beats)

Overnight:

Asia:

BOJ's Sato: Labor market reforms and other measures to boost potential growth must accompany monetary easing to raise long-term inflation expectations

PBoC skipped its open market operations (OMO) for 4th straight session; drained CNY70B v CNY70B prior; Shanghai Composite -0.4%

Europe:

PM May signed letter invoking Article 50 that would begin the 2-year Brexit negotiation process; letter expected to be delivered to EU on Wed

BOE's McCafferty (former hawk) stated that BOE would be raising interest rates when economy was strong enough. Did not know whether he would vote for a rate hike at next MPC meeting. Growth in UK would likely to become anemic rather than enter recession

Germany Fin Min Schaeuble reportedly rejected deferment of Greek interest payments believing it would amount to a new loan

SNB's Maechler stated that he expected world interest rate environment to persist at low levels for some time. Inflation was a large reason for SNB keeping monetary policy unchanged earlier this month; inflation outlook remains fragile

Americas:

Fed Chair Yellen: job market has improved substantially since recession; pockets of persistently high US unemployment remain

Fed's Powell (moderate, voter) Fed should be moving slowly toward a more neutral stance and saw scope for more rate hikes this year

Fed's Kaplan (moderate, voter): reiterates Fed should be taking steps to raise rates patiently and gradually

Fed's George (hawk, non-voter): FOMC is committed to raising rates gradually; quick rate hikes would be a shock to the economy

Energy:

Weekly API Oil Inventories: Crude: +1.9M v +4.5M prior (8th build in the past 10 weeks)

Economic Data

(JP) Japan Mar Small Business Confidence: 50.5 v 47.7 prior (1st time above the 50 level since Mar 2014)

(DE) Germany Feb Import Price Index M/M: 0.7% v 0.4%e; Y/Y: 7.4% v 7.0%e

(CH) Swiss Feb UBS Consumption Indicator: 1.50 1.44 prior

(FR) France Mar Consumer Confidence (in-line): 100 v 100e

(SE) Sweden Mar Consumer Confidence (miss): 102.6 v 104.0e; Manufacturing Confidence (miss): 112.7 v 117.0e; Economy Tendency Survey: 109.2 v 110.6e

(TH)Thailand Central Bank (BOT) left its Benchmark Interest Rate unchanged at 1.50% (as expected)

(IT) Italy Mar Consumer Confidence (beat): 107.6 v 106.6e; Manufacturing Confidence (beat): 107.1 v 106.0e, Economic Sentiment: 105.1 v 104.3 prior

(CH) Swiss Mar Credit Suisse Expectations Survey: 29.6 v 19.4 prior

(UK) Feb Net Consumer Credit: £1.4B v £1.3Be; Net Lending: £3.5B v £3.5Be

(UK) Feb Mortgage Approvals: 68.3K v 69.1Ke

Fixed Income Issuance:

(IN) India sold total INR100B vs. INR100B indicated in 3-month and 12-month Bills

(EU) ECB allotted $4.5B in 7-day USD Liquidity Tender at fixed 1.36% vs $1.01B prior

(NO) Norway sold NOK4.0B vs. NOK4.0B indicated in 2027 bonds; Avg Yield: 1.70% v 1.74% prior; Bid-to-cover: 2.30x v 2.41x prior (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills ; Avg yield: -0.294% v -0.294% prior; Bid-to-cover: 1.59x v 1.52x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.3% at 3,475, FTSE flat at 7,343, DAX +0.5% at 12,210, CAC-40 +0.3% at 5,061, IBEX-35 flat at 10,384, FTSE MIB flat at 20,327, SMI +0.2% at 8,615, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading higher as official Brexit negotiations are scheduled to begin later in the session, and as market participants digest Trump's failed health-care bill; Banking stocks trading generally higher across the board; shares of Engie leading the gains in the Eurostoxx after receiving an analyst upgrade overnight, with banking stocks Deutsche Bank, BNP and ING also trading higher; shares of 3I leading the gains in the FTSE 100 after receiving an analyst upgrade; energy, commodity and mining stocks also trading notably higher in the index as copper and oil prices trade higher intraday.

Upcoming scheduled US earnings (pre-market) include Omnova Solutions, Paychex, SecureWorks, and Unifirst Corp.

Equities (as of 09:45 GMT)

Consumer Discretionary: [Flybe Group FLYB.UK -5.2% (trading update, analyst downgrade), Grammer GMM.DE +5.9% (FY16 results, raises div), TUI TUI.UK -0.1% (trading update)]

Energy: [SMA Solar S92.DE +1.9% (sale of subsidiary SMA Railway Technology, outlook)]

Financials: [3i Group III.UK +2.8% (analyst upgrade)]

Healthcare: [Allergy Therapeutics AGY.UK +7.8% (H1 results), Circle Holdings CIRC.UK +21.9% (to be acquired by Toscafund for 30p/shr cash; FY16 results), Stada Arzneimittel SAZ.DE -0.8% (final FY16 results)]

Industrials: [Daimler DAI.DE +1.3% (CEO comments), Stagecoach SGC.UK +3.2% (trading update, analyst upgrade), Sika SIK.CH +0.6% (raises dividend)]

Technology: [Euromicron EUCA.DE +2.9% (FY16 results), Siemens SIE.DE +1.1% (unit awarded $4.13B DoD contract)]

Utilities: [Engie ENGI.FR +2.9% (analyst upgrade)]

Speakers

UK Chancellor Hammond expressed optimism that the UK could get a sensible and pragmatic deal with Europe. Sought a deep and special relationship with EU and understand that UK could not cherry pick. Confident could get a new EU customs agreement and wanted security and defense ties

Swiss KOF Institute spring forecasts noted that Swiss economy was in good shape and growth prospects were encouraging. Sluggish employment growth was likely to hold back any major improvement of the unemployment rate. Inflation was back in the positive zone, a significant increase in prices was not expected

South Africa Central Bank (SARB) stated that it would not bow to any pressure (**Reminder: SARB meets on Thursday, Mar 30th)

Thailand Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Reiterated view that monetary policy to remain accommodative and ready to use appropriate policy mix. Govt spending was driving the economy and saw greater risks to growth. Reiterated view that THB currency (Baht) strength was not good for economy; FX could face higher volatility

Currencies

The formal trigger of the Brexit process was the main theme in the session. PM May signed the letter invoking Article 50 that would begin the Brexit process while Sir Tim Barrow, the UK's permanent representative in Brussels would formally hand over Article 50 letter from the British government to the European council president, Donald Tusk later in the session.

GBP/USD was under pressure as the Brexit process was being set in motion. The pair was off approx. 0.5% in early European trading. Dealers cited "Brexit anxiety' for the GBP's soft tone although some analyst pondered whether investors had already priced a ‘hard Brexit'.

The USD was a tad firmer over the past 24 hours as impressive US economic strength kept the door open for continued gradual rate hikes by the Fed. Numerous Fed officials over the past day reiterated their view for steady pace in normalization. Interest rate divergences still remain in favor for the greenback (Both BOC and SNB hinted that was premature to consider tightening at their respective central banks at this time.

Fixed Income:

Bund futures trade at 160.57 down 3 ticks recovering from earlier 160.18 lows, as earlier equity strength begins to wain. Resistance remains at 160.74 then 161.06 followed by 161.44. Support remains at 160.04 followed by 159.73 then 159.41.

Gilt futures trade at 126.83 down 24 ticks, as Britain formally triggers Article 50. Support remains at 126.30 followed by 126.05. Resistance remains at 127.35 followed by 127.89. Short Sterling futures trade flat to down 1bp with Jun17Jun18 spread inching higher to 23.5Bp.

Wednesday's liquidity report showed Tuesday's excess liquidity rose to €1.347T a rise of €14B from €1.333T prior. Use of the marginal lending facility rose to €319M from €207M prior.

Corporate issuance saw a pick up with $10.9B coming to market via 7 issuers headlines by Applied Materials $2.2B 2 part offering, Rockwell Collins $4.65B 5 part offering and Ford 3 part $1.75B offering. This puts monthly issuance at $119.5B.

Looking Ahead

05:30 (EU) ECB allotment in 3-month LTRO tender

05:35 (SE) Sweden Central bank (Riksbank) Dep Gov Floden

06:00 (RU) Russia to sell OFZ Bonds

06:00 (FI) Finland to sell €1.0B in 0.00% Sept 2023 RFGB bond

06:00 (CZ) Czech Republic to sell 0.95% 2030 bond

06:45 (US) Daily Libor Fixing

07:00 (US) MBA Mortgage Applications w/e Mar 24th: No est v -2.7% prior

07:00 (UK) PM May question time in House of Commons

07:30 (UK) UK official to deliver Article 50 letter to EU

08:00 (BR) Brazil Jan IBGE Services Sector Volume Y/Y: No est v -5.7% prior

08:15 (UK) Baltic Dry Bulk Index

08:45 (EU) EU President Tusk on Brexit - 09:20 (US) Fed's Evans (dove, voter)

09:30 (BR) Brazil Feb Total Outstanding Loans (BRL): No est v 3.074T prior; M/M: No est v -1.0% prior

09:45 (DE) German Chancellor Merkel attends conference in Berlin

10:00 (US) Feb Pending Home Sales M/M: +2.5%e v -2.8% prior; Y/Y: No est v 2.7% prior

10:30 (US) Weekly DOE Crude Oil Inventories

11:00 (EU) EU's Moscovici participates in Citizens Dialogue in Brussels

11:30 (US) Fed's Rosengren (moderate, non-voter) in Boston

11:30 (US) Treasury to sell 2-Year Floating Rate Notes Reopening

12:00 (CA) Canada to sell 2-Year Bonds

12:50 (BE) ECB's Praet (Belgium, chief economist) in Frankfurt

13:00 (US) Treasury to sell 7-Year Notes

13:15 (US) Fed's Williams (moderate, non-voter) in NY

EUR/USD continues to lose ground and has dropped below the 1.08 line in the Wednesday session. Currently, the pair is trading at 1.0790. On the release front, it's another light day. The sole eurozone event is German Import Prices, which gained 0.7%. This beat the estimate of 0.4%. In the US, today's highlight is Pending Home Sales, which is expected to rebound with a solid gain of 2.3%. On Thursday, Germany releases Preliminary CPI, while the US publishes Final GDP and unemployment claims.

March has been kind to the euro, which has gained 2.1% against the US dollar. The euro punched above the 1.09 level on Monday, its highest level since November 2016. The currency was bolstered by an excellent reading from German Ifo Business Climate in March, which rose to 112.3 points. This beat the estimate of 111.2 and marked its highest level since July 2011. The excellent release underscores high optimism in the business sector, despite rumblings of protectionism from the US and the uncertainty in Europe over the imminent Brexit negotiations. Stronger global demand has led to increased exports, notably German cars and machinery. Germany's GDP expanded 1.6% in 2016, its highest rate since 2012. The economy has enjoyed a robust first quarter, and this has helped boost growth in the eurozone. Later this week, Germany releases key consumer and employment numbers, including CPI, retail sales and unemployment claims. Any unexpected readings could have a strong impact on the movement of EUR/USD.

President Donald Trump was on the wrong end of the rough-and tumble politics in Washington, as his bill to replace the Affordable Care Act was pulled before it even went to a vote. This was a humiliating setback for Trump, given that the Republicans enjoying a majority in Congress. The bruising defeat has sent the US dollar sharply lower and market jitters higher. Trump's administration has stumbled out of the starting gate, and after more than two months in office, he has yet to provide any details over even an outline of economic policy. The inquiry into the Trump administration's links with Russia is gathering steam, and is another cause for concern for nervous investors. Trump has said he will now focus on tax reform, but he has his work cut out, trying to convince a skeptical Congress and general public that he can deliver the goods and push his tax legislation through Congress.

Initial basing signal came after repeated downside rejections at 110.00 support that left two consecutive long-tailed daily candled, but the pair so far failed to capitalize on this.

Recovery attempts were so far limited, with key near-term barrier at 111.36 (weekly cloud top / Fibo 23.6% of 115.49/110.09 fall) remaining intact.

This maintains downside risk for renewed attack at strong 110.00 zone (psychological support / 50% retracement of 101.17/118.65 rally), break of which would signal bearish continuation of the downleg from 115.49 (10 Mar high).

Firm bearish setup of daily studies favors scenario of selling on correction, with 111.36 marking strong barrier ahead of falling daily Tenkan-sen (111.78) expected to cap any stronger uptick.

Repeated close below weekly cloud top is needed to confirm strong bearish stance.

Res: 111.36, 111.56, 111.78, 112.15
Sup: 110.92, 110.60, 110.00, 109.50

EUR/USD

Current level - 10792

The outlook is bearish after the recent violation of 1.0828 support, for a slide towards 1.0700 area. Crucial on the upside is 1.0870 high.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 111.13

The second attempt downwards failed as well and after the violation of 110.70 resistance, the bias is already positive, for a rise towards 112.26 zone. Initial static support is projected at 110.70.

GBP/USD

Current level - 1.2405

Yesterday's break through 1.2530 support signals a reversal at 1.2619 and the outlook is bearish below 1.2470, for a slide towards 1.2335, en route to 1.2230.

USD/CHF - 0.9936

Original strategy :

Exit short entered at 0.9910,

Position : - Short at 0.9910

Target :  -

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The greenback rallied after finding renewed buying interest at 0.9831 yesterday, dampening our bearishness and suggesting recent decline has ended at 0.9813, hence upside risk remains for this rise from 0.9813 to bring retracement of recent decline and further gain to resistance at 0.9960 would be seen but break there is needed to provide confirmation and retain bullishness for further rise towards another previous chart resistance at 1.0003 later.

In view of this, would be prudent to stand aside in the meantime. below the Kijun-Sen (now at 0.9888) would suggest an intra-day top is formed instead, bring weakness to the lower Kumo (now at 0.9851) but break of said support at 0.9831 is needed to revive bearishness for retest of 0.9813 first.

GBP/USD - 1.2431

Original strategy :

Sell at 1.2485, Target: 1.2365, Stop: 1.2520

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.2500, Target: 1.2365, Stop: 1.2535

Position : -

Target :  -

Stop : -

As cable has dropped sharply since yesterday, suggesting top has been formed at 1.2616 and the selloff from there is likely to bring retracement of recent upmove, hence further weakness to 1.2360-65 (50% Fibonacci retracement of 1.2109-1.2616) would be seen, however, loss of near term downward momentum should prevent sharp fall below 1.2335 support and reckon 1.2300-05 (61.8% Fibonacci retracement) would hold from here, bring rebound later.

In view of this, we are looking to turn short on recovery as the Kijun-Sen (now at 1.2486) should limit upside and bring decline. Above 1.2500-10 would defer but only break of previous support at 1.2539 would abort and signal the fall from 1.2616 has ended instead, bring rebound to 1.2560-65 first.

EUR/USD - 1.0791

Original strategy  :

Bought at 1.0800, Target: 1.0900, Stop: 1.0765

Position : - Long at 1.0800

Target :  - 1.0900

Stop : - 1,0765

New strategy  :

Hold long entered at 1.0800, Target: 1.0900, Stop: 1.0765

Position : - Long at 1.0800

Target :  - 1.0900

Stop : - 1.0765

Although the single currency has remained under pressure after overnight selloff and near term downside risk remains for marginal weakness, as this move is viewed as retracement of recent upmove, reckon downside would be limited and bring rebound later, above 1.0825-30 would suggest and intra-day low is formed but break of 1.0845-50 is needed to add credence to this view, bring test of resistance at 1.0873 first. Only break of 1.0873 would signal the retreat from 1.0903 has ended, bring retest of this level, above there would extend recent rise to 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340) but loss of near term upward momentum should prevent sharp move beyond 1.0955-60 and price should falter below 1.0990-00.

In view of this, we are holding on to our long position entered at 1.0800. Only below support at 1.0760 would abort and signal top has been formed at 1.0906, bring retracement of recent upmove to 1.0730 but 1.0719 support should remain intact.