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Daily Pivots: (S1) 0.9915; (P) 0.9928; (R1) 0.9946; More.....

A temporary low is in place at 0.9881 in USD/CHF, ahead of 0.9860 support. Intraday bias is turned neutral first. Deeper decline is in favor as long as 1.0002 minor resistance holds. Break of 0.9860 will extend the whole fall from 1.0342 towards 100% projection of 1.0342 to 0.9860 from 1.0169 at 0.9687. However, break of 1.0002 will argue that fall from 1.0169 is finished and will turn bias back to the upside for this resistance instead.

In the bigger picture, USD/CHF is staying in medium term sideway pattern between 0.9443/1.0342. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone.

Daily Pivots: (S1) 110.50; (P) 111.03; (R1) 111.45; More...

A temporary low is in place at USD/JPY with 4 hour MACD staying above signal line. Intraday bias is turned neutral first. At this point, we're still favoring the case for strong support around 111.12/13 to bring rebound. This level represents 61.8% projection of 118.65 to 111.58 from 115.49 at 111.12 and 38.2% retracement of 98.97 to 118.65 at 111.13. Break of 112.86 resistance will indicates completion of the correction from 118.65. In such case, intraday bias will be turned back to the upside for 115.49 resistance and above. However, sustained trading below 111.12/13 will pave the way to 100% projection at 108.42 next.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Nonetheless, sustained trading below 55 week EMA (now at 111.12) will extend the consolidation from 125.85 with another fall through 98.97 before completion.

The financial markets are holding their breaths as US House delayed the vote of President Donald Trump's health care plan. DJIA recovered to 20757.89 overnight but closed down -0.02% at 20656.68. S&P 500 also recovered to 2358.92 but closed down -0.11% at 234596. 10 year yield recovered by closing up 0.022 at 2.418 but stayed below 55 day EMA at 2.434. Gold lost momentum after failing to stay above 1250 an is trading in tight range around 1245. WTI crude oil is also bounded in right range between 47/48.5. Dollar index recovers after dipping to 99.54 but is yet to find follow through buying to get pass 100 at the time of writing.

Vote on healthcare act postponed to Friday

A vote on Trump's American Health Care Act was originally scheduled in House yesterday. House Republicans had a closed-door meeting but it's reported that after frantic negotiations, there are still some conservatives who are not convinced. For the conservatives, the bill was still too costly and did not do enough to roll back so called Obamacare. Meanwhile, some moderates worried that the loss of benefits to some would be too much for their constituents to bear.

The vote is now scheduled for Friday after Trump offered ultimatum to House Republicans. Trumps' budget director Mick Mulvaney warned that if the vote fails, the administration will just move on to other priorities like tax reform. And in that case, Obamacare will stay. It should be noted again that the health care bill is seen as a litmus test for Trump's ability to push through his reforms. A failure will heighten the concern that he would not be able to fulfill his election promises on tax cut and infrastructure spending. Stocks and yields would likely extend this week's fall then.

Fed Williams: Three or more hike this year

San Francisco Fed President John Williams said that "three or maybe even more increases this year, makes sense to me, but it would depend on the data." He sounded upbeat regarding the economy and said that momentum "has been very positive". And "risks are pretty balanced overall, which is a good place to be." And, "maybe news of significant fiscal stimulus" would give the Fed the reasons for a faster rate path.

Dallas Fed President Robert Kaplan, on the other hand, wanted a "gradual and patient" approach in rate hike. He also noted that trimming the balance sheet is an appropriate further step for the Fed. Minneapolis Fed President Neel Kashkari urged Fed to reduce the balance sheet as soon as possible. Fed Chair Janet Yellen also spoke yesterday but she didn't touch on monetary policy.

Elsewhere...

New Zealand trade deficit narrowed to NZD -18m in February but missed expectation of NZD 160m surplus. Japan PMI manufacturing dropped to 52.6 in February. Eurozone PMIs will be the main feature in European session. UK will release BBA mortgage approvals. In US session, focus will be on US durable goods orders and Canada CPI.

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.50; (P) 111.03; (R1) 111.45; More...

A temporary low is in place at USD/JPY with 4 hour MACD staying above signal line. Intraday bias is turned neutral first. At this point, we're still favoring the case for strong support around 111.12/13 to bring rebound. This level represents 61.8% projection of 118.65 to 111.58 from 115.49 at 111.12 and 38.2% retracement of 98.97 to 118.65 at 111.13. Break of 112.86 resistance will indicates completion of the correction from 118.65. In such case, intraday bias will be turned back to the upside for 115.49 resistance and above. However, sustained trading below 111.12/13 will pave the way to 100% projection at 108.42 next.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Nonetheless, sustained trading below 55 week EMA (now at 111.12) will extend the consolidation from 125.85 with another fall through 98.97 before completion.

Economic Indicators Update

Following on from our oil shorts post, I thought a quiet Friday Asian session would be the perfect time to do a little update.

Oil Hourly:

Already we can see these types of short term pullbacks holding perfectly.

Are shorts in play already?

With the higher time frame level still in play, let's take a look at what the levels are doing now:

Oil Hourly:

As you can see, not only the higher time frame level that was the basis of the previous blog has held, but both of these short term levels are also still in play.

Headlines

US stocks opened largely unchanged as investors sat on the side-lines ahead of a closely followed House of Representatives vote on a bill that would largely repeal and replace the Affordable Care Act, also known as Obamacare. European stock markets gain 0.2% to 0.5%.

UK retail sales beat expectations in February, rising 1.5% m/m ex. auto fuel after a 0.3% m/m decline in January. However, British retail sales in the 3 months to February recorded their biggest slide in nearly 7 years as higher fuel prices eroded shoppers' disposable income. A drag on overall Q1 economic growth now looks all but certain.

Initial jobless claims rose by 15,000 to 258,000 in the week ended March 18, the Labor department said. It was the highest level since the week ended January 28 and above consensus (240,000). Meanwhile, continuing claims, a measure of the number of people claiming benefits, was little changed at 2m.

Purchases of new homes increased in February to a seven-month high, indicating the effects of the recent rise in borrowing costs on the US residential real estate market have been modest. Sales rose 6.1% to a 592,000 annualized pace.

EMU banks took up more free long-term loans than expected at the ECB's final TLTRO auction as expectations grow that the era of free cash may be coming to an end. The TLTRO saw 474 banks borrow €233.5B over four years. It was also way more than in the previous three auctions, once the repayment of existing loans is taken out.

German Chancellor Angela Merkel's conservatives would win more votes than the centre-left Social Democrats (SPD) if an election were to be held this Sunday, a survey showed, six months before a national vote in Europe's political and economic powerhouse.

Rates

Bond markets in wait and see modus

Global core bonds hovered sideways in a tight range. The small intra-day movements of the Bund were inversely correlated with equities (EuroStoxx), which traded also in a tight range. Data had only a temporarily impact. The ECB TLTRO was a big success. At the time of writing, the German yield curve flattened with yield changes between +1.3 bps (2-yr) and -0.4 bp (30-yr). Changes on the US yield curve vary between -1.1 bps (2 & 30-yr) and -1.7 bp (5yr). On intra-EMU bond markets, 10-yr yield spread versus Germany narrowed 3 to 4 bps for both peripherals and semi-core bonds, helped by a strong TLTRO bidding (see below).

The EMU eco data, albeit not the most important ones, were a bid disappointing and shrugged off by the EMU bond market. German consumer confidence weakened a tad and March French business confidence fell short of expecations in some aspects. US initial claims jumped surprisingly higher, without the LBS reporting special factors. The only noticeable move up of US Treasuries started after the weak claims but didn't carry far and gains were reversed after stronger than expected US New Home sales. It all came down to some volatility in a narrow sideways range.

The last TLTRO auction was a big success as banks asked a net €217.5 billion in 4-year liquidity, the largest amount asked since the start of the programme. The banks pay a rate between zero and -40 bps depending on the amount of their new lending to the real economy. The high demand was likely triggered by the fact that it was the last operation and by expectations that rates could go higher in the not too distant future.

Currencies

USD-indecisiveness persists ahead of healthcare vote

There was no clear story for USD trading. Indecisiveness prevailed as markets looked out whether the Trump administration would be able to set a first step to amend Obamacare. USD/JPY continues to trade with a tentatively negative bias (currently 111 area). At the same time, EUR/USD is locked in a tight range close to, but mostly slightly below 1.08.

Overnight, Asian equities traded slightly stronger, but the gains of both equities and the dollar remained modest. Amongst others, global investors were awaiting a first vote in the US house of representatives to repeal Obamacare. It is seen as a proxy to pass other fiscal legislation. USD/JPY hovered in the lower half of the 111 big figure.

The indecisiveness of the Asian markets persisted in Europe. Core bond yields showed no clear trend and changes in interest rate differentials were too small to guide currency trading. The dollar also showed a mixed picture. USD/JPY still traded with a negative bias even as European equities rebounded. Technical factors (end of quarter repositioning of Japanese investors) might be part of the explanation of current yen strength. At same time, EUR/USD also struggled to avoid further losses below the 1.08 big figure.

US jobless claims were higher (worse) than expected at 258 000. The data were probably only of second tier importance, but US markets kept a cautious attitude going into a potential vote on a new healthcare bill. The USD trends of this morning initially persisted, but the dollar profited slightly from better than expected US new homes sales. USD/JPY is trading in the 111 area, off the intraday low around 110.65. EUR/USD is still going nowhere just below 1.08 (currently 1.0780). The outcome of the health care vote (or the absence of a clear outcome) might tilt the USD balance in one way or another. For now, the euro shows little safe haven allure.

Sterling extends gradual rise after good retail data

Yesterday, sterling quite easily reversed a temporary decline after the terrorist attack in London. Sterling remained well bid and EUR/GBP traded with a slightly negative bias going into the publication of the UK retail sales. The ONS February retails sales (1.4% M/M and 3.7% Y/Y) were stronger than expected. Sterling rallied further after the publication of the report. EUR/GBP dropped to the low 0.86 area. Cable jumped to the 1.2525 area. However, sterling ran into resistance even as the CBI retail data (published at noon) also suggested decent retail activity in March. Even after better data in March, activity over the previous three months has slowed materially. We also have the impression that sterling is currently more sensitive to (better than expected) price data, rather than activity data. EUR/GBP trades currently in the 0.8615/20 area. Cable is changing hands in the 1.25 area. That said, the gradual post-BoE raise of sterling/decline of EUR/GBP remains intact.

USD/CHF - 0.9923

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9927

Kijun-Sen level                    : 0.9912

Ichimoku cloud top                 : 0.9956

Ichimoku cloud bottom              : 0.9931

Original strategy :

Sell at 1.0000, Target: 0.9900, Stop: 1.0035

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.0000, Target: 0.9900, Stop: 1.0035

Position : -

Target :  -

Stop : -

Dollar’s rebound after falling to 0.9882 yesterday suggests consolidation above this level would be seen and corrective bounce to 0.9945-50 cannot be ruled out, however, reckon upside would be limited to 0.9980 and renewed selling interest should emerge around 1.0003 resistance, bring another decline later. A break of said support at 0.9882 would add credence to our view that recent decline from 1.0171 is still in progress and may extend weakness to 0.9865-70 but loss of downward momentum should prevent sharp fall below 0.9850 and reckon 0.9825-30 would hold.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 1.0000-05 should limit upside and bring another decline. Only above previous support at 1.0060 (now resistance) would abort and signal low is formed instead, risk rebound to 1.0090-95 first.

USD/CHF - 0.9923

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9927

Kijun-Sen level                    : 0.9912

Ichimoku cloud top                 : 0.9956

Ichimoku cloud bottom              : 0.9931

Original strategy :

Sell at 1.0000, Target: 0.9900, Stop: 1.0035

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.0000, Target: 0.9900, Stop: 1.0035

Position : -

Target :  -

Stop : -

Dollar’s rebound after falling to 0.9882 yesterday suggests consolidation above this level would be seen and corrective bounce to 0.9945-50 cannot be ruled out, however, reckon upside would be limited to 0.9980 and renewed selling interest should emerge around 1.0003 resistance, bring another decline later. A break of said support at 0.9882 would add credence to our view that recent decline from 1.0171 is still in progress and may extend weakness to 0.9865-70 but loss of downward momentum should prevent sharp fall below 0.9850 and reckon 0.9825-30 would hold.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 1.0000-05 should limit upside and bring another decline. Only above previous support at 1.0060 (now resistance) would abort and signal low is formed instead, risk rebound to 1.0090-95 first.

GBP/USD - 1.2522

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2496

Kijun-Sen level                    : 1.2476

Ichimoku cloud top              : 1.2469

Ichimoku cloud bottom        : 1.2421

Original strategy :

Buy at 1.2425, Target: 1.2540, Stop: 1.2390

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2425, Target: 1.2540, Stop: 1.2390

Position : -

Target :  -

Stop : -

As cable has continued trading with a firm undertone, adding credence to our bullish view that recent upmove from 1.2109 is still in progress and may extend further gain to 1.2540-50 but loss of upward momentum would limit upside to previous chart resistance at 1.2570 and price should falter below 1.2600-10, risk from there has increased for a retreat to take place later.

In view of this, would not chase this move here and we are looking to buy cable on subsequent pullback as 1.2400 should limit downside. Below 1.2380-85 would defer and risk correction to 1.2350-55 but still reckon support at 1.2335 would remain intact, bring another rise later. 

EUR/USD - 1.0784

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0786

Kijun-Sen level                  : 1.0797

Ichimoku cloud top             : 1.0797

Ichimoku cloud bottom      : 1.0769

Original strategy  :

Buy at 1.0725, Target: 1.0840, Stop: 1.0690

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0725, Target: 1.0840, Stop: 1.0690

Position : -

Target :  -

Stop : -

As the single currency retreated after rising to 1.0825 yesterday, suggesting minor consolidation below this level would be seen and pullback to 1.0750-60 cannot be ruled out, however, reckon support at 1.0719 would limit downside and bring another rise later, above indicated resistance at 1.0825-29 would extend further rise to 1.0850-60 but loss of near term upward momentum should prevent sharp move beyond 1.0880 and price should falter below 1.0900, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on subsequent pullback as 1.0719 support should limit downside and bring another rise later. Below 1.0690-00 would defer and suggest top is possibly formed, risk weakness to 1.0640 (previous resistance now support) but still reckon indicated support at 1.0600 would remain intact.

USD/JPY - 111.06

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 110.95

Kijun-Sen level                  : 111.11

Ichimoku cloud top             : 111.93

Ichimoku cloud bottom      : 111.57

Original strategy  :

Sell at 112.00, Target: 110.80, Stop: 112.35

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 112.00, Target: 110.80, Stop: 112.35

Position :  -

Target :  -

Stop : -

As the greenback recovered after falling to 110.63, suggesting consolidation above this level would be seen and corrective bounce to 111.55-60 is likely, however, still reckon upside would be limited to 112.00-10 and bring another decline later, a break of said support at 110.73 would signal recent decline is still in progress and may extend further fall to 110.50 but near term oversold condition should prevent sharp fall below 110.20-25 and reckon 110.00 would hold from here. 

In view of this, would not chase this fall here and would be prudent to sell cable on recovery as 112.00 should limit upside. Only above indicated previous support at 112.26 would abort and signal low is formed instead, bring a stronger rebound to 112,59 but resistance at 112,87-90 should cap upside.