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Daily Pivots: (S1) 1.0896; (P) 1.0945; (R1) 1.0989; More...

Range trading continues in EUR/USD and intraday bias remains neutral first. As long as 1.1120 support turned resistance holds, larger down trend from 1.1494 is still expected to continue. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will confirm short term bottoming, at least, and bring stronger rebound back towards 1.1494 structural resistance instead.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Daily Pivots: (S1) 1.2975; (P) 1.3027; (R1) 1.3053; More...

Intraday bias in GBP/USD is turned neutral with 4 hour MACD crossed above signal line. Some consolidations could be seen but further fall is expected with 1.3193 resistance intact. On the downside, below 1.2999 will target 100% projection of 1.4248 to 1.3158 from 1.3748 at 1.2658 next. However, firm break of 1.3193 will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In any case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Daily Pivots: (S1) 0.9343; (P) 0.9365; (R1) 0.9409; More....

Intraday bias in USD/CHF remains on the upside at this point. Current rally should target 0.9471 resistance first. Break there will resume whole rally from 0.8756 to 61.8% projection of 0.8756 to 0.9471 from 0.9090 at 0.9532. On the downside, break of 0.9318 minor support will turn intraday bias neutral and bring consolidations.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that whole down trend form 1.0342 (2016 high), has completed with waves down to 0.8756. A medium term up trend should be set up to target 1.0237/0342 resistance zone.

Daily Pivots: (S1) 117.60; (P) 117.91; (R1) 118.52; More...

A temporary top is formed at 118.44, ahead of 118.65 long term resistance. Intraday bias is turned neutral for some consolidations first. Downside of retreat should be contained above 116.34 resistance turned support to bring another rally. On the upside, firm break of 118.65 will target 100% projection of 109.11 to 116.34 from 114.40 at 121.63.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 125.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 113.46 support holds.

Euro and Sterling are the relatively stronger ones today, but gains are so far limited. The rallies are still capped by the war uncertainties. Economic data is not really playing a role here, considering the UK job data was solid while German economic sentiment plunged. Meanwhile, Canadian Dollar and Swiss Franc are the softest ones, followed by Dollar. Yen's selling looks exhausted ahead of a key resistance level against the greenback.

Technically, a focus will be on whether Euro and Sterling could real stage a sustainable rebound. EUR/CHF and EUR/JPY are performing well. But EUR/USD is still limited below 1.1120 resistance. For Sterling, GBP/USD is held below 1.3193 resistance, GBP/JPY below 155.20 resistance. These levels need to be broken to confirm a short term turnaround in both currencies.

In Europe, at the time of writing, FTSE is down -0.62%. DAX is down -0.62%. CAC is down -0.64%. Germany 10-year yield is down -0.035 at 0.333. Earlier in Asia, Nikkei rose 0.15%. Hong Kong HSI dropped -5.72%. China Shanghai SSE dropped -4.95%. Singapore Strait Times rose 0.12%. Japan 10-year JGB yield rose 0.0154 at 0.211.

US PPI rose 0.8% mom, 10.0% yoy in Feb

US PPI for final demand rose 0.8% mom in February, below expectation of 1.0% mom. On an unadjusted basis, final demand prices moved up 10.0 yoy for the 12 months ended in February, matched expectations. Prices for final demand goods was up 2.4% mom while prices for final demand services was unchanged.

Empire State Manufacturing index dropped sharply from 3.1 to -11.8 in March, well below expectation of 7.3.

Canada manufacturing sales rose 0.6% mom in Jan

Canada manufacturing sales rose 0.6% mom to CAD 64.8B in January, below expectation of 1.3% mom. That's nonetheless the fourth consecutive month of increase. Sales rose in 14 of 21 industries, led by the petroleum and coal (+6.8%) and wood (+6.5%) product industries. The gain was partially offset by lower sales of motor vehicles (-17.5%).

German ZEW had largest fall on record, expect a stagflation in the coming months

German ZEW Economic Sentiment tumbled sharply from 54.3 to -39.3 in March, well below expectation of 10.3. That -93.6 pts decline was the largest on record, since the survey began in December 1991. That's even worse than the -58.2 pts fall at the beginning of the pandemic. Current Situation Index dropped from -8.1 to -21.4, slightly better than expectation of -22.5.

Eurozone ZEW Economic Sentiment dropped from 48.6 to -38.7, below expectation of 49.3. Current Situation Index dropped 22.5 pts to -21.9.

Inflation expectations indicator stands at jumped sharply from -35.1 to 69.5. 76.5 per cent of the experts expect the inflation rate to increase in the next six months.

"A recession is becoming more and more likely. The war in Ukraine and the sanctions against Russia are significantly dampening the economic outlook for Germany. The collapsing economic expectations are accompanied by an extreme rise in inflation expectations. The experts therefore expect a stagflation in the coming months. The worsened outlook affects practically all sectors of the German economy, but especially the energy-intensive sectors and the financial sector," comments ZEW President Achim Wambach on current expectations.

Eurozone industrial production flat in Jan, EU rose 0.4% mom

Eurozone industrial production rose 0.0% mom in January, below expectation of 0.4% mom. Production of non-durable consumer goods rose by 3.1%, while production of intermediate goods and energy both fell by -0.3%, durable consumer goods by -0.5% and capital goods by -2.4%.

EU industrial production rose 0.4% mom. Among Member States for which data are available, the largest monthly increases were registered in Austria (+6.2%), Czechia (+3.1%) and Poland (+3.0%). The highest decreases were observed in Estonia (-6.1%), Portugal (-5.0%) and Greece (-4.1%).

UK payrolled employees rose 275k in Feb, unemployment rate dropped to 3.9% in Jan

UK number of payrolled employees rose 275k in February. Comparing with prepandemic level in February 2020, number of payrolled employees was up 662k. Claimant count dropped -48.1k, versus expectation of 20.3k rise.

In the three months to January, unemployment rate dropped from 4.1% to 3.9% in the three months to January, better than expectation of 4.0%.

Average earnings including bonus rose 4.8% 3moy in January, above expectation of 4.6%. Average earnings excluding bonus rose 3.8% 3moy, also above expectation of 3.7%.

China industrial production and retail sales growth unexpectedly strong

For the two months of January and February, China industrial production grew 7.5% yoy, well above expectation of 3.9% yoy. That's the fastest pace since June 2021. Retail sales rose 6.7% yoy, also well above expectation of 3.0% yoy, also the fastest since June 2021. Fixed asset investment rose 12.2% yoy, above expectation of 5.0% yoy, highest since July 2021.

Separately, PBoC unexpectedly kept the rate of CNY 200B worth of one-year medium term lending facility (MLF) loans to some financial institutions unchanged at 2.85%. The operation resulted in a net injection of CNY 100B funds to the market. The central bank said it is for "maintaining banking system liquidity reasonably ample".

RBA minutes reiterate patient stance on interest rate

In the minutes of March 1 meeting, RBA reiterated that it will not hike cash rate "until actual inflation is sustainably within the 2 to 3 per cent target band. Now, it was "too early to conclude that" inflation is "sustainably within the target band".

There were "uncertainties about how persistent the pick-up in inflation". Wage growth "remained modest", and "it was likely to be some time before aggregate wages growth would be at a rate consistent with inflation being sustainably at target."

Thus, RBA is "prepared to be patient" on lifting interest rate.

New Zealand BNZ services index rose to 48.6, pain is accumulating

New Zealand BNZ Performance of Services Index rose slightly from 46.0 to 48.6 in February. Activity/sales rose from 44.6 to 50.7. Employment dropped from 47.0 to 45.0. New orders/business rose from 41.2 to 53.6. Stocks/inventories rose from 48.0 to 50.0. Supplier deliveries dropped from 43.4 to 34.4.

BNZ Senior Economist Doug Steel said that "February marks the PSI's seventh consecutive month below the breakeven 50 mark. Pain is accumulating. While there were some overs and unders in the components, all remain below their respective long-term averages."

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 117.60; (P) 117.91; (R1) 118.52; More...

A temporary top is formed at 118.44, ahead of 118.65 long term resistance. Intraday bias is turned neutral for some consolidations first. Downside of retreat should be contained above 116.34 resistance turned support to bring another rally. On the upside, firm break of 118.65 will target 100% projection of 109.11 to 116.34 from 114.40 at 121.63.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 125.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 113.46 support holds.

Economic Indicators Update

Canada manufacturing sales rose 0.6% mom to CAD 64.8B in January, below expectation of 1.3% mom. That's nonetheless the fourth consecutive month of increase. Sales rose in 14 of 21 industries, led by the petroleum and coal (+6.8%) and wood (+6.5%) product industries. The gain was partially offset by lower sales of motor vehicles (-17.5%).

Full release here.

US PPI for final demand rose 0.8% mom in February, below expectation of 1.0% mom. On an unadjusted basis, final demand prices moved up 10.0 yoy for the 12 months ended in February, matched expectations.

Prices for final demand goods was up 2.4% mom while prices for final demand services was unchanged.

Full release here.

GBP/USD has rebounded on Tuesday after sharp employment numbers. The pound came within a whisker of the symbolic 1.30 line on Monday, dropping to a low of 1.3001.

UK employment data outperforms

The markets were forecasting good news from the UK employment report, and the data exceeded markets expectations. The number of unemployed persons fell by 48.1 thousand, the unemployment rate dropped from 4.1% to 3.9% and wage growth rose to 4.8%, up from 4.6%. These strong numbers come on the heels of strong releases on Friday. GDP for January jumped 0.8% MoM and a sizzling 10.0% YoY. Manufacturing Production for January also rose 0.8% MoM and 3.6% YoY.

The spate of recent data shows that the UK economy continues to recover from Covid and is headed in the right direction. With no UK events on Wednesday, investors will shift their attention to the BoE policy meeting on Thursday. Will the central bank raise rates? The markets have priced in a 25-basis point hike, which would mark an unprecedented third straight hike in as many meetings. The pound remains vulnerable and is coming off a third successive weekly loss, and if the BoE stays on the sidelines, the pound could take a tumble.

The US dollar has held steady against the pound today, as rising US yields have offset reduced haven flows, on hopes that Russia might agree to a ceasefire in Ukraine. The US 10-year yield has broken above the 2.0% level and is currently at 2.11%. The grim situation in Ukraine could deteriorate further, or we could see progress towards a ceasefire, which makes for potentially volatile markets in the face of tremendous uncertainty.

Investors are keeping an eye on the FOMC meeting on Wednesday, with the Fed widely expected to start its lift-off of rate hikes. A quarter-point rise is a virtual certainty, and a hawkish rate statement could give a boost to the dollar.

GBP/USD Technical

• 1.3075 is a monthly support line. Below, there is support at 1.2962
• There is resistance at 1.3184 and 1.3328

EURJPY is confronting the simple moving averages (SMAs) around the 130.00 price region after recently rocketing from a 15-month low of 124.38 - an upward move that has recouped more than fifty percent of the collapse from the 133.14 peak. Currently, the dipping SMAs are not reflecting a convincing trend but have managed to curb additional gains in the pair.

Nonetheless, the short-term oscillators are indicating strengthening positive momentum in the pair. The MACD, in the negative zone, has distanced itself above its red trigger line and is heading for the zero threshold, while the RSI is pushing higher in the bullish region. The stochastic lines are positive around the 80 overbought level, signalling persistent upward impetus in the pair.

At the moment, positive developments in the pair are shaky around the converged 50- and 100-day SMAs at 129.58 and under the 130.00-130.29 resistance band, which is an area existing between the 200-day SMA and the February 25 high. If the pair successfully overcomes these obstacles, the bulls may then aim for the 130.76 barrier before propelling to test the upper Bollinger band at 131.60 and the adjacent 131.90 high.

Alternatively, if positive drive in the pair falters in the neighbourhood of the SMAs and the price retreats below the 50- and 100-day SMAs, initial support could stem from the zone between the 129.04 inside swing high and the mid-Bollinger band at 128.47. If buyers fail to find footing in this region, the bears could then drive the price towards the 128.00 handle. In the event selling interest amplifies further, a dive deeper than the 127.40 low could spark concerns about dominating negative pressures as the bears sink towards the 126.72 barrier.

Summarizing, EURJPY is exhibiting a strong bullish tone, but negative risks may continue to linger should the price fail to advance beyond the SMAs and the 130.29 high.

German ZEW Economic Sentiment tumbled sharply from 54.3 to -39.3 in March, well below expectation of 10.3. That -93.6 pts decline was the largest on record, since the survey began in December 1991. That's even worse than the -58.2 pts fall at the beginning of the pandemic. Current Situation Index dropped from -8.1 to -21.4, slightly better than expectation of -22.5.

Eurozone ZEW Economic Sentiment dropped from 48.6 to -38.7, below expectation of 49.3. Current Situation Index dropped 22.5 pts to -21.9.

Inflation expectations indicator stands at jumped sharply from -35.1 to 69.5. 76.5 per cent of the experts expect the inflation rate to increase in the next six months.

"A recession is becoming more and more likely. The war in Ukraine and the sanctions against Russia are significantly dampening the economic outlook for Germany. The collapsing economic expectations are accompanied by an extreme rise in inflation expectations. The experts therefore expect a stagflation in the coming months. The worsened outlook affects practically all sectors of the German economy, but especially the energy-intensive sectors and the financial sector," comments ZEW President Achim Wambach on current expectations.

Full release here.