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Daily Pivots: (S1) 1.3833; (P) 1.3863; (R1) 1.3883; More...

Further recovery remains mildly in favor in USD/CAD despite some loss of upside momentum as seen in 4H MACD. Still, even in case of another rise, upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166). On the downside, firm break of 1.3780 short term bottom will resume the whole fall from 1.4791.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4150 resistance turned support holds. firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

Trading was particularly subdued today, even by the quiet standards of a typical Monday in Asia. That’s not surprising, given the near-empty economic calendar offering little to move the markets. Instead, traders are exercising understandable caution ahead of a heavy barrage of important data releases later this week, including US and Eurozone GDP figures, inflation reports from the US, Eurozone, and Australia, and the US non-farm payrolls report.

Now that the peak of the tariff shock appears to have passed, at least for this current wave, the market's attention is shifting toward how these escalations are starting to materialize in hard economic data. Early indications from global PMIs and corporate earnings have been mixed, but this week's heavyweight releases will offer more definitive evidence. For now, the overall market mood remains cautiously optimistic, and there is still room for a further rebound in risk assets if the incoming data holds up or surprises to the upside.

Meanwhile, Yen will also be a major focus this week with BoJ’s rate decision and new economic projections due. Yen has softened notably since last week as risk appetite improved globally. Speculation is also building that BoJ might delay its next rate hike in response to tariff-induced uncertainties. Should the BoJ’s updated projections lean dovish, Yen could face another leg of weakness against its major counterparts.

Technically, USD/JPY’s recovery from the short-term bottom at 139.87 remains in favor as long as 142.26 minor support holds. However, the broader near-term outlook stays bearish unless the pair can break decisively above 38.2% retracement of 158.86 to 139.87 at 147.12. Failure to do so, followed by break back below 142.26, would argue that the recovery is a corrective move, and bring retest of 139.87 next.

In Asia, at the time of writing, Nikkei is up 0.43%. Hong Kong HSI is up 0.07%. China Shanghai SSE is down -0.03%. Singapore Strait Times is down -0.43%. Japan 10-year JGB yield is down -0.017 at 1.323.

Japan denies report of US preference for weaker Dollar and stronger Yen

Japanese officials moved swiftly to deny a media report suggesting that US Treasury Secretary Scott Bessent had conveyed a preference for a weaker Dollar and stronger Yen during recent bilateral meetings in Washington last week.

Japan’s top currency diplomat, Atsushi Mimura, emphasized to reporters that "the US side did not touch upon exchange-rate targets" in discussions between Finance Minister Katsunobu Kato and his US counterpart.

Finance Minister Kato also reiterated via social media that exchange-rate frameworks were not discussed, directly refuting the report published by the Yomiuri newspaper.

Meanwhile, Bessent himself described the talks with Japan as "very constructive" in a post on X, noting that they covered reciprocal trade issues and "matters pertaining to exchange rates" without mentioning any explicit preferences.

China reaffirms growth target, holds back on major stimulus

China pledged its full confidence in achieving this year’s growth target of around 5%, vowing to implement timely and multiple support measures as the country is now in full-fledged trade war with the US. However, no major stimulus was announced immediately, giving the impression that Beijing is not in a rush to roll out large-scale interventions. Authorities appear inclined to first monitor the trade shock’s timing and magnitude before deciding on more aggressive measures.

Zhao Chenxin, deputy head of the National Development and Reform Commission, stressed at a press conference today that China retains "ample policy reserves and plenty of policy space," and highlighted plans to stabilize employment and strengthen public employment services.

At a Politburo meeting chaired by President Xi Jinping last week, officials called for a “timely reduction” in interest rates and reserve requirement ratios to support the economy. Additional measures to aid struggling businesses, boost consumption among middle- and lower-income groups, and promote further development in technology and artificial intelligence were also emphasized.

As a touch of optimism, official data released over the weekend showed China’s industrial profits returning to growth in the first quarter. Cumulative profits rose 0.8% yoy to CNY 1.5T, reversing a -0.3% decline seen in the first two months.

High-stakes week ahead

It’s shaping up to be an extremely busy week for global markets, even though Monday’s economic calendar is near-empty. The action will pick up quickly, with BoJ rate decision and BoC summary of deliberations. Meanwhile, high-profile data releases include US GDP, PCE inflation, non-farm payrolls; Eurozone GDP and CPI' Australia’s CPI; Canada’s GDP; and China's PMIs.

Starting with BoJ, the central bank is widely expected to leave its short-term policy rate unchanged at 0.50% during this week’s meeting. According to a recent Reuters poll, only about half of economists still expect a hike to 0.75% in Q3, a notable drop from the 70% figure recorded in March. Market pricing now sees about a 65% chance of a 25bps hike by year-end.

The impact of Trump’s tariffs has made Japan’s economic outlook highly uncertain, particularly with manufacturing earnings expected to deteriorate. As a result, BoJ is likely to delay any further rate hikes, and is set to lower its economic growth forecast in the upcoming quarterly outlook. Nevertheless, BoJ is still expected to signal that rising wages and gradually firming inflation trends remain intact, keeping the door open for tightening when conditions allow.

From the US, a barrage of key releases will take center stage: the advance estimate of Q1 GDP, PCE inflation report, ISM manufacturing, and the all-important April non-farm payrolls. Fed officials have recently made it clear that May is too early for any rate cut, but there are increasing signs that attention is shifting back toward the employment side of the dual mandate. Should the labor market show signs of unexpected weakness, the probability of a Fed rate cut in June — currently hovering around 65% — could firm up sharply.

Turning to the Eurozone, flash GDP and CPI figures will be pivotal. Reports suggest a growing consensus within the ECB for another rate cut in June. Relief comes from the observation that the inflationary shock from US tariffs has been relatively muted, with Euro’s appreciation and weakening growth dynamics exerting deflationary pressure.

However, the durability of this trend is still in question. If Eurozone core inflation shows signs of re-acceleration, it could complicate ECB’s easing plans. Hence, this week’s CPI data will be crucial in either validating or challenging the market’s current expectation for further ECB easing.

In Australia, sentiment is shifting toward an imminent rate cut by RBA. Recent data have underwhelmed, with wage growth missing RBA’s own projections and consumption proving softer than expected. Coupled with lingering global trade uncertainties, particularly between the US and China, the case for another RBA rate cut to cushion the economy has strengthened considerably. Unless Australia’s Q1 CPI report delivers a major upside surprise this week, the market is likely to fully price in a rate cut at the May meeting.

Here are some highlights for the week:

• Tuesday: Germany Gfk consumer sentiment; Eurozone M3 money supply; US goods trade balance, house price index, consumer confidence.
• Tuesday: Japan industrial production, retail sales, housing starts; New Zealand ANZ business confidence; Australia quarterly CPI; China officials PMIs, Caixin PMI manufacturing; Eurozone GDP flash; Swiss KOF economic barometer; US ADP employment, GDP advance, Chicago PMI; personal income and spending, PCE inflation; Canada GDP, BoC summary of deliberations.
• Thursday: Japan PMI manufacturing final, consumer confidence, BoJ rate decision; Australia trade balance, import prices; Swiss retail sales; UK PMI manufacturing final, M4 money supply, mortgage approvals; US jobless claims, PMI manufacturing final, ISM manufacturing, construction spending; Canada PMI manufacturing.
• Friday: Japan unemployment rate, monetary base; Australia retail sales, PPI; Swiss PMI manufacturing; Eurozone PMI manufacturing final, CPI flash, unemployment rate; US non-farm payroll, factory orders.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3833; (P) 1.3863; (R1) 1.3883; More...

Further recovery remains mildly in favor in USD/CAD despite some loss of upside momentum as seen in 4H MACD. Still, even in case of another rise, upside should be limited by 1.4150 support turned resistance (38.2% retracement of 1.4791 to 1.3780 at 1.4166). On the downside, firm break of 1.3780 short term bottom will resume the whole fall from 1.4791.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4150 resistance turned support holds. firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

China pledged its full confidence in achieving this year’s growth target of around 5%, vowing to implement timely and multiple support measures as the country is now in full-fledged trade war with the US. However, no major stimulus was announced immediately, giving the impression that Beijing is not in a rush to roll out large-scale interventions. Authorities appear inclined to first monitor the trade shock’s timing and magnitude before deciding on more aggressive measures.

Zhao Chenxin, deputy head of the National Development and Reform Commission, stressed at a press conference today that China retains "ample policy reserves and plenty of policy space," and highlighted plans to stabilize employment and strengthen public employment services.

At a Politburo meeting chaired by President Xi Jinping last week, officials called for a “timely reduction” in interest rates and reserve requirement ratios to support the economy. Additional measures to aid struggling businesses, boost consumption among middle- and lower-income groups, and promote further development in technology and artificial intelligence were also emphasized.

As a touch of optimism, official data released over the weekend showed China’s industrial profits returning to growth in the first quarter. Cumulative profits rose 0.8% yoy to CNY 1.5T, reversing a -0.3% decline seen in the first two months.

Japanese officials moved swiftly to deny a media report suggesting that US Treasury Secretary Scott Bessent had conveyed a preference for a weaker Dollar and stronger Yen during recent bilateral meetings in Washington last week.

Japan’s top currency diplomat, Atsushi Mimura, emphasized to reporters that "the US side did not touch upon exchange-rate targets" in discussions between Finance Minister Katsunobu Kato and his US counterpart.

Finance Minister Kato also reiterated via social media that exchange-rate frameworks were not discussed, directly refuting the report published by the Yomiuri newspaper.

Meanwhile, Bessent himself described the talks with Japan as "very constructive" in a post on X, noting that they covered reciprocal trade issues and "matters pertaining to exchange rates" without mentioning any explicit preferences.

Key Highlights

• EUR/USD started a downside correction from the 1.1575 zone.
• A key bullish trend line is forming with support at 1.1250 on the 4-hour chart.
• GBP/USD corrected some gains and traded below 1.3300.
• Gold prices dipped sharply from the record high and traded below $3,300.

EUR/USD Technical Analysis

The Euro gained pace for a move above the 1.1500 level against the US Dollar. EUR/USD tested the 1.1575 zone and recently started a downside correction.

Looking at the 4-hour chart, the pair traded below the 1.1500 support zone. There was a move below the 23.6% Fib retracement level of the upward move from the 1.0732 low to the 1.1573 high. However, the pair is still well above the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

There is also a key bullish trend line forming with support at 1.1250 on the same chart. The trend line is near the 38.2% Fib retracement level of the upward move from the 1.0732 low to the 1.1573 high.

On the downside, immediate support sits near the 1.1300 level. The next key support sits near the 1.1260 level and the trend line. Any more losses could send the pair toward the 1.1200 level.

If there is a fresh increase, the pair could face resistance near the 1.1420 level. The next major resistance is near the 1.1450 zone. A close above the 1.1450 level could set the tone for another increase. In the stated case, the pair could even clear the 1.1500 resistance.

Looking at GBP/USD, the pair corrected some gains below 1.3300 but the bulls might remain active above the 1.3280 level.

Upcoming Economic Events:

• Dallas Fed Manufacturing Business Index for March 2025 – Forecast 24, versus 24.5 previous.

EUR/USD edged higher to 1.1572 last week but retreated since then. A short term top could be formed on bearish divergence condition in 4H MACD. Deeper decline is in favor this week. Nevertheless, strong support should be seen from 38.2% retracement of 1.0176 to 1.1572 at 1.1039 to contain downside. On the upside, break of 1.1572 will resume larger up trend.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0776) holds.

In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1299) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.

USD/JPY edged lower to 139.87 last week but recovered since then. A short term bottom could be formed on bullish convergence condition in 4H MACD. Further rise is expected this week for 38.2% retracement of 158.86 to 139.87 at 147.12. However, break of 141.51 minor support will bring retest of 139.87 low instead.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

In the long term picture, it's still early to conclude that up trend from 75.56 (2011 low) has completed. A medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 137.19 and even below.

GBP/USD edged higher to 1.3422 last week but retreated ahead of 1.3433 resistance. A short term top could be formed on bearish divergence condition in 4H MACD. Deeper decline is in favor this week. Nevertheless, downside should be contained by 38.2% retracement of 1.2099 to 1.3422 at 1.2917. On the upside, firm break of 1.3433 will resume larger up trend.

In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could be the second leg. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on break of 1.3433 at a later stage.

In the long term picture, price actions from 1.0351 (2022 low) are seen as a corrective pattern to the long term down trend from 2.1161 (2007 high) only. Outlook will be neutral at best as long as 1.4248 structural resistance holds, even in case of strong rebound.

USD/CHF edged lower to 0.8038 last week but recovered. A short term bottom could be formed on bullish convergence condition in 4H MACD. Further rise is in favor this week as long as 0.8196 minor support holds. Nevertheless, upside should be limited by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. On the downside, below 0.8196 minor support will bring retest of 0.8038. Firm break there will resume larger down trend.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8801) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

In the long term picture, price action from 0.7065 (2011 low ) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). It's uncertain if the fall from 1.0342 is the second leg of the pattern, or resumption of the down trend. But in either case, sustained trading below 61.8% retracement of 0.7065 to 1.0342 at 0.8317 will pave the way back to 0.7065.