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Gold's near term down trend resumes today thanks to broad based strength in Dollar. The development also further solidify the case of medium term reversal. That is, rise from 1160.17 has completed at 1346.71, on bearish divergence condition in daily MACD.

Near term outlook will now stay bearish as long as 1280.85 support turned resistance holds. Gold is targeting 61.8% retracement of 1160.17 to 1346.17 at 1234.42 and below.

In the bigger picture, gold was once again rejected below key fibonacci level of 38.2% retracement of 1920.70 to 1046.37 at 1380.36. The developments keeps down trend from 1920.70 intact. It's too early to declare resumption of the down trend. But reactions to 1160.17 support will be closely watched to assess the chance of breaking through 1046.37 low.

Entering into US session, Sterling is the strongest one in a rather listless day so far. Technical support is seen as the major reason for the bounce. GBP/USD is close to 1.2960 key near term support. EUR/GBP is also "relatively" close to 0.8722 key near term resistance. Yen and Dollar are the next strongest ones, mainly thanks to sluggishness elsewhere.

For now, Swiss Franc is the weakest one, as funds are flowing out of this safe haven. Rise in oil price is seen as a major factor. Technically, USD/CHF broke 1.0128 key resistance last week and medium term up trend has resumed for 1.0342 resistance. EUR/CHF also takes out 1.1444 key resistance today, indicating near term reversal. 1.1501 resistance is next and will likely be conquered with ease. Australian and New Zealand Dollar are the next weakest. The Aussie will be vulnerable to CPI release tomorrow.

In Europe:

• FTSE is up 0.45%.
• DAX is down -0.23%.
• CAC is down -0.14%.
• German 10-year yield is up 0.0288 at 0.055.

Earlier in Asia:

• Nikkei rose 0.19%.
• Hong Kong HSI dropped -0.00%.
• China Shanghai SSE dropped -0.51%.
• Singapore Strait Times dropped -0.13%.
• Japan 10-year yield dropped -0.0025 to -0.029.

GBPAUD turned higher after it touched a new two-month low of 1.8100 last Wednesday, sending prices above the 38.2% Fibonacci retracement level of the upleg from 1.7220 to 1.8860, around 1.8195. The RSI is turning slightly higher approaching the 50 level, while the stochastic seems to be strongly bullish as the %K line and the %D line completed a positive cross in the oversold zone.

On the upside, immediate resistance could come around the 20-day simple moving average (SMA) currently at 1.8320 while next the price could flirt with the 23.6% Fibonacci of 1.8470, which coincides with the 40-day SMA. Higher still, the 1.8730 resistance could attract traders’ attention.

On the other hand, significant declines below the two-month low may meet support near the 50.0% Fibonacci of 1.8035 but the pair first needs to penetrate the 1.8100 psychological level. Below that, the 1.7990 support could come into focus.

Overall, GBPAUD seems to be in negative correction following the pullback on the 33-month high of 1.8860. If the price remains below the short-term SMAs, investors could turn their interest to the downside. However, the latest action and the technical indicators suggest an upside rally.

Notes/Observations

• UK Parliament returns from Easter recess; PM May facing yet another threat to her leadership.

Asia:

• Japan Fin Min Aso had no comment on content of talks with US Treasury Sec Mnuchin
• BOJ Senior Official Maeda reiterates BOJ would ease policy further if needed, if momentum for hitting price target was threatened; ready to act including combining various means
• China PBOC skips OMO and drains liquidity for first time since late March
• China 10-year bond yields extended gains amid focus on PBOC policy outlook; recent stabilization of data dampens RRR cut hopes

Europe/Mideast:

• 1922 Committee of Conservative MPs (back benchers) Chair Brady said to have prepared to tell PM May that she must step down by the end of June or her MPs would change the Tory party leadership rules to force her out
• Greece officially submitted a request to ESM for early repayment of IMF loans

Americas:

• Herman Cain withdrew his nomination from Fed
• US House speaker Pelosi: House Democrats had differing views on how to proceed after Mueller report. Important to know that the facts regarding holding the President accountable could be gained outside of impeachment hearings

Energy:

• President Trump: oil flow lost from Iran sanctions would be more than made up by Saudi Arabia and others

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.25% at 389.48, FTSE +0.39% at 7,488.77, DAX -0.13% at 12,205.90, CAC-40 -0.18% at 5,570.31, IBEX-35 -0.57% at 9,526.85, FTSE MIB -0.17% at 21,919.50, SMI -0.21% at 9,551.50, S&P 500 Futures -0.05%]
• Market Focal Points/Key Themes: European Indices trade mostly lower this morning with the exception of the FTSE 100 following the long weekend after a mixed session in the US and Asia. On the corporate front Umicore shares decline sharply after warning profits will be below expectations; Ahold Delhaize also declines on a downgrade in forecasts; Melexis falls on a sharp fall in profits and Revenue while Plastic Omnium also declines on earnings. Getinge trades almost 10% higher after Q1 results handily beats forecasts, while Faurecia and Lysogene also trades higher after a trading update. Elsewhere Thomas Cook gains on reports Fosun International raised its stake to 17%, with TehchnipFMC and BW Offshore gaining on contract awards. Looking ahead notable earnings include Verizon, Coca Cola, Twitter, P&G and Lockheed Martin among others.

Equities

• Consumer discretionary: Thomas Cook [TCG.UK] +14% (reportedly approached by potential bidders), Ahold Delhaize [AD.NL] -5% (profit warning due to strikes), Casino Guichard-Perrachon [CO.FR] -0.5% (partnership with Amazon)
• Financials: Partners Group [PGHN.CH] +0.5% (acquisition)
• Industrials: Faurecia [EO.FR] +1.5% (Q1 sales)
• Technology: Wirecard [WDI.DE] -2.5% (short ban expired), Melexis [MELE.BE] -6% (earnings), Datalex [DLE.IR] -3% (trading to be suspended), TechnipFMC [FTI.FR] +3% (contract)
• Materials: Plastic Omnium [POM.FR] -1.5% (earnings); Umicore [UMI.BE] -15% (profit warning), Severstal [SVST.UK] +1.5% (earnings)

Speakers

• ECB's Coeure (France) stated that he did not see monetary policy argument for tiering at this time but discussions was. both useful and relevant. Negative interest rates were not the biggest problem for the banking sector; Sector should focus on costs
• Italy govt could delay the approval of the growth pact possibly until Monday, Apr 29th citing renewed tension in ruling coalition
• Poland Central Bank's Kropiwnicki reiterated rate-setter stance that was no need or room for Base Rate cuts at this time. Did motion to begin raising rates in early 2020
• China official reiterated that have made substantial progress in trade talks
• Saudi Arabia welcomed US announcement related to Iranian oil export sanctions

Currencies/Fixed Income

• FX volatility remained at a lull against the major pairs.
• EUR/USD slightly lower I the mid-1.12 area as dealers believe the 1.13 level was solid resistance at this time.
• GBP/USD was back below the 1.30 level as UK Parliament returned from Easter recess and the Brexit drama now saw PM May again facing yet another threat to her leadership. 1922 Committee of Conservative MPs (back benchers) Chair Brady said to have prepared to tell PM May that she must step down by the end of June or her MPs would change the Tory party leadership rules to force her out
• USD/JPY below the 112 level in subdued trade as investors focused on the upcoming BOJ rate decision on Thursday. Japan investors were also said to be reducing risk and exposure ahead of the extended Golden Week holiday that begins next weeo .
• EUR/SEK was higher by 0.4% ahead of Thursday's Riksbank rate decision. Dealers are expecting the central bank to signal that it would remain on hold for longer than previously expected as inflation was not seen sustainably at target level for the time being
• AUD softer ahead of Wednesday Q1 CPI data for Australia. Dealers believing that the data would reinforce speculation that the next RBA move would be a rate cut

Economic Data

• (NL) Netherlands Apr Consumer Confidence Index: -3 v -4 prior
• (NL) Netherlands Feb Consumer Spending Y/Y: 0.9% v 0.9% prior
• (DK) Denmark Apr Consumer Confidence Indicator: 3.7 v 3.8 prior
• (NL) Netherlands Mar House Price Index M/M: +0.4 v -0.1% prior; Y/Y: 7.7 v 7.5% prior
• (JP) Japan Mar Final Machine Tool Orders Y/Y: -28.5% v -28.5% prelim
• (CH) Swiss Mar M3 Money Supply Y/Y: 3.5% v 3.5% prior
• (ZA) South Africa Feb Leading Indicator: 104.9 v 102.8 prior
• (TW) Taiwan Mar Industrial Production Y/Y: -9.9% v -1.5%e
• (PL) Poland Mar Retail Sales M/M: 14.1% v 14.9%e; Y/Y: 3.1% v 4.1%e; Retail Sales Y/Y: 1.8% v 2.7%e
• (HK) Hong Kong Mar CPI Composite Y/Y: 2.1% v 2.2%e
• (EU) Euro Zone 2018 Govt Debt/GDP Ratio: 85.1% v 87.1% prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR23.4T vs. IDR15.0T target in 3-month and 9-month Bills and 5-year, 10-year, 15-year, 20-year and 30-year Bonds
• (CH) Switzerland sold CHF400.4M in 3-month Bills; Avg Yield: -0.778%
• (ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2026, 2032 and 2037 bonds

Looking Ahead

• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:45 (US) Daily Libor Fixing
• 07:45 (US) Weekly Chain Store Sales data
• 08:00 (BR) Brazil CONAB Sugarcane and Ethanol Production
• 08:00 (PL) Poland Mar M3 Money Supply No est v 1.3% prior; Y/Y: 9.6%e v 9.8% prior
• 08:00 (UK) Baltic Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:30 (CA) Canada Feb Wholesale Trade Sales M/M: 0.1%e v 0.6% prior
• 08:55 (US) Weekly Redbook Retail Sales data
• 08:55 (FR) France Debt Agency (AFT) to sell combined €B in 3-month, 6-month and 12-month Bills
• 09:00 (MX) Mexico Mar Unemployment Rate (Seasonally Adj): 3.5%e v 3.4% prior; Unemployment Rate (unadj): 3.1%e v 3.3% prior
• 09:00 (US) Feb FHFA House Price Index M/M: 0.6%e v 0.6% prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (US) Apr Richmond Fed Manufacturing Index: 10e v 10 prior
• 10:00 (US) Mar New Home Sales: 647Ke v 667K prior
• 10:00 (EU) Euro Zone Apr Advance Consumer Confidence: -7.0e v -7.2 prior
• 10:00 (MX) Mexico weekly International Reserves data
• 11:30 (US) Treasury to sell 52-Week Bills
• 13:00 (US) Treasury to sell 2-Year Notes
• 16:30 (US) Weekly API Oil Inventory data

The DAX index has started the week with slight losses. On Tuesday, the DAX is at 12,193, down 0.23% on the day. In economic news, there is only one event on the schedule. The eurozone releases consumer confidence, which is projected to remain unchanged at -7 points for a third straight month. On Wednesday, Gemany releases the Ifo Business Climate index.

Crude oil prices jumped to a 5-month high after the Trump administration announced that it would terminate sanction waivers given to some importers of Iranian oil, as of May 1. This move is intended to further tighten sanctions against Iran and cripple Iranian oil exports. The move has been bitterly criticized by Iran, which has upped the ante by threatening to close the Strait of Hormuz, a critical gateway for seaborne oil shipments. The rising geopolitical temperature could further boost oil prices, which are up 50% since December. Higher oil prices could weigh on economic growth and send stock markets lower.

With the eurozone mired in an economic slowdown, investors are hoping that the German locomotive will pull the rest of the eurozone back onto the tracks. German numbers have also disappointed, particularly manufacturing, which has been hit hard by the global trade war. Not unsurprisingly, German business climate has been steadily losing ground since the middle of 2018, reflective of weakening economic conditions. Still, the indicator remains close to the symbolic 100-level, and the April estimate stands at 99.9 points.

The USD/CAD has formed a bullish SHS pattern. A bounce off the POC zone 1.3360-70 targets upper camarilla levels.

Additionally, the price has formed a T-89 pattern which is a bit bullish as it comes with now moment buyers and rejection off the D H4 camarilla level. If the bullish momentum persists we should see 1.3376, 1.3401 and 1.3420 as the final target. For a continuous bullish domination on intraday level the price should ideally stay above the D L3 level. Above W H3 1.3420 we should expect more bulls to join.

The Aussie dollar extends bear-leg from 0.7205 on Tuesday and broke through important supports at 0.7128 (20SMA / Fibo38.2% of 0.7003/0.7205) and 30SMA (0.7116).

Reduced risk appetite on weaker Chinese equities and firmer greenback, add to negative near-term sentiment, along with rising bearish momentum.

Deeply oversold stochastic suggest bears may pause before extending towards 0.7080 (Fibo 61.8%) and 0.7053 (2 Apr trough), as markets await release of Australian inflation data, due early Wednesday.

Daily close below broken support at 0.7128 (20SMA / Fibo 38.2%) is needed to maintain bearish bias.

Res: 0.7128, 0.7139, 0.7152, 0.7187
Sup: 0.7104, 0.7080, 0.7083, 0.7041

Tuesday April 23: Five things the markets are talking about

Most equity markets have opened after the long holiday weekend with mixed results. European stocks have started under pressure, while U.S futures trade rangebound and Asian equities recorded a mixed showing in the overnight session as the U.S earnings season reporting begins to intensify.

Note: Asian trading volumes remain below the 30-day average just ahead of Japan's Golden Week holidays (April 29).

In commodities, crude oil prices have extended their recent U.S ‘no waiver' gains and continue to excite oil bulls. The ‘big' dollar still has support amongst the majors in another tight range, while U.S treasury yields remain somewhat steady, while Euro yields back up a tad.

Investors continue to look for signs as to whether the ‘dovish' policy swivel from G7 central banks in recent months is the correct move to solidify global growth just enough to outweigh any weakness in corporate earnings.

On tap this week: Stateside, Amazon, Facebook, Twitter, Microsoft and Tesla report earning's this week. In Europe, bank earnings from Deutsche Bank, UBS, Barclays, Credit Suisse and Swedbank. On the monetary policy front, the Bank of Japan (BoJ), Bank of Canada (BoC) and Sweden's Riksbank (April 24) set monetary policy.

1. Stocks mixed results

In Japan, the Nikkei average ended modestly higher overnight, with oil-related stocks leading the gains after the U.S announced the move to end all Iran sanctions waivers Monday. The benchmark Nikkei 225 index closed out a gain of +0.2%, a five-month high. The broader Topix added +0.3%.

Note: With Japanese companies releasing their annual results later this week and ahead of the 10-day Golden Week holiday, do not be surprised to see investors book some profits.

Down-under, Aussie shares ended atop of their eight-month high overnight, supported by gains in banking and energy stocks. The S&P/ASX 200 index closed up +1%. The benchmark had added about +0.1% last Thursday. In S. Korea, the Kospi stock index was largely unchanged (+0.17%) overnight as investors remained cautious ahead of the release of Korea's Q1 GDP data, which is forecast to be weak (+0.3% – the weakest in nearly two-years).

In China, equities edged lower again overnight, extending this week's sharp declines over how much additional support Beijing will provide to the economy after growth beat expectations. The Shanghai Composite index was down -0.5%, while China's blue-chip CSI300 index was down -0.02%.

Note: The CSI300 and Shanghai Composite both recorded their biggest single-day drops since March 25 on Monday.

In Hong Kong, stocks ended little changed after the long holiday weekend. At the close of trade, the Hang Seng index was down -0.1%, the Hang Seng China Enterprises index fell -0.32%.

In Europe, regional bourses trade mostly lower with the exception of the FTSE 100 following the holiday weekend and after a mixed Asian session.

U.S stocks are set open in the ‘red' (-0.5%).

Indices: Stoxx600 -0.25% at 389.48, FTSE +0.39% at 7,488.77, DAX -0.13% at 12,205.90, CAC-40 -0.18% at 5,570.31, IBEX-35 -0.57% at 9,526.85, FTSE MIB -0.17% at 21,919.50, SMI -0.21% at 9,551.50, S&P 500 Futures -0.05%

2. Oil prices hit new highs, gold under pressure

Crude oil prices remain better bid after the Trump administration announced yesterday that they will “not renew waivers” that permitted a number of countries to purchase Iranian crude without facing U.S sanctions after they expire on May 2.

This situation is forcing Iran to renew talks with its partners in the Middle East in a bid to alleviate some of the fallout from Trumps decision. Iran is even threatening to close the Strait of Hormuz, a key oil shipping passage.

Currently, the Saudis have indicated that they are willing to step up if Iranian oil exports crash.

Brent crude futures are at +$74.58 per barrel, up +0.7% from their last close and their highest level since November 2018. U.S West Texas Intermediate (WTI) crude futures are trading atop their strongest print since October 2018 at +$65.10 per barrel, up +0.8% from Monday's close.

Note: The U.S government has mentioned a number of times this year that they want to cut Iran's oil exports below +1M bpd or even to zero, and that new action would be taken by May.

Crude oil bulls believe that this week's surprise announcement by the U.S should have a significant impact in tightening the market even further.

Already having a price impact is Washington having placed sanctions on Venezuela's oil exports, and also OPEC+ led supply cuts since the beginning of this year.

Ahead of the U.S open, gold prices have edged a tad lower overnight as strong equities provided a risk environment for investors, countering support from the Trump administration move to end waivers on Iranian oil sanctions. Spot gold fell -0.1% to +$1,273.18 per ounce, while U.S gold futures lose -0.2% to +$1,275 an ounce.

3. Italian yields hit two-month highs on rating worries

Italy's 10-year government bond yield has backed up to its highest level in nearly eight weeks this morning, pressured up by unease over government infighting and an upcoming ratings review.

With bond markets remaining very thin following the Easter holiday, exaggerated price moves remain very doable. Also pressuring Euro yields is crude oil prices printing new 2019 highs.

Italy's 10-year bond yield has jumped +8 bps to +2.67%, its highest since early March. The Italian/German yield gap is now at its widest in a fortnight at around +261 bps.

Ratings agency S&P Global is due to review Italy's credit rating this Friday. Currently, it rates Italy at BBB, two notches above junk, but has a negative outlook on the country.

Elsewhere, the yield on 10-year Treasuries has dipped -1 bps to +2.58%. In Germany, the 10-year Bund yield has increased +1 bps to +0.04%, while in the U.K, the 10-year Gilt yield has also gained +1 bps to +1.212%.

4. Dollar confined to a tight range

USD volatility remains at a lull against G10 currency pairs.

As the U.K parliament returns from the Easter recess, expect the pound (£1.3000) to brace itself for heightened volatility. PM May will again ramp up Brexit negotiations this week as the House of Commons sits again.

The Bank of Canada (BoC) will announce its latest policy decision tomorrow (10:00 am EDT). No action is expected, so all eyes will be on the accompanying statement, updated forecasts, and Governor Poloz's tone. Markets seem to be expecting an overly ‘dovish; message, and while the Bank is indeed likely to appear cautious overall, it is unlikely to go as far as abandon its rate-hike plans completely. Currently, the loonie (C$1.3369) is getting very little love from eight-month high oil prices.

AUD (A$0.7113) is a tad weaker ahead of tomorrow's Q1 CPI data. The market is currently speculating that the next Reserve Bank of Australia (RBA) move would be a rate cut.

Bitcoin (BTC) has rallied some +6% the past two-days, edging above +$5,500. Following the roughly +25% jump already this month, BTC has been slightly trending higher despite this post-Easter hop.

5. Hong Kong inflation steady in March

Data this morning showed that Hong Kong inflation remained steady last month as increases in food and housing prices were partially offset by declines in utilities and communication-services costs.

The city's CPI rose +2.1% from a year earlier, matching February's rate.

Digging deeper, excluding out-of-home meals, food costs were +4.7% higher y/y, while public-housing rent jumped +12%. But private-housing costs rose just +2.9%, while utility costs fell -5.4% and prices of information/communication services dropped -8.6%

EUR/USD is showing little movement on Tuesday, as the holiday hangover continues in the markets. Currently, the pair is trading at 1.1253, down 0.03% on the day. There are no major events, so the pair is likely to have a quiet day. The eurozone releases consumer confidence, which is expected to remain unchanged at -7 points. In the U.S., New Home Sales is forecast to slow to 647 thousand, while the Richmond Manufacturing index is also projected to remain unchanged at 10 points. On Wednesday, Gemany releases the Ifo Business Climate index.

With the eurozone mired in an economic slowdown, investors are hoping that the German locomotive will pull the rest of the eurozone back onto the tracks. German numbers have also disappointed, particularly manufacturing, which has been hit hard by the global trade war. Not unsurprisingly, German business climate has been steadily losing ground since the middle of 2018, reflective of weakening economic conditions. Still, the indicator remains close to the symbolic 100-level, and the April estimate stands at 99.9 points.

Crude oil prices jumped to a 5-month high after the Trump administration announced that it would terminate sanction waivers given to some importers of Iranian oil, as of May 1. This move is intended to further tighten sanctions against Iran and cripple Iranian oil exports. Oil prices are up close to 50% since December, and if the rally continues, we could see volatility from EUR/USD.

A breakout occurred through the upper boundary of a four-week descending channel pattern at 1.5774. The 50– and 100-hour SMAs are currently providing support for the currency pair at 1.5756.

Given that a breakout had occurred, most likely, the single European currency will aim for a resistance level formed by the 200-hour simple moving average at 1.5863 during the following trading sessions.

Although, the weekly pivot point at 1.5817 could provide resistance for the currency exchange rate in the short-term.