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EUR/USD

Current level - 1.1244

The outlook is bearish below 1.1280, for a slide towards 1.1175 lows. A violation of the latter will challenge 1.1020 area.

USD/JPY

Current level - 111.84

Today's dip to 111.60 could be the finale of the consolidation pattern below 112.15 and my outlook is positive, for a break through the mentioned hurdle, towards 113.20 area.

GBP/USD

Current level - 1.2986

I favor a break through 1.2960 static support, towards 1.2800 area. Initial resistance lies at 1.3030 and crucial on the upside is 1.3120 peak.

The Euro edged lower in early Tuesday's trading, after two-day recovery stalled at 1.1260 zone, just ahead of 1.1263 pivot (Fibo 38.2% of 1.1323/1.1226).

The single currency came under pressure from broadly higher dollar in thin post-holiday trading.

The greenback regained traction after being hit by significant drop in US existing home sales on Monday, with release of US new home sales, being in focus today (Mar -3.0% f/c vs 4.9% prev).

Loss of bullish momentum keeps near-term action in red, but return and close below 20SMA (1.1248) is needed to confirm negative signal for retest of 1.1226 higher base.

Overall negative outlook is expected to persist while the price action holds below 30SMA (1.1276), which guards upper triggers provided by daily cloud base (1.1283) and 55SMA (1.1294).

Res: 1.1263, 1.1276, 1.1283, 1.1294
Sup: 1.1241, 1.1226, 1.1210, 1.1183

The recent declines in gold prices are set for a pause. Price is stabilizing above the 1274 handle. Ahead of a busy week that includes central bank meetings and the US advance GDP reports, gold investors are likely to wait and watch for data. For now, the risk sentiment remains somewhat mixed. But we will get a better idea as the markets open following a long Easter weekend.

XAUUSD Forming an Inverse Head and Shoulder Pattern

XAUUSD has been consolidating above the previous lows at 1275. In the process, an inverse head and shoulders is forming with the neckline resistance at 1279.25. With the right shoulder forming, we expect a breakout above the neckline resistance. An expected move to the upside will see gold prices targeting the 1285 level.

Oil prices settled at a six-month high on Monday. The gains came after President Trump announced an end to Iran’s crude oil exports to eight countries. Oil production will now suffer the blow of the sanctions on Iran and Venezuela as well as the political unrest in Libya. In retaliation, Iran threatened to close the Straits of Hormuz which could lead to longer delays in crude oil shipments.

Can WTI Maintain the Momentum?

Following the surge to the 65 – 66 region, the momentum looks somewhat mixed. If oil prices fail to post any major highs from this level, we expect to see prices turning flat. This also potentially sets the tone for a short term correction. The initial support level is at 64.50 which remains a key level to the downside.

The sentiment in the euro is hit by the weak PMI’s from last week. But the currency rose slightly to post a modest 0.12% gain on the day. Economic data was sparse, and today’s docket will see the eurozone consumer confidence report coming out. Economists forecast the consumer confidence to hold steady at -7.

EURUSD Consolidating Into a Bearish Flag

The EURUSD has moved into a temporary holding pattern, forming a bearish pattern. The current retracement could see a downside breakout validating the bearish outlook. Closing below the recent swing low of 1.1228 could signal further declines. The minimum downside is at the support level of 1.1176.

Australia will report inflation numbers for the first quarter on Wednesday at 0130 GMT, providing investors with a vital piece of information ahead of the Reserve Bank of Australia’s policy meeting on May 7. With rate cut odds easing slightly following some upbeat economic indicators out of China recently, a weaker-than-expected price reading on Wednesday could lead to some of these bullish bets being pared back. Hence, the Australian dollar will be sensitive to any surprises in the data.

Inflation in Australia has barely stood inside the RBA’s 2-3% target band since the end of 2014 and likely weakened substantially during the first three months of the year. The consumer price index (CPI) is forecast to have risen by 1.5% year-on-year in the first quarter, slowing from 1.8% in the prior quarter. On a quarterly basis, CPI is expected to have increased by 0.2%, which would be the lowest since the second quarter of 2017.

Underlying measures of inflation have also been running below the RBA’s target band for much of the past year, raising doubts about the Bank’s game plan that a tightening labour market would eventually put upward pressure on prices. Core CPI, which excludes volatile items, edged up to 1.6% in Q4 2018 after slumping to 1.2% in the previous quarter, while the weighted median and trimmed mean printed at 1.7% and 1.8%, respectively.

But as inflation shows no sign of moving towards the RBA’s desired range, policymakers appear to be shifting their stance, with the central bank’s April policy meeting minutes giving the strongest hint yet that the next move in interest rates could be down. In the minutes, the RBA clearly laid out the conditions under which a rate cut would be “appropriate” where inflation is not moving any higher and unemployment is trending up.

While this may provide investors with clarity on where the RBA stands, the outlook on the economy is not so clear. Unemployment in Australia is hovering around 5%, near 8-year lows, and employment continues to rise at healthy levels. However, wage growth remains muted at 2.3% y/y and only faster economic expansion would help push wage pressures significantly higher.

Those prospects have started to improve lately as China’s economy starts to recover and the US appears to have avoided a steep slowdown. But even if the signs of green shoots prove not to be a false alarm, it will be difficult for the RBA to sit on the sidelines and wait for wage growth to pick up as long as inflation stays below 2% and there’s no signs of it moving higher.

This puts all the more focus on Wednesday’s CPI report as any surprises to the data would either increase or reduce market expectations of a rate cut. At the moment, traders have fully priced in a 25-bps rate cut by October. Any change in those odds would have a major impact on the aussie/dollar pair in forex markets.

The Australian currency has been trading in a $0.70-$0.72 range since February and will likely remain confined to that range whilst geopolitical and economic uncertainties persist. In the near term, though, a strong set of inflation figures could propel aussie/dollar above the 23.6% Fibonacci retracement level of the upleg from 0.6743 to 0.7295, at 0.7165, before attempting to take on the 0.72 level.

On the other hand, a weakening in inflationary pressures could pull aussie/dollar below the 50-day moving average (MA), currently at 0.7112. Failure to hold above the 50-day MA would open the way for the 50% Fibonacci at 0.7019

• Nasdaq 100 at record highs ahead of key earnings
• Aussie pulls back ahead of inflation data early on Wednesday
• Sterling retreats as PM May prepares to stave off another ‘Tory rebellion’

Nasdaq 100 cruises to record highs as earnings season fires up

Markets remained quiet on Monday, with moves in both currencies and equities being muted overall, and the spotlight remaining on oil prices instead. US stocks closed mostly in the green, with gains in the energy sector offsetting losses elsewhere and dragging the S&P 500 (+0.10%) slightly higher. Meanwhile, the tech-heavy Nasdaq 100 (+0.31%) closed at a new record high, aided by advances in the likes of Facebook and Amazon, as investors loaded up ahead of earnings releases by both firms later this week.

Indeed, market focus will turn to corporate earnings from today. Notable names releasing their Q1 results include Coca Cola, Procter & Gamble, Verizon, and Twitter – all before Wall Street’s opening bell. It’s still relatively early in this earnings season so investors are looking for ‘bellwethers’ to gauge the broader picture. This implies that besides impacting their own stocks, the quality of corporate results today could well impact broader market sentiment as well.

Aussie retreats ahead of inflation data

The rally in oil prices was not enough to ‘lift all boats’ in the commodity sphere, as both the antipodean currencies – the aussie and the kiwi – are on the retreat this week. Given that risk sentiment has been modestly positive, the losses in these currencies seem owed to monetary policy expectations. It’s striking that markets have priced in one-and-a-half rate cuts by both the RBA and the RBNZ by year-end, which now seems a little out of sync with the signs of stabilization in China, for example.

For the aussie, the latest pullback likely reflects some profit-taking ahead of the release of Australia’s CPI data for Q1 at 01:30 GMT on Wednesday. Inflation is expected to have cooled and even though that would be discouraging, it still may not be enough to elicit a rate cut by the RBA without some deterioration in the labour market as well. The bottom line is that much pessimism is already priced in, so any positive surprise in these data could trigger a major re-think of the whole easing narrative.

Sterling inches down on rumors of ‘Tory rebellion’ against May

The British pound has been quietly moving lower in recent days, even in the absence of any material Brexit news, as the UK Parliament was in recess and talks between Conservatives and Labour to solve the impasse were paused for Easter. That all changes today, with British lawmakers returning to Westminster and the cross-party negotiations resuming. In other words, brace for a comeback of Brexit headlines.

The latest reports are not particularly encouraging, as it seems Theresa May has another ‘Tory rebellion’ on her hands. Leading Conservatives are calling for the Prime Minister to step down, and even though she is theoretically safe from a leadership challenge for several months still, it seems there may be some ‘alternative methods’ of removing her, assuming sufficient support. To be clear, even though the market reaction has been minimal so far, this is the biggest risk for sterling in the near-term; May being replaced with a hardline Brexiteer, as that would resurrect the no-deal risk.

Bitcoin is attempting to advance above its current 2019 trading high, at $5,452, in early Tuesday trade, with the BTCUSD pair still well supported by strong dip-buying demand. The daily frame is showing that the $5,260 and the $5,200 levels are the main intraday support areas. Overall, the BTCUSD pair has a bullish weekly bias while trading above the $5,200 level and may start to target the $5,700 level.

The BTCUSD pair is only bullish while trading above the $5,200 level, key intraday resistance is found at the $5,452 and $5,700 levels.

If the BTCUSD pair trades under the $5,200 level, sellers may test towards the $5,080 and $4,900 support levels.

The euro currency continues to edge higher against the US dollar in early Tuesday trade, following a breakout above the 1.1250 level. If buyers hold price above the 1.1250 level the EURUSD pair faces strong weekly technical resistance from the 1.1280 level. Both the Momentum and the MACD indicators on the four-hour time frame are correcting from oversold conditions.

The EURUSD pair is only intraday bearish while trading below the 1.1250 level, key technical support remains at the 1.1230 and 1.1216 levels.

If the EURUSD pair trades above 1.1250 level, key intraday resistance is found at the 1.1280 and 1.1300 levels.

The US dollar has fallen back towards its weekly pivot point against the Japanese yen currency after buyers failed to move price above the 112.00 level. The move lower is currently seen as a technical correction, as bulls have been able to maintain the USDJPY pair above the pivotal 111.68 level. The inverted head and shoulders pattern on the four-hour time frame remains valid while price trades above the 110.30 level.

The USDJPY pair is intraday bullish while trading above the 111.68, key intraday resistance is found at the 112.00 and 113.20 levels.

If the USDJPY pair trades below the 111.68 level, key intraday support is found at the 111.30 and 110.90 levels.