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The US dollar is trading close to the best levels of the month against the Japanese currency as optimism grows that a trade deal is nearing between the United States and China. The four-hour time is also showing that buyers are probing the neckline of a bullish inverted head and shoulders pattern. The upside target of bullish pattern would take the USDJPY close to the 113.80 level.

The USDJPY pair is intraday bullish while trading above the 111.65, key intraday resistance is found at the 112.00 and 113.20 levels.

If the USDJPY pair trades below the 111.80 level, key intraday support is found at the 111.65 and 111.30 levels.

All eyes on Wednesday will be on China's growth figures for the first quarter, due at 02:00 GMT, as the world's second largest economy continues to lose steam. But while China's GDP growth is expected to have slowed further during the first three months of the year, there are encouraging signs lately that the slowdown is levelling off and a rebound is on the way.

After expanding by an annual rate of 6.4% in the final quarter of 2018 – the slowest pace since the financial crisis – China's economy is expected to have grown by 6.3% in the first quarter of this year. Although such a figure would represent only a modest slowdown from the prior quarter, it would nevertheless make it the weakest growth in nearly three decades.

As economists debate whether the alarming deceleration in growth is mainly down to the government's deleveraging efforts or the trade war with the United States, it appears that authorities' recent actions to counter the slowdown seems to at least be starting to have some impact.

The first glimpse of a turnaround came from the March manufacturing PMIs, which returned to expansionary territory. They were followed by trade figures last Friday that showed exports jumped sharply in March, and from a bigger-than-expected increase in bank lending during the same month. The data fuelled hopes that the worst of the slowdown is over and the economy is gaining momentum again.

With March indicators so far pointing up and at the same time, trade negotiations with the US looking like they're nearing the end game, the GDP numbers on Wednesday could be overshadowed by the other data that are also due for release. Accompanying the growth figures will be monthly stats on industrial production, investment in urban areas and retail sales.

Growth in Chinese industrial output had fallen to a 17-year low of 5.3% year-on-year in February, but analysts are predicting a pick up to 5.9% in March. Fixed-asset investment is also forecast to accelerate, rising by 6.3% in the year-to-date to March after a 6.1% increase in the prior month. An improvement in retail spending is being anticipated too, with sales forecast to have grown by 8.4% y/y in March compared to 8.2% previously.

A strong rebound in the March data would further bolster views that China's economy is turning the corner and could offset any slight disappointment in the headline GDP figure. It would also lift risk-sensitive currencies, particularly the Australian dollar, which is often traded as a liquid proxy for China-related developments.

Having hit a 1½-month peak of 0.7192 on Friday, aussie/dollar could overcome resistance at the 200-day moving average if the numbers out of China beat expectations. A break higher would bring the January top of 0.7295 into range.

Alternatively, any setback in risk sentiment from a worrying set of figures would pull aussie/dollar below nearby support at the 50-day moving average, just above the 0.71 handle. Slipping below the 0.71 level could open the way towards the March low of 0.7000.

Notes/Observations

• German Apr ZEW survey mixed but optimistic that global environment not as bad as anticipated
• Some ECB members said to doubt any growth rebound in 2019

Asia:

• RBA Apr Minutes reiterated its stance that there was not a strong case for near term adjustment in rates and discussed scenario where rate cut would be appropriate. Rate cut would be appropriate if inflation stayed low while unemployment trended up.
• China PBoC Open Market (OMO) injected CNY40B in 7-day reverse repos for its first operation in 18 sessions Japan Econ Min Motegi stated that trade talks with US were 'frank and good'

Europe:

• ECB's Villeroy (France): Data pointed to much weaker H1 growth than has been forecast

Americas:

• Fed's Rosengren (moderate, voter): Fed was waiting to see evidence that inflation would reach 2% target; unemployment falling, did not expect recession; Balance sheet asset allocation would be topic in future FOMC discussions
• Fed Evans (dove, voter): if activity softened more than expected or inflation was too low, policy might be left on hold or loosened
• President Trump: on China trade, we're going to win either way; we either win by getting a deal or we win by not getting a deal
• House Speaker Pelosi (D-CA): if there was any weakening of Good Friday Accords, there would be no chance for a US-UK trade agreement post-Brexit

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.31% at 389.24, FTSE % at #, DAX +0.72% at 12,106.59, CAC-40 +0.15% at 5,516.92, IBEX-35 +0.26% at 9,522.18, FTSE MIB +0.24% at 21,944.50, SMI +0.65% at 9,575.50, S&P 500 Futures +0.36%]
• Market Focal Points/Key Themes: European Indices trade higher across the board trading towards the highs of today following strength in Asia overnight and in particularly the Shanghai Composite which rose over 2% and stronger US Index futures. On the corporate front shares of Swedish traded Beijer Ref trades over 15% higher after a beat on the top and bottom line and up beat outlook; Zalando also rises sharply after guiding Q1 EBIT above consensus. VAT Group, JD Sports, Ashmore and Flow Traders are among other notable names rising on earnings. Galliford Try declines sharply after warnings FY19 profits to be below forecasts, while Hays Plc and Telit Communications also decline on earnings. Lufthansa shares reverse earlier losses after guiding Q1 EBIT loss on rising fuel costs and overcapacity in Europe. In other news Tele Columbus gains after confirming its in very early stages of evaluating Fiber options while Singulus Tech gains on additional orders. Looking ahead notable earners include UnitedHealth, BlackRock, Johnson & Johnson and Bank of America among others.

Equities

• Consumer discretionary: Lufthansa [LHA.DE] n/c, Air France-KLM [AF.FR] n/c (Lufthansa prelim results), Zalando [ZAL.DE] +% (prelim results), Galliford Try [GFRD.UK] -17% (profit warning), Hays [HAS.UK] -3.5% (trading update), JD Sports Fashion [JD.UK] +5% (earnings)
• Financials: Unicredit [UCG.IT] +2% (US sanctions probe), Ashmore [ASHM.UK] +3% (AUM stats)
• Materials: Eramet [ERA.FR] +11% (authorisation)
• Industrials: Beijer Ref [BEIJB.SE] +17% (earnings), Rolls-Royce [RR.UK] n/c (CEO comments on outlook)
• Technology: Tele Columbus [TC1.DE] +14% (evaluating strategic options)
• Telecom: Telit Communications [TCM.UK] -4% (earnings)

Speakers

• Several ECB policymakers said to doubt projections for growth rebound in H2 2019
• EU's Tusk reiterated that Brexit extension was flexible. EU 27 must keep an open mind on Brexit
• EU's Juncker reiterates that EU was prepared for all Brexit scenarios - even a no-deal outcome. UK had the time and space to overcome the Brexit impasse
• German ZEW Economists: Improvement in sentiment was largely based on hope that the global economic environment would develop less poorly than previously envision. Domestic economic data pointed to weak development
• China Finance Ministry official: Q1 fiscal revenue growth was within a reasonable range; fiscal spending +15% y/y. VAT cuts to put pressure on fiscal revenues but expected the 2019 growth target to be achieved. Q1 fiscal revenue +6.2% y/y; spending +15.0% y/y

Currencies/Fixed Income

• Major European pairs FX price action remained subdued.
• EUR/USD was softer just ahead of the NY morning after reports circulated that some ECB members were said to doubt any growth rebound in 2019. pair lower by 0.1% at 1.1290.
• AUD currency remained on soft footing after Apr RBA Minutes maintained its dovish bias and actually discussed scenarios where rate cut would be appropriate. AUD/USD lower by 0.3% to trade under 0.7150 area.

Economic Data

• (FI) Finland Feb GDP Indicator WDA Y/Y: 1.7% v 2.1% prior
• (CZ) Czech Mar PPI Industrial M/M: 0.5% v 0.3%e; Y/Y: 3.8% v 3.7%e
• (TR) Turkey Feb Industrial Production M/M: 1.3% v 0.3%e; Y/Y: -5.1% v -6.7%e
• (UK) Mar Jobless Claims Change: +28.3K v +26.7K prior; Claimant Count Rate: 3.0% v 2.9% prior
• (UK) Feb Average Weekly Earnings 3M/Y: 3.5% v 3.5%e; Weekly Earnings (ex-Bonus) 3M/Y: 3.5% v 3.4%e
• (UK) Feb ILO Unemployment Rate: 3.9% v 3.9%e; Employment Change 3M/3M: +179K v +181Ke
• (EU) Euro Zone Construction Output M/M: +3.0% v -0.8% prior; Y/Y: +5.2% v -0.1% prior
• (EU) Euro Zone Apr ZEW Expectations Survey: +4.5 v -2.5 prior
• (DE) Germany Apr ZEW Current Situation Survey: 5.5 v 8.5e; Expectations Survey: 3.1 v 0.5e

Fixed Income Issuance

• (NL) Netherlands Debt Agency (DSTA) sold €1.51B vs. €1.0-2.0B indicated range in 0.25% July 2029 DSL bond; Avg Yield: 0.238% v 0.555% prior
• (IN) India sold total INR200B vs. INR200B in 3-month, 6-month and 12-month bills
• (ID) Indonesia sold total IDR6.06T vs. IDR6.0T target in 6-month Islamic Bills, 2-year, 4-year, and 15-year Project-based Sukuk (PBS)

Looking Ahead

• 05:30 (UK) Weekly John Lewis LFL Sales data
• 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) DMO to sell £2.25B in 1.75% Sept 2037 Gilt
• 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (IL) Israel Q4 Final GDP Annualized: No est v 3.0% prelim
• 06:00 (IL) Israel Mar Trade Balance: No est v -$1.6B prior
• 06:00 (IE) Ireland Feb Trade Balance: No est v €7.2B prior
• 06:30 (EU) ESM to sell €2.5B in 6-month bills
• 06:45 (US) Daily Libor Fixing
• 07:45 (US) Weekly Chain Store Sales data
• 08:00 (PL) Poland Mar CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 1.3%e v 1.0% prior
• 08:00 (BR) Brazil Feb PPI Manufacturing M/M: No est v -0.7% prior; Y/Y: No est v 7.8% prior
• 08:00 (UK) Baltic Bulk Index
• 08:00 (RU) Russia announces upcoming OFZ Bond issuance
• 08:30 (CA) Canada Feb Int'l Securities Transactions (CAD): No est v 28.4B prior
• 08:30 (CA) Canada Feb Manufacturing Sales M/M: -0.1%e v +1.0% prior
• 08:55 (US) Weekly Redbook Retail Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:15 (US) Mar Industrial Production M/M: 0.2%e v 0.0% prior (revised from 0.1%); Capacity Utilization: 79.2%e v 79.1% prior (revised from 78.2%); Manufacturing Production: +0.1%e v -0.4% prior
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (15+ years)
• 09:50 (AT) ECB's Nowotny (Austria) in NY
• 10:00 (US) Apr NAHB Housing Market Index: 63e v 62 prior
• 10:00 (MX) Mexico weekly International Reserve data
• 10:30 (NZ) Fonterra Global Dairy Trade Auction
• 13:00 (IE) ECB's Lane (Ireland, in-coming chief economist)
• 14:00 (US) Fed's Kaplan (dove, non-voter)
• 15:00 (AR) Argentina Mar National CPI M/M: 4.1%e v 3.8% prior; Y/Y: No est v 51.3% prior
• 16:30 (US) Weekly API Oil Inventory data

The Turkish lira rose slightly on Tuesday, lifted by better than expected Turkish Industrial Production (Feb -5.1% vs -6.5% f/c and -7.4% prev). The USDTRY bulls may take a breather as overextended studies suggest adjustment (momentum crested and turns lower and stochastic is attempting to emerge from overbought territory) with solid data expected to add to scenario. Overall structure remains strongly bullish and consolidation is likely to precede final push through recent peak at 5.8410 and attack at weekly cloud top (5.8732) and Fibo 38.2% of 7.1074/5.1323 (5.8868). Rising 5SMA offers initial support at 5.7573, with deeper dips expected to hold above ascending 10SMA (5.7003) and keep bulls intact.

Res: 5.8231, 5.8410, 5.8732, 5.8868
Sup: 5.7841, 5.7573, 5.7293, 5.7003

The Pound Sterling has appreciated about 1.18% in value against the Canadian Dollar since last week's trading session. The currency pair tested the upper boundary of a descending channel pattern at 1.7547 during yesterday's session.

The exchange rate was stranded between SMAs during the morning hours of Tuesday's trading session. The 200-hour simple moving average was providing resistance for the pair at 1.7556, while the 50-hour SMA was providing support at 1.7462.

Everything being equal, it is likely that a breakout could occur through the upper boundary of the descending channel pattern during the following trading session.

Meanwhile, technical indicators flash bullish signals on both the 4(H) and weekly time frames chart.

The British Pound has continued its downside movement against the Australian Dollar. The currency pair has depreciated about 0.94% in value since last week's trading sessions.

The exchange rate is currently testing a resistance level formed by the 50-hour simple moving average at 1.8331.

If this resistance line holds, a decline towards a support cluster formed by the combination of the weekly and the monthly PPs at 1.8160 could be expected during the following trading session.

However, if the currency exchange rate passes the 50-hour SMA, bulls could aim for the 200-hour moving average at 1.8513 within this week's trading sessions.

The common European currency traded with low volatility against the Japanese Yen on Monday. The monthly pivot point at 126.69 restricted the currency pair from making an upside movement.

The 50-hour simple moving average at 126.59 was providing resistance for the pair during the first half of today's trading session.

If the resistance level formed by the 50-hour SMA holds, a decline towards a support cluster set by the weekly PP and the 100-hour simple moving average at 125.99 could be expected today.

On the other hand, if the EUR/JPY pair passes the resistance level as mentioned earlier, a surge towards a swing high of 126.80 could be a reality.

The Australian Dollar has depreciated about 40 base points against the US Dollar since yesterday's trading session. The decline was stopped by the 200-hour simple moving average at 0.7138.

Everything being equal, it is likely that the currency exchange rate will continue its downside movement within this session. Bears could drag the rate towards a support level at 0.7111.

However, if the support line formed by the 200-hour SMA at 0.7138 holds, a surge towards the upper boundary of a dominant descending channel at 0.7197 could be the next target.

The US Dollar appreciated about 92 base points against the Canadian Dollar on Monday. A breakout occurred through the upper boundary of a medium-term descending channel pattern at 1.3386 during yesterday's trading session.

As for the near future, it is likely that the currency exchange rate will continue its upside momentum during the following trading session. Bullish traders could push the exchange rate closer to the weekly R2 at 1.3448.

Although, the USD/CAD currency pair could reverse from the current price level at 1.3390 and aim for the 50-, 100– and 200-hour SMAs at 1.3348 today.

The New Zealand Dollar has depreciated about 41 base points against the US Dollar since Monday's trading session.

The exchange rate was stranded between SMAs during the first part of today's trading session. The 50-hour simple moving average was providing resistance for the currency pair, while the 100– and 200-hour was providing support for the rate.

A breakout could be expected from the moving averages during the following trading session.

Meanwhile, technical indicators flash bullish signals on both the smaller and the larger time-frame charts.