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EUR/JPY Bullish Breakout Starts Impulsive Wave 3
The EUR/JPY is now challenging the 144 ema close on the daily chart, which is a key decision zone for a bullish breakout or bearish bounce. The current daily candle is showing strength as the close was near the high. A breakout above the previous top of wave 1 could indicate a continuation higher.
The EUR/JPY made a strong bullish impulsive breakout above both resistance trend lines (dotted red), which makes it likely that the wave 2 (pink/purple) correction has been completed and that price could be ready for a double wave 3 (pink/purple). The EUR/JPY needs to reach the Fibonacci targets of wave 3 vs 1 before this wave 3 pattern becomes more probable.
Risk-On Sentiment Is Back In The Markets
Market movers today
After better-than-expected Chinese and euro area data triggered a sell-off in global bond markets on Friday, markets will pay close attention to a range of sentiment indicators released on both sides of the Atlantic later this week.
But today we start the week in a somewhat quiet fashion , with the US Empire Manufacturing index the only data release of interest. The US manufacturing sector has not been immune to the global slowdown and we will look to see whether the April figure points to any trend reversal.
On the political front, EU ministers are expected to vote today on approving the negotiating mandate for the Commission to start trade talks with the US . With cracks in the EU's united front not only showing with regard to the Brexit strategy, focus will be on whether France openly opposes the start of the negotiations.
Selected market news
Equities in Asia saw a brisk opening, following good earnings news from the US, where the S&P 500 index climbed over the 2,900 level for the first time since early October 2018. Positive export and bank loan data from China last week and optimism on the oncoming China-US deal are also supporting the risk-on sentiment. On Saturday, US Treasury Secretary Steven Mnuchin declared a China-US trade agreement would go "way beyond" previous efforts to open China's markets to US companies hoping that the two countries were "close to the final round" of negotiations.
Reuters wrote that US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing. In the push to secure a deal in the next month or so, US negotiators have become resigned to securing less than they would like on curbing those subsidies and are focused instead on other areas where they consider demands are more achievable.
On Monday, the US starts trade talks with Japan. Mnuchin wants a currency clause to stop manipulation of the JPY to support exports.
US President Donald Trump criticised the Fed, tweeting that if the Fed had done its job properly the stock market 'would have been up 5,000 to 10,000 additional points, and GDP would have been well over 4% instead of 3% with almost no inflation', blaming quantitative tightening. ECB chief Mario Draghi said he was worried about central bank independence, especially in "the most important jurisdiction in the world", thus criticising Trump. Central bank independence was a key part of IMF meetings in Washington over the weekend.
Euro-Zone’s Industrial Production Declined Less Than Expectations In February
For the 24 hours to 23:00 GMT, the EUR rose 0.32% against the USD and closed at 1.1295 on Friday, amid speculation that news of a Japanese bank's plans to purchase a German multi-billion-dollar aviation finance business might boost demand for the currency.
Data indicated that the Euro-zone's seasonally adjusted industrial production dropped 0.2% on a monthly basis in February, amid drop in energy production and less than market expectations for a fall of 0.6%. In the previous month, industrial production had recorded a revised gain of 1.9%.
In the US, data showed that the US flash Reuters/Michigan consumer sentiment index declined to a level of 96.9 in April, compared to a reading of 98.4 in the prior month. Market participants had envisaged the index to drop to a level of 98.2.
In the Asian session, at GMT0300, the pair is trading at 1.1313, with the EUR trading 0.16% higher against the USD from Friday's close.
The pair is expected to find support at 1.1289, and a fall through could take it to the next support level of 1.1264. The pair is expected to find its first resistance at 1.1331, and a rise through could take it to the next resistance level of 1.1348.
Amid lack of macroeconomic releases in the Euro-zone today, investors will keep an eye on the US Empire State manufacturing index for April, slated to release later in the day.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
UK’s Rightmove House Price Index Rose By The Most In A Year In April
For the 24 hours to 23:00 GMT, the GBP rose 0.15% against the USD and closed at 1.3077 on Friday.
In the Asian session, at GMT0300, the pair is trading at 1.3100, with the GBP trading 0.18% higher against the USD from Friday's close.
Overnight data showed that UK's Rightmove house price index advanced 1.1% on a monthly basis in April, rising by the most in a year and following a gain of 0.4% in the preceding month.
The pair is expected to find support at 1.3056, and a fall through could take it to the next support level of 1.3013. The pair is expected to find its first resistance at 1.3138, and a rise through could take it to the next resistance level of 1.3177.
Amid lack of economic releases in UK today, traders would focus on global macroeconomic events for further direction.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Japanese Yen Trading A Tad Higher In The Asian Session
For the 24 hours to 23:00 GMT, the USD rose 0.36% against the JPY and closed at 112.02 on Friday.
In the Asian session, at GMT0300, the pair is trading at 112.00, with the USD trading marginally lower against the JPY from Friday’s close.
The pair is expected to find support at 111.77, and a fall through could take it to the next support level of 111.53. The pair is expected to find its first resistance at 112.17, and a rise through could take it to the next resistance level of 112.33.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Swiss Franc Trading Higher In The Morning Session
For the 24 hours to 23:00 GMT, the USD slightly declined against the CHF and closed at 1.0028 on Friday.
In the Asian session, at GMT0300, the pair is trading at 1.0023, with the USD trading 0.05% lower against the CHF from Friday’s close.
The pair is expected to find support at 1.0003, and a fall through could take it to the next support level of 0.9983. The pair is expected to find its first resistance at 1.0037, and a rise through could take it to the next resistance level of 1.0051.
Moving ahead, traders would await Switzerland’s producer & import prices for March, set to release in a while.
The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.
Loonie Extends Its Gains In The Asian Session
For the 24 hours to 23:00 GMT, the USD declined 0.34% against the CAD and closed at 1.3331 on Friday.
In the Asian session, at GMT0300, the pair is trading at 1.3322, with the USD trading 0.07% lower against the CAD from Friday’s close.
The pair is expected to find support at 1.3299, and a fall through could take it to the next support level of 1.3275. The pair is expected to find its first resistance at 1.3360, and a rise through could take it to the next resistance level of 1.3397.
Trading trend in the Loonie today, is expected to be determined by Canada’s existing home sales for March, scheduled to release later in the day
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Aussie Extends Its Gains In The Morning Session
For the 24 hours to 23:00 GMT, the AUD rose 0.67% against the USD and closed at 0.7172 on Friday.
LME Copper prices rose 0.9% or $57.5/MT to $6490.0/MT. Aluminium prices declined 0.2% or $4.0/MT to $1843.5/MT.
In the Asian session, at GMT0300, the pair is trading at 0.7178, with the AUD trading 0.08% higher against the USD from Friday’s close.
The pair is expected to find support at 0.7137, and a fall through could take it to the next support level of 0.7095. The pair is expected to find its first resistance at 0.7206, and a rise through could take it to the next resistance level of 0.7233.
In absence of key economic releases in Australia today, investor sentiment would be determined by global macroeconomic events.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Gold: Yellow Metal Extends Its Losses In The Morning Session
For the 24 hours to 23:00 GMT, Gold declined 0.08% against the USD and closed at USD1294.40 per ounce on Friday.
In the Asian session, at GMT0300, the pair is trading at 1291.10, with gold trading 0.25% lower against the USD from Friday’s close.
The pair is expected to find support at 1287.57, and a fall through could take it to the next support level of 1284.03. The pair is expected to find its first resistance at 1296.87, and a rise through could take it to the next resistance level of 1302.63.
The yellow metal is trading below its 20 Hr and 50 Hr moving averages.
Silver: White Metal Trading On A Weaker Footing This Morning
For the 24 hours to 23:00 GMT, Silver rose 0.20% against the USD and closed at USD14.95 per ounce on Friday.
In the Asian session, at GMT0300, the pair is trading at 14.90, with silver trading 0.33% lower against the USD from Friday’s close.
The pair is expected to find support at 14.82, and a fall through could take it to the next support level of 14.74. The pair is expected to find its first resistance at 15.02, and a rise through could take it to the next resistance level of 15.15.
The white metal is trading below its 20 Hr and 50 Hr moving averages.
