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• US earnings season commences with JPMorgan & Wells Fargo
• Dollar advances alongside US yields, but pares gains
• Yen retreats ahead of US-Japan trade talks, gold follows

Earnings season kicks off with major US banks

US equity markets closed practically flat yesterday, though the Nasdaq Composite (-0.22%) did post some losses, with traders appearing reluctant to take on new positions ahead of what promises to be a stormy earnings season. US banking behemoths JPMorgan Chase and Wells Fargo will report their Q1 results today and markets will keep a watchful eye for evidence of whether the global slowdown has started to hit bank earnings, which are sensitive to business cycle changes.

In other words, the quality of earnings from these banks will not only affect their own stock price, but perhaps the market in general, as they may be a litmus test for the broader financial sector. To be clear, the earnings season likely presents the biggest near-term risk for US markets, considering the prospect for disappointing results or downbeat guidance in an environment where the major equity indices are trading just below all-time highs.

Dollar advances after solid US data, but can’t hold onto gains

Data on Thursday showed that US applications for unemployment benefits dropped spectacularly to 49 ½-year lows in the week ending April 6th and below expectations for a slight increase, indicating a resilient labor market and underpinning confidence in the US economy. Some upbeat remarks by Fed Vice Chair Clarida may have helped as well. However, gains were limited, keeping the greenback below the key 112 level against the Japanese yen as investors still need to see a sustainable improvement in economic indicators and reliable progress in global issues such as trade and Brexit before abandoning thoughts of a more dovish Fed.

Yet, the greenback is giving back some of its gains early on Friday against a basket of six major currencies, mainly thanks to a stronger euro, which holds the biggest weight by far in that basket. A monthly preliminary survey by the University of Michigan will provide some clues on US consumer sentiment later in the day, with investors looking for any inflationary signs.

Yen retreats alongside gold

In the broader market, there were some sizeable moves, but with little in the way of fresh news behind them. Among the main under-performers was the Japanese yen, which fell nearly across the board, without a clear trigger. Perhaps traders trimmed some of their long exposure ahead of the US-Japan trade talks that will commence next week, and that could cloud the outlook for the currency via the threat of tariffs, despite its safe-haven status.

Gold retreated as well, though that seems owed mainly to the rebound in the dollar and long-term US interest rates. Since gold contracts are generally denominated in dollars, a strengthening US currency diminishes the appeal of the yellow metal for investors using foreign currencies.

• Rates: Q1 earnings might play important role in coming weeks
  Today’s eco calendar only contains second tier data with EMU production and Michigan consumer confidence. JP Morgan and Wells Fargo kick off Q1 earnings season. Earnings and especially corporate outlooks might play an important role in comings weeks if affected by the global growth slowdown.
• Currencies: Euro resilience persists despite solid US eco data
  EUR/USD dropped (temporary) off this week’s top levels yesterday as the dollar was supported by higher yields and multi-year low US jobless claims. However, the EUR/USD correction was already reversed in Asia this morning. EUR/USD shorts stay in the defensive. Will EUR/USD clear the 1.13 mark today?

The Sunrise Headlines

• US equity markets were close to unchanged yesterday with technology shares underperforming (Nasdaq -0.21%). Asian equities are trading mixed this morning with Chinese indices underperforming ahead of trade data.
• France will oppose the opening of trade negotiations between the EU and US. The Elysee said that the continuous threats of new tariffs and the decision to quit the Paris climate accord are not a good basis to start trade talks.
• Herman Cain, US President Trump’s nomination for a seat on the Fed board, is facing growing opposition. As 4 out of 53 Republican senators publicly said not to back Cain, he would fall short of the 51 votes needed for confirmation.
• The Reserve Bank of Australia warned for a “sharper downturn” in the global economy in its semi-annual assessment. It also sees property prices fall further in Sydney as risks to Australian households have risen.
• The IMF said that new banking rules, emerged since the financial crisis, are keeping banks safer but that the implications for market liquidity are worrying. Recent abrupt gyrations in financial markets could be the “tip of the iceberg”.
• Eurogroup chief Centeno expects a rebound in the EMU economy in the second half of 2019, dependent on progress around Brexit and trade. He said that fundamentals remain strong and that the economic slowdown is still temporary.
• Today’s US eco calendar only contains April University of Michigan consumer confidence. The EMU prints (final) industrial production figures for February. JPMorgan Chase and Wells Fargo kick off the new earnings season

Currencies: Euro Resilience Persists Despite Solid US Eco Data

Euro shows remarkable resilience

EUR/USD initially held near 1.1285 yesterday despite soft comments of ECB’s Draghi on Wednesday. There were no important EMU data. The US-German interest rate differential rewidened slightly in favour of the US currency. US jobless claims printed at a multi decade low and supported the intraday USD momentum. EUR/USD drifted off recent top (closed 1.1253). USD/JPY also rebounded (close at 111.66).

Overnight, Asian equities show no clear trend with China again underperforming. EUR/USD and EUR/JPY jumped higher. We didn’t see specific news to explain the euro uptick. The move is said to be due to strong euro demand at the Tokyo fixing. EUR/USD is again trading in the 1.1290 area. USD/JPY gained a few tricks (111.75 area). Commodity related currencies like the Aussie dollar, the kiwi dollar and the Canadian dollar lost momentum yesterday as the oil rally ran into resistance. In its financial stability rapport, the RBA warns on additional risk to Australian households from elevated house prices. There was little negative impact on the Aussie dollar (AUD/USD 0.7135 area). Today, the EMU February production is expected to decline 0.5% M/M. The figure is outdated, but euro bulls might look for signs of bottoming after recent soft patch of the European economy. In the US, U. of Michigan consumer confidence is expected little changed after last month’s rebound. First Q1 earnings from major US banks will set the tone for (US) equity trading. Earlier this week, the euro was remarkably resilient despite a soft ECB. Yesterday, EUR/USD declined (temporarily) due to overall USD strength. The jury is still out, but the overnight price action suggests that euro shorts remain in the defensive. At same time, the Fed’s wait-and-see bias doesn’t help the dollar. Last week, EUR/USD came close to the 1.1177/87 support, but a break didn’t occur. For that to happen, big negative EMU news or surprisingly strong US data are needed. Recent evidence doesn’t support this scenario. We keep the view that a sustained EUR/USD break lower isn’t evident. In case of a break above 1.13, next high-profile EUR/USD resistance comes in at 1.1448.

EUR/GBP held a sideways consolidation pattern in the lower part of the 0.86 big figure. Markets are awaiting the next steps in the Brexit saga as the UK secured a delay on Brexit. Overnight, EUR/USD gains also spilled over into the EUR/GBP cross rate. There are no important UK eco data today. With the UK heading for a new period of domestic political uncertainty, we see no reason to turn more positive on sterling. We assume the EUR/GBP 0.85 support area to be solid.

EUR/USD holding in the high 1.12 area despite strong US data

General Trend:

• Healthcare, Property, Consumer Discretionary and Materials firms are among the decliners in Shanghai
• Heavily weighted companies lead equity gains in Japan (Softbank and Fast Retailing)
• Nikkei-weighted Fast Retailing rises over 7%, Q2 earnings beat ests
• China PBoC skipped open market operation (OMO) for 17th straight session
• Various Chinese press articles comment on the possible stabilization in domestic economic data
• China March trade balance expected to be released on Friday during the China afternoon
• China Q1 GDP expected to be released on April 17th (Wed)
• RBA Financial Stability Review did not comment directly on monetary policy, April policy meeting minutes due on April 16th (Tuesday)
• Singapore Central Bank left policy unchanged (as expected), Q1 growth slowed more than expected
• US bank earnings in focus on Friday, JPMorgan, Wells Fargo and PNC are expected to report
• US/Japan due to hold first round of trade talks on April 15-16th (Mon-Tues) in Washington D.C
• New Zealand Q1 CPI data is expected to be released on April 17th (Wed)
• Bank of Korea (BOK) is expected to hold its rate decision on April 18th (unchanged expected)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.5%
• (AU) RESERVE BANK OF AUSTRALIA (RBA) FINANCIAL STABILITY REVIEW: DOES NOT COMMENT DIRECTLY ON MONETARY POLICY
• Commonwealth Bank [CBA.AU]: Said to be preparing plan to cut 10,000 jobs (approx 20% of global workforce*) - Australia press
• (NZ) New Zealand March REINZ Median House Prices M/M: -1.9%; Y/Y: 4.7%
• (NZ) New Zealand Mar Business Manufacturing PMI: 51.9 v 53.4 prior (lowest reading since July 2018)

China/Hong Kong

• Shanghai opened -0.2%, Hang Seng opened -0.1%
• (CN) China PBoC Open Market Operation (OMO): Skips for 17th straight session: Net: CNY0 v CNY0 prior
• (CN) China PBoC sets yuan reference rate: 6.7220 v 6.7088 prior
• (CN) Economic data signals stable growth - China Daily
• (CN) China Former PBOC Official: China economy to stabilize in Q2 - Chinese Press

Japan

• Nikkei opened +0.3%
• (JP) Japan Fin Min Aso: Japanese firms are eager to invest in the US; will further expand US-Japanese trade - comments from Washington
• (JP) Bank of Japan (BOJ) Gov Kuroda: Japan's first presidency of the G20 will focus on financial regulations and global economy - comments in DC
• (JP) Japan Fin Min Official: G20 won't issue statement on Friday
• (JP) Japan Econ Min Motegi: Confirms first round of US-Japan trade talks to be held on April 15-16th; want to firmly discuss for a good outcome; will start by deciding on targeting goods and categories

Korea

• Kospi opened -0.2%
• (KR) Pres Trump: Another meeting with [North Korea] Leader Kim could happen
• (KR) South Korea sells KRW500B v KRW500B indicated in 50-year bonds: avg yield 1.880% v 1.98% prior

Other

• (SG) SINGAPORE Q1 ADVANCE GDP Q/Q: 2.0% V 2.2%E; Y/Y: 1.3% V 1.4%E (slowest annualized growth since 2016)
• (SG) MONETARY AUTHORITY OF SINGAPORE (MAS) SEMI-ANNUAL MONETARY POLICY STATEMENT: LEAVES POLICY UNCHANGED (AS EXPECTED); Follows 2 consecutive tightening moves
• (PH) Philippines Central Bank (BSP) Gov Diokno: Rate cut is on the agenda, reserve ratio (RRR) cut in agenda 'all the time'

North America

• (US) US Fed Chair Powell said to reiterate 'rates in right place'
• (US) Herman Cain expected to withdraw his name from Fed consideration amid opposition to his nomination - US Media
• (US) White House Economic Adviser Hassett: Q2 growth could be 4%, putting us on track for annual growth of 3%
• Disney [DIS]: CEO Iger: To step down in 2021; succession plan in works - CNBC

Europe

• (EU) ECB policymakers are reportedly skeptical about tiered deposit rate; reportedly leaning towards offering negative rate on TLTRO to banks that achieve lending targets - press

Levels as of 1:20 ET

• Nikkei 225,+0.7 %, ASX 200 +0.8%, Hang Seng -0.2%; Shanghai Composite -0.2%; Kospi +0.3%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 +0.2%
• EUR 1.1295-1.1252 ; JPY 111.81-111.58 ; AUD 0.7134-0.7115 ;NZD 0.6738-0.6713
• Gold +0.2% at $1,295/oz; Crude Oil +0.4% at $63.83/brl; Copper +0.3% at $2.903/lb

Daily Pivots: (S1) 111.14; (P) 111.42; (R1) 111.95; More...

USD's break of 112.82 resistance suggests that rise from 107.71 has resumed. Intraday bias stays on the upside for 112.13. Decisive break there will resume larger rise from 104.69. Next target will be 114.54 key resistance. On the downside, break of 110.84 is needed to indicate completion of rise from 109.71. Otherwise, further rise remains in favor even in case of retreat.

In the bigger picture, medium term outlook in USD/JPY remains a bit mixed as it's staying inside falling channel from 118.65, but there are signs of bullish reversal. On the upside, break of 114.54 resistance will revive the case the corrective fall from 118.65 has completed with three waves down to 104.69. And whole rise from 98.97 (2016 low) is resuming for 118.65 and above. But before that, outlook stays neutral first.

Daily Pivots: (S1) 0.7128; (P) 0.7152; (R1) 0.7194; More...

Despite breaching 0.7168 resistance, AUD/USD quickly retreated and intraday bias is turned neutral again first. On the downside, break of 0.7109 minor support will turn bias back to the downside for 0.7003/7052 support zone. On the upside, above 0.7174 will target 0.7206 resistance. Break will likely resume rise from 0.6722 through 0.7295 high.

In the bigger picture, as long as 0.7393 resistance holds, fall from 0.8135 is still expected to extend. Such decline is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Daily Pivots: (S1) 1.3331; (P) 1.3365; (R1) 1.3416; More...

Intraday bias in USD/CAD remains neutral as it's staying in sideway trading between 1.3250/3467. On the upside, decisive break of 1.3467 resistance will resume rise from 1.3068. Further rally should be seen to retest 1.3664 next. On the downside, firm break of 1.3250 support will indicate completion of whole rebound from 1.3068. In that case, deeper fall would be seen back to 1.3068/3112 support zone.

In the bigger picture, structure of the medium term rise from 1.2061 (2017 low) to 1.3664 is not clearly impulsive. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.3210) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high). However, firm break of the channel support should confirm reversal and target 1.2061 low again.

Daily Pivots: (S1) 1.1282; (P) 1.1299; (R1) 1.1308; More...

EUR/CHF's rise from 1.1162 is still in progress and intraday bias remains on the upside. Sustained trading above 1.1310 support turned resistance will pave the way to retest 1.1444 key resistance level next. On the downside, below 1.1254 minor support will turn bias back to the downside for 1.1154 key fibonacci level instead.

In the bigger picture, multiple rejection by 55 week EMA indicates medium term bearishness. Focus remains on 1.1154/98 support zone (2016 high and 61.8% retracement of 1.0629 to 1.2004 at 1.1154). Decisive break there will confirm resumption of whole down trend from 1.2004 and long term bearish reversal. EUR/CHF should then target 1.0629 support and below. This will now remain the favored case as long as 1.1444 resistance holds.

Daily Pivots: (S1) 144.95; (P) 145.32; (R1) 145.69; More...

No change in GBP/JPY's outlook as it's staying in consolidation from 148.87. Intraday bias remains neutral at this point. On the downside, sustained break of 143.72 will indicate near term reversal, after rejection by 149.48 key resistance. In that case, intraday bias will be turned to the downside for 141.00 support first. On the upside, decisive break of 149.48 key resistance will carry larger bullish implication and target 156.58 resistance next.

In the bigger picture, focus is now staying on 149.98 key resistance. Decisive break there should confirm that medium term fall from 156.59 (2018 high) has completed at 131.51 already. Rise from 131.51 is then seen as the third leg of the corrective pattern from 122.36 (2016 low). GBP/JPY should then target 156.59 and above. However, rejection by 149.98 will retain medium term bearishness and could extend the fall from 156.59 through 131.51 to 122.36.

Market movers today

After a busy week we finish off on a quiet note. The main release today will be preliminary US consumer confidence for April from the University of Michigan. The consensus is for a small decline from 98.4 to 98.0.

Otherwise, focus continues to be on comments from UK politicians regarding Brexit and any news on US-China trade talks . This week, US Treasury Secretary Steven Mnuchin said the US and China has found agreement on an enforcement mechanism, which has been one of the key challenges.

Selected market news

Asian stocks traded mixed following the US markets, which were steady ahead of corporate earnings and leaning on solid economics. The Treasuries market also calmed. Chinese equities and the Japanese Topix index slid slightly and, while US stock futures were flat, Q1 19 reporting starts today with several US banks.

Market concerns over a sharp slowdown in US growth were alleviated as data showed the number of people filing applications for unemployment benefits dropped to a 50-year low. Also, comments from Fed Vice Chairman Richard Clarida that the US economy is in a "good place" calmed the markets. Clarida also re-emphasised the Fed's patience on rate hikes.

The IMF's Christine Lagarde stated yesterday that the six-month delay in Brexit avoids the "terrible outcome" of a "no-deal" solution, but does nothing to lift uncertainty over the final outcome. The IMF's Deputy Managing Director, Mitsuhiro Furusawa, warned that a sharper-than-expected slowdown in China's economy is still a key risk to global growth.

In Washington, Bank of Italy Governor and ECB council member Ignazio Visco said new TLTRO details would be defined at the 6 June meeting, when new economic projections would be released. The ECB will also discuss the side effects of negative rates before the meeting. A Reuters report stated that the ECB was considering offering negative rates on TLTRO loans as the idea of a tiered deposit rate was "met with widespread scepticism".

US President Donald Trump declared yesterday that he would not revoke sanctions on North Korea at a meeting in Washington with South Korean President Moon Jae-in discussing how to get US-North Korea nuclear talks back on track after an unsuccessful summit in Hanoi.

PM Theresa May told Parliament she will try to get a Brexit deal approved to avoid getting trapped in a long extension. May also hinted at a compromise on what trade ties with the EU should look like after Brexit. She said there was not much difference between Labour and her government in terms of their trade proposals, hinting that a customs union is a possible topic for compromise. May also restated that she opposes a second referendum on Brexit.

For the 24 hours to 23:00 GMT, the EUR declined 0.16% against the USD and closed at 1.1259.

In economic news, Germany's final consumer price index (CPI) advanced 1.3% on a yearly basis in March, in line with market expectations and confirming the preliminary print. In the prior month, the CPI had recorded a rise of 1.5%.

The US dollar gained ground against a basket of currencies, following upbeat US economic data.

In the US, data showed that the US producer price index (PPI) rose to a 5-month high level of 2.2% on an annual basis in March, surpassing market anticipations for a climb of 1.9%. In the prior month, the PPI had registered a rise of 1.9%. Moreover, the nation's seasonally adjusted initial jobless claims unexpectedly declined to a level of 196.0K in the week ended 06 April 2019, declining to its lowest level since 1969 and defying market consensus for a rise to a level of 210.0K. Initial jobless claims had recorded a revised reading of 204.0K in the preceding week.

In the Asian session, at GMT0300, the pair is trading at 1.1288, with the EUR trading 0.26% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1261, and a fall through could take it to the next support level of 1.1235. The pair is expected to find its first resistance at 1.1303, and a rise through could take it to the next resistance level of 1.1319.

Moving ahead, traders would keep an eye on the Euro-zone's industrial production for February, slated to release in a few hours. Later in the day, the US Michigan consumer sentiment index for April, will be on investors radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.