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US initial jobless claims dropped -8k to 196k in the week ending April 6, below expectation of 210k. It's also the lowest since October 4, 1969, which it was 193k. Four-week moving average of initial claims dropped -7k to 207k, lowest since December 6 1969.

Continuing claims dropped -13k to 1.713M. Four-week moving average of continuing claims dropped -11k to 1.735M.

Also from the US, headline PPI accelerated to 2.2% yoy in March, well above expectation of 1.9% yoy. Core PPI slowed to 2.4% yoy, matched expectations.

CBI Director General Carolyn Fairbairn, criticized that the Brexit delay till October 31 only provides "brief relief" for businesses. And they wouldn't be "dancing in the streets". Instead, it will be quickly followed by " frustration, exasperation, we're still here."

She added that "our huge hope off the back of this six-month reprieve is that it's used to set up a process and it's not just people locked in a room on their own which we've seen in the last few days."

Key messages from the Fed and ECB were delivered in completely different fashion on Wednesday, with important implications for the market. The EU has decided to extend Brexit til October 31st, a proposal that will have to be approved by British Parliament. More central bank talk is coming in the day ahead. Market volumes wind down as traders unoficially start a long weekend ahead of the Easter & Passover holidays over the next 2 weeks. 6 out of the existing 8 Premium trades are currently in the green. 5 in currencies, 2 in commodities and 1 in crypto.

Sometimes central banks are subtle, other times they are straight forward. Once in awhile both happen on the same day and that was the story on Wednesday.

The message from the FOMC Minutes was a completely clear impression that the Fed doesn't know what's going to happen next and does not have a notable bias. The text said the majority saw rates on hold through 2019 and that patience is needed. They said time would be needed to assess if Q1 weakness spills into Q2.

As Ashraf summarized: “We could hike, we could cut, but in truth we'd like to believe we've reached equilibrium. Leave us alone and don't expect us to hike during elections.”

Draghi meanwhile was playing a different game. He characterized the meeting as one where the Governing Council acknowledged Eurozone economic weakness and that it will extend through the rest of the year. He said the base-line was only to act if negative contingencies developed. He, however, repeatedly emphasized that all options were available if needed.

The message here was much more subtle. He was saying (to paraphrase), 'don't bet against the eurozone because if there is a deterioration, we are ready, we still have ammo.' He has undoubtedly seen the buildup in spec positions against the euro and the worries about European financials. The question is: Will the market call his bluff?

Looking ahead, we hear from the Fed's Clarida and Bullard in the day ahead. Clarida spoke on Tuesday but didn't touch on the outlook. There has been some shifting towards a more-constructive tone among Fed speakers in the past week, we will watch if that continues. Even a hard commitment to the sidelines poses upside risks for the dollar with the market pricing in a 58% chance of a cut before year end.

Another central banker to watch is the BOC's Wilkins. Canadian data has been far better than expectations so far this year but the outlook is plagued by growth worries abroad and expectations that the Q1 blip isn't going to last. The market certainly hasn't rewarded CAD lately but that could change if oil continues to rise and data continues to beat.

Oil loses momentum just after breaking resistance

A second large inventory build in two weeks, reported by EIA on Wednesday, has seen the oil rally stutter just as it was getting going.

A break through an important resistance zone last week looked to have been the catalyst for another pop higher in WTI, with the price having jumped from around $63 to $65 in just a couple of days but already we’re seeing consolidation around these levels and momentum appears to have waned.

WTI Crude Daily Chart

The rise in inventories accompanied new economic projections by the IMF which highlighted slowing growth around the world and numerous risks to the economy. Reports that Russia may be contemplating raising production and refusing to partake in OPEC+ cuts beyond the current June deadline may also have contributed to oil quickly losing its appeal.

EIA Crude Oil Inventories

There remains numerous supportive factors for oil prices though, with clashes in Libya drawing much attention despite current production being uninterrupted. Above $65, the $67-68 has previously been a major area of support and resistance so we may not have to wait long for the rally to once again run into difficulty, if of course it finds its mojo again.

The DAX index has gained ground on Thursday, continuing the upward trend seen on Wednesday. Currently, the DAX is at 11,947, up 0.36% on the day. In economic news, German Final CPI remained steady, with a gain of 0.4%. This matched the forecast. On Friday, the eurozone releases industrial production.

There were no surprises for investors from the ECB policy meeting. The bank held the minimum bid rate at 0.00%, where it has been pegged since 2016. Investors were more interested in Mario Draghi’s comments after the rate decision. Draghi acknowledged that eurozone economic data remains weak, particularly in the manufacturing sector. The economic outlook remains weak, with Draghi saying that “slower growth momentum is expected to extend into the current year”. At the same time, Draghi said that the likelihood of a recession remains low. On the inflation front, Draghi stated that interest rates will remain at current levels at least until the end of 2019 and possibly later.

In a CNBC interview yesterday, US Treasury Secretary Steve Mnuchin talked about some concrete progress in US-China trade negotiations, including the core issue of enforcement.

Mnuchin said: "We've pretty much agreed on an enforcement mechanism. We've agreed that both sides will establish enforcement offices that will deal with the ongoing matters. This is something both sides are taking very seriously... We are really focused on the execution of the documents."

Nevertheless he refused to put a timeline of the talks. "We are hopeful we can do this quickly, but we are not going to set an arbitrary deadline," Mnuchin said. "If we can complete this agreement, this will be the most significant changes to the economic relationship between the U.S. and China in really the last 40 years. The opening of the Chinese economy will be a tremendous opportunity with structural changes that will benefit U.S. workers and U.S. companies."

Chinese commerce ministry confirmed today that senior trade negotiators from both countries held phone calls earlier this week. Gao Feng, the ministry's spokesman said "in the next step, both trade teams will keep in close communication, and work at full speed via all sorts of effective channels to proceed with negotiations."

The British Pound has depreciated about 3.32% in value against the Japanese Yen since the currency pair reversed from the upper boundary of a descending channel pattern at 148.78.

As for the near future, it is likely that the exchange rate continues its decline in the descending channel pattern.

The GBP/JPY currency exchange rate will target a support cluster formed by the combination of the weekly and the monthly pivot points at 142.94 during the following trading sessions.

The Australian Dollar has appreciated about 2.71% in value against the Japanese Yen since March 25. The currency pair reached March 5 swing high of 79.71 during Tuesday's trading session.

Currently, the exchange rate is gradually regaining some of its lost points and aiming for the upper boundary of a medium-term ascending channel pattern at the 80.00 area.

However, the weekly R1 at 79.71 could hinder the currency exchange rate from reaching the forecast.

Although, technical indicators suggest that the AUD/JPY currency pair will end this week's trading session with an upside momentum

Notes/Observations

• EU grants UK a six-month extension (until Halloween) on Bexit to avert a potential crisis but membership could be cut short if UK fails to hold EU elections next month
• UK PM May had indicated that she still aimed to leave by May 22 to avoid EU elections

Asia:

• Australia PM Morrison confirmed that Federal elections to be held May 18th
• Australia Apr Consumer Inflation Expectation: 3.9% v 4.1% prior
• China Mar CPI saw its fastest pace since Oct (YoY: 2.3% v 2.3%e)

Europe:

• EU's Tusk confirmed that EU and UK had agreed to Brexit extension until Oct 31st (additional 6-months) and would set up a review for Jun 21st to check on progress. Condition includes that UK must now hold EU elections or leave the Bloc by Jun 1st
• PM May: Still looking to leave the EU asap. EU agreed that the extension could end when Withdrawal Agreement was ratified by Parliament; UK to keep full membership rights during extension. UK could leave EU before June 30th and did not need to hold EU elections if deal was reached by May 22nd. No simple way to break deadlock in UK Parliament
• France President Macron: EU leaders were convinced to grant the UK an extension because PM May believed that a cross party deal could pass parliament. There were different sensibilities but reached a compromise at Brexit summit; True that a majority of EU leaders were for longer extension, but it was neither good for us nor the UK
• Germany Chancellor Merkel: Brexit delay was in the best interest of EU. Germany fighting for an orderly Brexit because of our own interests. Important that UK prepared for EU elections
• UK Labour Shadow Chancellor Mc’Donnell: There’s a potential for a deal with PM May’s govt but so far there were fundamental disagreements
• PM May reportedly would seek to stay on as PM if Brexit deal was not passed by end of June
• ECB's Coeure (France): ECB not in business of helping banks

Americas:

• US Treasury Sec Mnuchin stated that had agreed with China on enforcement mechanism and to establish enforcement offices. Hopeful could reach a trade deal quickly but would not set any arbitrary deadline for Trump-Xi summit He had no comment on tariffs. Both US and China were working hard to reach trade agreement with more calls scheduled this week
• FOMC Mar Minutes: Most officials saw no need for change in rates this year. Majority said that patient approach was needed given uncertainties

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.20% at 385.92, FTSE -0.07% at 7,416.75, DAX -0.25% at 11,876.69, CAC-40 +0.31% at 5,466.69, IBEX-35 -0.26% at 9,382.04, FTSE MIB -0.69% 21,521.50, SMI +0.17% at 9,557.40, S&P 500 Futures -0.02%]

Market Focal Points/Key Themes:

• European Indices trade mostly lower with the French CAC bucking the trend after a mixed session in Assia and Flat US futures.
• On the corporate front shares of French listed LVMH and Christian Dior rise after strong Q1 Revenue numbers which beat forecasts; Sodexo also gains sharply on earnings and affirmed outlook. Other notable gainers on earnings include 2G Energy, Euromicron, Barry Callebaut and Lindab. Shares of Hella KGaA declines on earnings, with Curetis and hVIVO also declining on earnings.
• In other news Prysmian trades sharply lower on the cancellation of shareholder meeting, as a spokesperson notes it is to re-examine financial statements on WesternLink; Lufthansa gains after launching the formal sale process for its catering unit while Ocado, Marks & Spencer, Engie and Glencore all trade lower on analyst downgrades.
• In the US, Tesla shares fall over 4% on the premarket after reports its to freeze spending on its $4.5B gigafactory.
• Looking ahead notable earners include Fastenal, Apogee Industries and Rite Aid.

Equities

• Consumer discretionary: LVMH [MC.FR] +3% (sales), Ted Baker [TED.UK] +0.5% (new CEO; notes probe), WH Smith [SMWH.UK] -0.5% (earnings), Barry Callebaut [BARN.CH] +3.5% (earnings), Christian Dior [CDI.FR] +2.5% (sales), easyHotel [EZH.UK] +7.5% (trading update), Grafton [GFTU.UK] +2.5% (acquisition)
• Financials: Man Group [EMG.UK] -0.5% (FUM stats), Commerzbank [CBK.DE] +0.5% (reports on labor talks regarding merger)
• Healthcare: hVIVO [HVO.UK] -7% (earnings)
• Industrials: Hella [HLE.DE] n/c (earnings), BMW [BMW.DE] -0.5% (sales), Lindab [LIAB.SE] +10% (earnings), Oxford Instruments [OXIG.UK] +4.5% (trading update)
• Technology: ASML [ASML.NL] -2% (confirmed it has been victim to corporate Chinese espionnage responding to Dutch press reports)

Speakers

• ECB Survey of Professional Forecasters (SPF) cut its inflation view for the forecast horizon (2019-2021 period) and cut its growth outlook as well for both 2019 and 2020.
• Ireland PM Varadkar: Brexit extension gave the UK time to reach a cross-party agreement; talks might work out
• German BGA exporters association on Brexit: Extending Britain’s departure date was the lesser evil as it avoided chaos but added crippling uncertainty for companies
• RBNZ Gov Orr: mixed picture makes next RNBZ rate decision on May 8th difficult
• China Commerce Ministry (MOFCOM) Spokesman Gao stated that US and China to continued to talk on 'legacy issues'
• IEA Monthly Oil Report maintained its 2019 global oil demand growth forecast at 1.4M bpd but noted Oil market was tightening but global demand could falter. Production decline was the result of production curbs from the OPEC and its allies, as well as outages in Venezuela due to US sanctions

Currencies/ Fixed Income

• FX markets quiet despite the plethora of events on Wednesday and appeared to be lacking a directional theme.
• GBP currency hovering around the 1.31 area after the risk of a cliff edge Brexit subsided for now with EU granting an extension until Halloween (with conditions). UK PM May had indicated that she still aimed to leave by May 22 to avoid EU elections
• EUR/USD steady at 1.1280 despite a ‘dovish’ ECB meeting on Wed with some dealers believing the central bank could open the way for more rate cuts if risks intensify.
• The SEK currency (Kroner ) was initially firmer after as Swedish March inflation data kept the door open for another rate hike in the 2nd half of 2019. EUR/SEK tested below 10.42 following the data but retraced the bulk of the move as analysts noted that the Riksbank could not overlook the recent spat of soft data for the country.

Economic Data

• (DE) Germany Mar Final CPI M/M: 0.4% v 0.4%e; Y/Y: 1.3% v 1.3%e
• (DE) Germany Mar Final CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 1.4% v 1.4%e
• (FR) France Mar Final CPI M/M: 0.8% v 0.8%e; Y/Y: 1.1% v 1.1%e; CPI (ex-tobacco) Index: 103.43 v 103.44e
• (FR) France Mar Final CPI EU Harmonized M/M: 0.9% v 0.9%e; Y/Y: 1.3% v 1.3%e
• (TR) Turkey Feb Current Account Balance: -$0.7B v -$0.9Be
• (SE) Sweden Mar CPI M/M: 0.2% v 0.2%e; Y/Y: 1.9% v 1.8%e; CPI Level: 331.79 v 331.60e
• (SE) Sweden Mar CPIF M/M: 0.2% v 0.1%e; Y/Y: 1.8% v 1.8%e
• (SE) Sweden Mar CPIF (ex-energy) M/M: 0.3% v 0.2%e; Y/Y: 1.5% v 1.4%e
• (SE) Sweden Mar Average House Prices (SEK): 3.097M v 2.984M prior
• (SE) Sweden Feb Household Consumption M/M: 0.2% v 1.1% prior; Y/Y: 1.8% v 1.8% prior
• (IS) Iceland Mar International Reserves (ISK): 765B v 752B prior
• (GR) Greece Jan Unemployment Rate: 18.5% v 18.4% prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €3.94B vs. €3.5-4.5B indicated range in 2024 and 2035 bonds
• Sold €2.69B in new July 2024 SPGB bond; Avg yield: 0.171% v 0.142% prior; Bid-to-cover: 2.24x v 2.13x prior (Mar 7th 2019 under 0.35% July 2023 SPGB)
• Sold €1.249B in July 2035 SPGB bond; Avg yield: 1.639%; Bid-to-cover: 1.32x
• (IT) Italy Debt Agency (Tesoro) sold total €7.25B vs. €6.25-7.25B indicated range in 2022, 2026 and 2035 BTP bonds
• Sold €2.5B vs. €2.0-2.5B indicated range in 1.00% July 2022 BTP; Avg Yield: 1.08% v 1.06% prior; Bid-to-cover: 1.62x v 1.49x prior
• Sold €3.75B vs. €3.25-3.75B indicated range in new 2.10% July 2026 BTP; Avg Yield: 2.05% v 2.05% prior; Bid-to-cover: 1.36x v 1.40x prior
• Sold €1.5B vs. €1.0-1.5B indicated range in 3.35% Mar 2035 BTP; Avg Yield: 3.00%; Bid-to-cover: 1.37x

Looking Ahead

• 05:30 (ZA) South Africa Feb Total Mining Production M/M: 0.1%e v 0.2% prior; Y/Y: -2.55e v -3.3% prior; Gold Production Y/Y: No est v -22.5% prior; Platinum Production Y/Y: No est v 28.1% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 06:00 (IL) Israel Mar Trade Balance: No est v -$1.6B prior
• 06:00 (IE) Ireland Mar CPI M/M: No est v 0.8% prior; Y/Y: No est v 0.6% prior
• 06:00 (IE) Ireland Mar CPI EU Harmonized M/M: No est v 0.8% prior; Y/Y: No est v 0.7% prior
• 06:00 (IE) Ireland Feb Property Prices M/M: No est v -0.4% prior; Y/Y: No est v 5.6% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (ZA) South Africa Feb Manufacturing Production M/M: -1.3%e v -2.0% prior; Y/Y: 0.5%e v 0.3% prior
• 08:00 (BR) Brazil CONAB Report
• 08:00 (UK) Baltic Bulk Index
• 08:00 (UK) PM May Statement following EU Leader Summit
• 08:30 (US) Mar PPI Final Demand M/M: 0.3%e v 0.1% prior; Y/Y: 1.9%e v 1.9% prior
• 08:30 (US) Mar PPI Ex Food and Energy M/M: 0.2%e v 0.1% prior; Y/Y: 2.4%e v 2.5% prior
• 08:30 (US) Mar PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.1% prior; Y/Y: No est v 2.3% prior
• 08:30 (US) Initial Jobless Claims: 210Ke v 202K prior; Continuing Claims: 1.74Me v 1.717M prior
• 08:30 (CA) Canada Feb New Housing Price Index M/M: No est v -0.1% prior; Y/Y: No est v -0.1% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 5th: No est v $489.5B prior
• 09:00 (RU) Russia Feb Trade Balance: $12.4Be v $13.4B prior; Exports: $31.7Be v $29.8B prior; Imports: $18.9Be v $16.5B prior
• 09:00 (MX) Mexico Feb Industrial Production M/M: 0.1%e v 0.6% prior; Y/Y: -0.8%e v -0.9% prior; Manufacturing Production Y/Y: 0.9%e v 1.3% prior
• 09:30 (Fed’s Clarida (hawk, voter) at IIF in Washington
• 09:40 (US) Fed’s Bullard (dove, voter) on economy and monetary policy
• 10:00 (MX) Mexico Central Bank Monetary Policy Minutes
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 13:00 (US) Treasury to sell 30-Year Bonds Reopening
• 14:00 (US) Fed’s Kaskari (dove, non-voter)
• 16:00 (US) Fed’s Bowman (voter)

GBPJPY Technical Analysis April 10/2019

GBPJPY: Bearish market patterns can be seen on the GBPJPY 4 hour chart. In the chart below a blue bearish Head and Shoulders pattern is visible and price has already broken below the Neck Line which can be signalling for more possible downside in the coming trading sessions. As long as the right shoulder of the H&S pattern remains intact it is highly possible that GBPJPY will continue lower. A break above the high of the right shoulder will invalidate the blue bearish pattern. If price stays below the high of the right shoulder and pushes lower traders will then need to watch for the break below the orange descending triangle pattern. A break below the orange triangle pattern will confirm that sellers are in control and price will continue lower and hit the targets below. Another added confirmation will be if price respects the light blue 50 moving average before the sell entry breakout. Price respecting the moving average before the sell breakout entry will signal that possible trend to the downside is still going on which started from the March 14/2019 high. If looking to trade GBPJPY traders will need to watch if price stays below the April 9/2019 high and SELL on the break below the April 9/2019 low (green sell entry). If this happens then stops should be placed at the high of the right shoulder (April 9/2019 high). If price breaks above top of right shoulder before the green SELL break entry then the sell trade setup is cancelled. There is UK news release coming later today at 4:30am EST so trade safe and only SELL GBPJPY if the patterns stay intact.

GBPJPY 4 Hour Chart 4.10.2019