Sample Category Title

For the 24 hours to 23:00 GMT, Crude Oil rose 0.36% against the USD and closed at USD64.37 per barrel.

Meanwhile, the Energy Information Administration (EIA) report indicated that US crude oil stockpiles rose 7.03 million barrels to 456.6 million barrels in the week ended 05 April 2019.

In the Asian session, at GMT0300, the pair is trading at 64.37, with oil trading flat against the USD from yesterday’s close.

The pair is expected to find support at 64.05, and a fall through could take it to the next support level of 63.72. The pair is expected to find its first resistance at 64.70, and a rise through could take it to the next resistance level of 65.02.

Crude oil is showing convergence with its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 110.81; (P) 111.04; (R1) 111.25; More...

With 111.28 minor resistance intact, intraday bias in USD/JPY remains on the downside. Fall from 111.82 is seen as the third leg of consolidation pattern from 112.13. Deeper decline would be seen to 109.71 and below. But downside should be contained by 104.69 to 112.13 at 109.28 to bring rebound. On the upside, above 111.28 minor resistance will turn intraday bias back to the upside for 112.13 resistance. Decisive break of 112.13 will resume whole rally from 104.69 and target 114.54 resistance next.

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) 0.9999; (P) 1.0017; (R1) 1.0042; More...

Intraday bias in USD/CHF remains on the upside at this point. The pull back from 1.0124 could have completed at 0.9879 already. Further rise would be seen to retest 1.0124/28 resistance zone. On the downside, though, below 0.9977 minor support will turn bias back to the downside for 0.9879 support instead.

In the bigger picture, USD/CHF is still holding above medium term trend line. Rise from 0.9186 could still be in progress. Decisive break of 1.0128 will resume this medium term rally to 1.0342 resistance next. Meanwhile, sustained break of the trend line (now at 0.9884) will argue that whole rise from 0.9186 has completed. Further break of 0.9716 will confirm reversal and target next support level at 0.9541.

Daily Pivots: (S1) 1.1241; (P) 1.1264; (R1) 1.1298; More.....

Intraday bias in EUR/USD remains neutral first. On the upside, above 1.1286 will extend the rise from 1.1183 for 55 day EMA (now at 1.1308) first. Sustained break will target 1.1448 resistance next. For now, we'd expect strong resistance between 1.1448/1569 to limit upside. On the downside, below 1.1210 minor support will turn bias to the downside. Decisive break of 1.1176 will resume the down trend from 1.2555.

In the bigger picture, medium term weakness was revived as the weak rebound from 1.1176 was rejected well below 55 week EMA and failed to sustain above 55 day EMA. Focus is back on 1.1176 low, with 61.8% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.1186. Decisive break there will resume whole down trend from 1.2555. Such decline target 1.0339 low next. On the upside, firm break of 1.1569 resistance is needed to be the first sign of medium term bottoming. Otherwise, downside breakout will be in favor.

Contrary to the market which has been pricing in a rate cut later this year, the Fed affirmed in the minutes for the March meeting that the members’ consensus was no change in the monetary policy for the rest of the year. Indeed, a few of them still favored rate hike while there was no reference for those who opted a cut. The members also discussed about the recent flattening of yield curve and its implication on recession. They, however, judged that “historical relationships a less reliable basis for assessing the implications of the recent behavior of the yield curve”. The Fed did not sound dovish over the inflation outlook. Indeed, it anticipated the PCE to move to, or “slightly above” the +2% target in the next two years. All in all, it appears that the market had taken the FOMC meeting overtly dovish last month. We believe the members are at least neutral towards the future move on interest rates. There is no sign that the next rate decision is skewed to a cut.

Recall that the median dot plot in March signaled that the policy rate would stay unchanged this year, compared with 2 rate hikes as projected last December. This had led the market to price in even a rate cut later in the year. Yet, the minutes affirmed that the majority of members indeed expected the policy rate to stay unchanged. As noted in the minutes, “most participants expected that the evolution of the economy, relative to their objectives of maximum employment and +2% inflation, would likely warrant keeping the federal funds rate at its current level through the end of 2019”. Moreover, “some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year”.

On the macroeconomic outlook, the minutes suggested that “a substantial majority of participants continued to view the degree of uncertainty attached to their economic projections for real GDP growth, unemployment, and inflation as broadly similar to the average of the past 20 years”. On inflation, “almost all participants projected that inflation, as measured by the four quarter percentage change in the price index for personal consumption expenditures (PCE), would increase slightly over the next two years, and most participants expected that it would be at or slightly above the Committee’s +2% objective in 2020 and 2021”. Despite downward revisions on the economic projections, the members refrained from turning dovish on the macroeconomic outlook.

There were also discussion about the flattening in yield curve structure. Notwithstanding historical correlation between an inverted yield curve and correlation, the members believed that this time is different. As noted in the minutes, "several participants expressed concern that the yield curve for Treasury securities was now quite flat and noted that historical evidence suggested that an inverted yield curve could portend economic weakness; however, their discussion also noted that the unusually low level of term premiums in longer-term interest rates made historical relationships a less reliable basis for assessing the implications of the recent behavior of the yield curve".

In short, the March minutes affirmed that the majority of the members expected to keep the powder dry this year. They remained confident that the economy could still grow at about/ slightly above trend.

Daily Pivots: (S1) 1.3043; (P) 1.3083; (R1) 1.3129; More....

GBP/USD recovers mildly ahead of 1.2960 support again. But after all, it's staying in established range of 1.2960/3381. Intraday bias remains neutral first and more consolidative trading could be seen. Further rally remains mildly in favor with 1.2960 support intact. On the upside, decisive break of 1.3381 will extend the rise from 1.2391 and target 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. However, on the downside, sustained break of 1.2960 will indicate that rebound from 1.2391 has completed earlier than expected. Deeper fall would then be seen to 1.2773 support for confirmation.

In the bigger picture, medium term decline from 1.4376 (2018 high) should have completed at 1.2391. Rise from 1.2391 is seen as the third leg of the corrective pattern from 1.1946 (2016 low). Further rise could be seen through 1.4376 in medium term. On the downside, though, break of 1.2773 support will dampen this view. Focus will be turned back to 1.2391 low and break will resume the fall from 1.4376 to 1.1946.

Sterling is given a mild lift after EU grants UK Article 50 delay till October 31. Even though it's still uncertain how Prime Minister Theresa May could get the Withdrawal Agreement through the parliament, the cliff-edge is at least pushed for nearly six months. The Pound is, after all, staying in familiar range without any direction.

Dollar is mixed for now after FOMC minutes solidified Fed's patience stance. It's a consensus among policy makers Fed will stand pat for the rest of the year. Inflation is close to target without little sign of heating up. Fed indeed has a lot of room to keep interest rates at current level for longer. At the same time, several members noted their openness to rate cut should development warrants it. It could depend on how the risks play out.

Euro is mixed too. The dovish ECB meeting yesterday triggered some knee jerk reactions. But the common currency quickly found its footing. Yet, Euro could be vulnerable to another selloff as Trumps looks determined to escalate political and trade tensions with the EU. In a tweet, Trump blamed EU for being "tough" on the UK and Brexit, just after they approved a "flexible" extension that UK could leave any time. And he condemned that EU is a "brutal trading partner" with the US.

For the week, Aussie is the far the strongest one, followed by Yen. While risk aversion is not apparent, both seem to be lifted by falling treasury yields elsewhere. US 10-year yield is back at 2.477 while Germany 10-year yield is negative. There was no extra bearish development in Australia to push RBA to deliver a rate cut yet. Swiss Franc is the weakest one, thanks to rally in oil prices. Dollar follows as second weakest.

In Asia, currently, Nikkei is down -0.05%. Hong Kong HSI is down -0.92%. China Shanghai SSE is down -1.36%. Singapore Strait Times is up 0.23%. Japan 10-year JGB yield is down -0.003 at -0.059, staying well negative. Overnight, DOW rose 0.03%. S&P 500 rose 0.35%. NASDAQ rose 0.69%. 10-year yield dropped -0.022 to 2.477.

FOMC minutes: Several members noted interest rate could shift in either direction

Minutes of March 19-20 FOMC meeting released overnight solidify Fed's patience stance. Additionally, the minutes indicated that some members are open to rate cut if incoming data and development warrant so.

It's noted that a "majority" of participants expected that evolution of economy and risks would likely warrant leaving interest rate unchanged for the rest of year. Some of them noted current interest rate was "close to" neutral.

At the same time, participants continued to "emphasize" decisions at coming meetings would depend on their ongoing assessments of the economic outlook and how risks evolved. "Several" participants noted their view on interest rate "could shift in either direction based on incoming data and other developments."

UK given "medium" Brexit delay while EU urges not to waste this time

EU agreed to give UK flexible Brexit extension at the special European Council meeting on Wednesday. The extension should last "only as long as necessary and, in any event, no longer than October 31 2019". If the Withdrawal Agreement cannot be ratified by then, Brexit will take place on November 1. During the extension, UK remains a EU remember with full right, and has a right to revoke Article 50 at any time.

In the statement, EU emphasized that "the extension cannot be allowed to undermine the regular functioning of the Union and its institutions." UK must hold European Parliament elections if it's still a EU member on May 23-26, or Brexit will happen on June 1. Also, EU reiterated there will be no renegotiations. And, the extension "cannot be used to start negotiations on the future relationship". Though, EU is open to reconsider the Political Declaration.

In the post summit press conference, European Council President Donald Tusk said "this extension is as flexible as I expected, and a little bit shorter than I expected, but it's still enough to find the best possible solution." He urged UK "please don't waste this time".

German Chancellor Angela Merkel said: "We looked at the matter and decided to shift the date to October. We want an orderly exit of Great Britain and an orderly exit of Great Britain can be best ensured if we give it some time". And, "the decisive point was when will the British parliament consent to the withdrawal agreement and we made it clear that that exit agreement applies and will not be changed".

French President Emmanuel Macron said: "It's true that the majority was more in favor of a very long extension. But it was not logical in my view, and above all, it was neither good for us, nor for the UK." And, "I take responsibility for this position, I think it's for the collective good."

On the data front

UK RICS house price balance improved to -24 in March, above expectation of -29. Japan M2 rose 2.4% yoy in March, matched expectations. Australian consumer inflation expectation slowed to 3.9% in April, down from 4.1%. China CPI accelerated to 2.3% yoy in March, matched expectations. PPI also rose to 0.4% yoy, matched expectations.

Looking ahead: Germany CPI, Canada new housing price index, US PPI and jobless claims will be featured. A number of Fed officials will speak today, including Clarida, Williams, Bullard and Bowman.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3043; (P) 1.3083; (R1) 1.3129; More....

GBP/USD recovers mildly ahead of 1.2960 support again. But after all, it's staying in established range of 1.2960/3381. Intraday bias remains neutral first and more consolidative trading could be seen. Further rally remains mildly in favor with 1.2960 support intact. On the upside, decisive break of 1.3381 will extend the rise from 1.2391 and target 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. However, on the downside, sustained break of 1.2960 will indicate that rebound from 1.2391 has completed earlier than expected. Deeper fall would then be seen to 1.2773 support for confirmation.

In the bigger picture, medium term decline from 1.4376 (2018 high) should have completed at 1.2391. Rise from 1.2391 is seen as the third leg of the corrective pattern from 1.1946 (2016 low). Further rise could be seen through 1.4376 in medium term. On the downside, though, break of 1.2773 support will dampen this view. Focus will be turned back to 1.2391 low and break will resume the fall from 1.4376 to 1.1946.

Economic Indicators Update

Asian markets are in mild risk aversion today as dragged down by pull back in Chinese and Hong Kong stocks. But such sentiments is not much reflected in the currency markets, except that Australian Dollar retreats broadly after this week's rally run. Sterling is one of the strongest for today as UK was granted "medium" flexible Brexit delay till October 31. But still it's unsure how the government could achieve the needed consensus in the parliament to get a withdrawal agreement through. More time might just mean more torture and fatigue.

Dollar is mixed for now after FOMC minutes solidified Fed's patience stance. It's a consensus among policy makers Fed will stand pat for the rest of the year. Inflation is close to target without little sign of heating up. Fed indeed has a lot of room to keep interest rates at current level for longer. At the same time, several members noted their openness to rate cut should development warrants it. It could depend on how the risks play out. Euro is mixed too. The dovish ECB meeting yesterday triggered some knee jerk reactions. But the common currency quickly found its footing.

For the week, Aussie is the far the strongest one, followed by Yen. While risk aversion is not apparent, both seem to be lifted by falling treasury yields elsewhere. US 10-year yield is back at 2.477 while Germany 10-year yield is negative. There was no extra bearish development in Australia to push RBA to deliver a rate cut yet. Swiss Franc is the weakest one, thanks to rally in oil prices. Dollar follows as second weakest.

Released in Asian session:

• UK RICS house price balance improved to -24 in March, above expectation of -29.
• Japan M2 rose 2.4% yoy in March, matched expectations.
• Australian consumer inflation expectation slowed to 3.9% in April, down from 4.1%.
• China CPI accelerated to 2.3% yoy in March, matched expectations. PPI also rose to 0.4% yoy, matched expectations.

Looking ahead: Germany CPI, Canada new housing price index, US PPI and jobless claims will be featured. A number of Fed officials will speak today, including Clarida, Williams, Bullard and Bowman.

In Asia, currently:

• Nikkei is down -0.12%.
• Hong Kong HSI is down -0.96%.
• China Shanghai SSE is down -0.95%.
• Singapore Strait Times is up 0.23%.
• Japan 10-year JGB yield is down -0.0044.

Overnight:

• DOW rose 0.03%.
• S&P 500 rose 0.35%.
• NASDAQ rose 0.69%.
• 10-year yield dropped -0.022 to 2.477.

STOCKS

Global equities broadly looks weak in the near term. The Dow and DAX have key resistances ahead and looks vulnerable for a fall in the near term. India's Sensex and Nifty retains their sideways range but can break the range on the downside.

Dow (26157.16, +6.58, +0.03%) seem to be getting support near 26100. A test of the key resistance at 26250 looks possible while above 26100. But a strong break above 26250 is needed for the Dow to gain strength and rally to 26500 and higher levels. But as long as it trades below 26250, a break and fall below 26000 targeting 25750 and 25700 cannot be ruled out.

DAX (11905.91, +55.34, +0.47%) has made an intermediate bounce as mentioned yesterday. However, the broader picture will continue to remain bearish for a fall to 11600 and 11550 as long as it trades below 12000.

Nikkei (21647, -40.07, -0.18%) has resistance at 21750 which is holding well as of now. A fall to 21500 looks likely and a break below it can drag the index further lower to 21300.

Shanghai (3227.63, -14.3, -0.44%) sustains above 3200 but seems to lack strength to bounce sharply. A range bound move between 3200 and 3280 is possible while it remains above 3200. A break below 3200 can trigger a corrective fall to 3150-3130.

Sensex (38585.35, -353.87, -0.91%) has fallen sharply within its 38500-39000 sideways range. Though the range seems to be holding well as of now, the 3-day candle chart indicates that the Sensex can break 38500 and fall to 38000 in the coming sessions.

Nifty (11584.30, -87.65, -0.75%) can fall to 11500 or even 11400 on a strong break below the range support at 11550. If Nifty manages to bounce from 11550, the 11550-11700 range will remain intact and the index can rise to 11700 thereafter.

COMMODITIES

Gold sustains higher but has a key near-term resistance coming up. Silver struggles to breach a key resistance and looks relatively weaker than gold. Copper looks mixed within is sideways range. Oil continues to trade strong and may see further upticks in the near term.

Gold (1307) is holding above 1300 and is moving higher towards 1310 as expected. Inability to breach 1310 can pull it down to 1305. But a strong break above 1310 will take it further higher to 1315-1317.

The resistance in the 15.25-15.28 region continues to cap the upside in Silver (15.22). A strong break above 15.28 is needed for it to test 15.45. Else a dip to 15.10 and 15 is possible in the coming sessions.

Copper (2.92) looks mixed within its 2.89-2.96 sideways range. It has equal chances dc - either to dip to 2.89 or move higher to 2.96 from current levels.

The supports at 64 and 63.7 on WTI (64.42) seems to be holding well. The outlook remains bullish for a test of 66 in the near term.

Brent (71.67) has risen and is heading towards the crucial 61.8% Fibonacci retracement resistance level of 72.7. A pull-back from this resistance can take Brent lower to 70.7 and 70. But a strong break above 72.7 will pave way for a further rally to 74.

FOREX

Dollar Index recovered after declining sharply post the FOMC minutes yesterday. Pound and Yuan could see some sideways movement while Aussie, Euro and Rupee could strengthen a bit. Euro-Yen looks weak in the coming sessions.

Dollar-Index (96.93) has dipped below 97 and could test 96.75 on the downside which if holds could produce a bounce back towards 97.30 or higher. Break below 96.75 would make it bearish for the medium term.

Euro (1.1276) initially dipped to test 1.1229 yesterday after the ECB comments but has recovered to move higher. A test of 1.13-1.1350 cannot be ruled out in the near term.

Euro-Yen (125.22) saw a narrow trade. A break below 125 would make it bearish towards 124 in the near term. On the upside 126 remains the immediate resistance. Near term looks bearish towards 124.

Dollar Yen (111.06) looks likely to break below 111 to test 110.50 in the coming sessions. A bounce from 110.5 thereafter would lead to a sharp upmove targeting 112-113 in the longer run. On the weekly chart, there is room towards 113 in the coming weeks.

Aussie (0.7159) broke above 0.7150. The speech from the RBA deputy Governor against the market expectation of a near term rate cut aided the currency to strengthen. On the upside Aussie could test 0.72. Break above 0.72, would take it higher to 0.73.

Pound (1.3098) has support at 1.30 as mentioned yesterday and could see trade within 1.30-1.3150 in the near term.

USDCNY (6.7148) is trading within narrow and sideways range. 6.70-6.72 is the immediate range for the next 1-2 sessions.

Dollar-Rupee (69.12) tested 69.10 as expected and could have room to test 69 today. Watch price action near 69 as it could produce a bounce back towards 69.35/50 in the near term. Break below 69 could bring in 68.75/50 into the picture for the medium term.

INTEREST RATES

Difference in views of some policy makers to hike policy rate later this year and that of others who agreed with the patient approach of the FED was evident from the FOMC minutes. The statement also indicated that the view of whether the FED would hike or cut rates is flexible and could shift.
The US yields have fallen. The 2Yr (2.34%), 5YR (2.29%), 10YR (2.48%) and 30YR (2.90%) have all fallen by 1bps. While below 2.92% and 2.52%, the 30YR and 10Yr yields could fall towards 2.88% and 2.45% respectively.

ECB kept interest rates unchanged but indicated downside risks for the Euro. This lead to a sharp fall in the German yields into the negative territory.
The German 10YR (-0.024%) fell from 0% yesterday and could test -0.1% in the near term before bouncing back from there. The 2Yr (-0.591%), 5YR (-0.438%) and 30YR (0.623%) are trading lower too from levels of -0.57%, -0.406% and 0.63% seen yesterday.

The German-US 2YR yield spread (-2.90%) fell to test support levels and could soon bounce back to test -2.93/95% in the near term indicating some rise in the Euro too. A break below -2.90% would turn bearish towards -3%.

The 10Yr GOI (7.5104%) may trade within 7.45-7.60% region in the near term.

Minutes of March 19-20 FOMC meeting released overnight solidify Fed's patience stance. Additionally, the minutes indicated that some members are open to rate cut if incoming data and development warrant so.

It's noted that a "majority" of participants expected that evolution of economy and risks would likely warrant leaving interest rate unchanged for the rest of year. Some of them noted current interest rate was "close to" neutral.

At the same time, participants continued to "emphasize" decisions at coming meetings would depend on their ongoing assessments of the economic outlook and how risks evolved. "Several" participants noted their view on interest rate "could shift in either direction based on incoming data and other developments."

Full minutes here.