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WTI oil futures picked up further steam early on Wednesday to unlock a fresh 5-month high of 64.74. According to the RSI and the Stochastics, the market is trading in overbought zone, suggesting that the price could soon reverse lower. Trend signals, however, are still positive as the bullish action is taking place comfortably above the 200-day simple moving average (SMA), while yesterday’s close above the 61.8% Fibonacci of the downleg from 76.87 to 42.53 is another indication that any weakness may be short-lived.

A drop below the 50% Fibonacci of 59.74 and a decisive close under the uptrend line drawn from the low on December 26, could turn the sell-off more convincing, opening the way towards the 50-day SMA (currently at 57.52) and then down to the 38.2% Fibonacci of 55.66.

Alternatively, should the price rebound near the 200-day SMA (currently at 57.52), further gains could probably stretch the upward pattern started on December 26 even higher. In such a case, the 66.63 barrier, a former key resistance and support level, could attract attention ahead of the 78.6% Fibonacci of 55.66.

The US 100 index continues to print higher highs and higher lows in the daily chart, running to fresh six-month highs ahead of the all-time high around 7700.

However, the technical indicators seem to be overstretched, suggesting a possible downward correction could be near. Specifically, the stochastic oscillator is hovering in the overbought zone, while the RSI has found resistance near the 70 level and is pointing down. Also, the MACD oscillator still stands above its trigger line with weaker momentum than before. It is worth mentioning that the 50- and 200-simple moving averages (SMAs) completed a ‘golden cross’ in the near term, but the 200-SMA is still flattening.

If the bulls stay in control, the next resistance level to watch is the all-time high, before heading towards the psychological level of 8000.

On the other side, if momentum indicators prove that a bearish retracement is near, immediate support is coming from the 7510 level, while a move below that could see sellers challenging the 7250 barrier. Another sell-off could turn the bias to a more neutral one, opening the way for the 23.6% Fibonacci retracement level of the upleg from 5845 to 7606, near 7194, which coincides with the 50-day SMA.

Overall, the near-term picture remains cautiously positive, though a corrective pullback may be on the cards in the immediate term.

The US dollar weakened against a basket of major currencies amid fears of the economic slowdown. Yesterday, the Ministry of Commerce reported that orders for manufactured goods fell by 0.5%, as experts expected, amid weak orders for cars, transportation equipment, computers and electronic products. The US currency also weakened due to the strengthening of its main competitors. The single currency added more than 50 pips in price. Technical factors mostly caused this movement. Participants in financial markets began to fix positions before the ECB meeting and the EU summit. The positive dynamics of oil prices supports the demand for commodity currencies. The dollar index (#DX) closed in the negative zone (-0.36%).

The situation around Brexit is running high again. There are only a few days left until the UK leaves the EU. It should be recalled that Brexit was to be held on March 29, then it was moved to April 12. However, today, the British Prime Minister, Theresa May, intends to meet with German Chancellor, Angela Merkel, and French President, Emmanuel Macron, to ask Brexit to be postponed. On Wednesday, April 10, the EU summit will take place, at which the leaders of the bloc will decide on the Brexit delay. If the exit date is not extended, then the UK is more likely to leave the unit without an agreement.

Prices for "black gold" continue to rise. At the moment, futures for the WTI crude oil are consolidating near yearly highs ($64.50/barrel). At 23:30 (GMT+3:00) a report on weekly crude oil stocks according to the American Petroleum Institute will be published.

Market Indicators

• Yesterday, in the US stock market, multidirectional dynamics was observed: #SPY (+0.08%), #DIA (-0.36%), #QQQ (+0.25%).
• The yield on 10-year US government bonds has updated local highs. Currently, the indicator is at the level of 2.51-2.52%.

The news feed for 2019.04.09:

• the number of open jobs in the JOLTS labour market in the United States at 17:00 (GMT+3:00).

• US officially proposes tariffs on EU, but market reaction minimal so far
• Euro advances, looks to ECB meeting tomorrow
• In Brexit, May will meet Merkel and Macron today ahead of EU summit

Lighthizer recommends tariffs on EU – new chapter in trade war?

The main story overnight was that the US Trade Representative, Robert Lighthizer, proposed introducing tariffs on a list of 11$bn worth of EU products in retaliation to EU aircraft subsidies. This is the clearest sign yet that once Washington wraps up a trade deal with Beijing, it will likely turn its gaze to Europe, whose economy is already struggling without a trade war. The timing is also consistent with Trump’s method of operation so far, of negotiating on ‘one front at a time’ (NAFTA, China, EU).

Brussels will likely respond to any US levies in kind, as it has previously, which implies that tensions could escalate rapidly once the US makes the first move. Yet, markets have taken the news in their stride. Futures tracking US stock indices are indeed pointing to a lower open today but only marginally, while in the FX market, commodity currencies like the aussie and kiwi are trading higher. Regardless, it wouldn’t be a surprise to see risk aversion return soon, as investors digest that the trade war theme will not vanish after any US-China accord.

As for today, the economic calendar is relatively light, with the only noteworthy indicators due for release being the US NFIB small business optimism for March and the JOLTS job openings for February.

Euro advances, but protectionism may keep Draghi cautious tomorrow

The euro outperformed its major peers on Monday, without any clear catalyst behind the move. Attention remains on the ECB policy decision tomorrow. No action is expected, so all eyes will be on Draghi’s remarks. European data have shown some tentative stabilization lately, though probably not enough to allay policymakers’ concerns around growth.

Meanwhile, the news that the US may impose tariffs on Europe soon are likely to reinforce concerns about protectionism within the ECB, providing yet another reason for Draghi & Co. to ‘stick to the playbook’ and strike a cautious tone.

UK’s May meets Merkel and Macron ahead of EU summit

The British Prime Minister will meet her German and French counterparts today, in an attempt to secure support for the Brexit delay she has requested – until June 30. Her visit comes ahead of the crucial EU summit tomorrow, where EU leaders will decide whether and how long of an extension to offer the UK.

Europe is highly unlikely to accept the UK’s June 30 request, and will probably instead offer a longer extension, perhaps until year-end. If that is the case and PM May accepts, the pound could advance as the risk of a no-deal fades and expectations that the UK ultimately ends up with a closer relationship with the EU grow. Any signals that May could accept a customs union arrangement could have a similar market effect. In general though, for sterling to climb, a no-deal outcome on April 12 must be taken off the table first.

The Euro stood at the front foot in Asia on Tuesday, maintaining positive tone following Monday's 0.4% advance that eventually broke and closed above significant barrier at 1.1246 (Fibo 23.6% of 1.1448/1.1183 fall). Fresh bulls pressure key barriers at 1.1284 (20SMA/Fibo 38.2%/10WMA), firm break of which is needed for reversal signal and further recovery. However, risk of stall under 1.1284 pivot exists as negative momentum continues rise and bearish divergence on daily momentum weighs. Negative scenario needs extension and close below 10SMA (1.1230) to confirm top and shift focus towards cracked key supports at 1.1186/76 (Fibo 61.8% of 1.0340/1.2555/2019 low posted on 7 Mar). Key events: ECB's policy meeting, EU summit and US CPI data on Wednesday are expected to provide fresh direction signals.

Res: 1.1274, 1.1284, 1.1321, 1.1347
Sup: 1.1255, 1.1230, 1.1206, 1.1186

An air of caution lingered across financial markets this morning after US President Donald Trump threatened new tariffs on European goods.

The Trump Administration is proposing new tariffs on about $11 billion in imports from the European Union in response to EU subsidies given to Airbus, which according to the World Trade Organization has caused “adverse effects to the United States”. With concerns already elevated over Eurozone growth decelerating, this unfavorable development is the last thing the EU needs right now. Should tensions between the United States and European Union heighten, market players are likely to maintain a safe distance from riskier assets and seek refuge in safe-haven investments.

In the currency space, the Dollar extended losses against a basket of currencies today despite last Friday’s US jobs report soothing concerns over the health of the largest economy in the world. The Dollar is positioned to weaken further amid speculation around the Federal Reserve cutting interest rates by year-end. Much attention will be directed towards the FOMC Minutes scheduled for release on Wednesday, which will be closely scrutinized for more clues on the Fed’s policy path this year. Should the minutes be presented with a dovish touch, this has the potential to weaken the Dollar further.

Brexit drama is set to remain a major theme in the United Kingdom as the April 12 deadline for exiting the EU looms. With Theresa May set to hold last-minute talks with German Chancellor Angela Merkel and French President Emmanuel Macron, this will be another wild week for the Pound. While the outcome of such talks remains uncertain, it will certainly have a strong impact on Sterling. When dealing with Brexit, one should always expect the unexpected and this will remain the mantra until more clarity is provided.

Taking a lookatthe commodity markets, Oil hovered near a 2019 high above $64.50 this morning, as escalating tensions in Libya fueled concerns over further supply disruptions. OPEC’S ongoing supply cuts and US sanctions on Iran and Venezuela have also supported Oil prices in recent months. With a depreciating Dollar adding to the basket of themes pushing Oil prices higher, WTI Crude has the potential to challenge $65.00 in the short to medium-term.

Gold continues to sparkle in the background amid the overall caution and Dollar weakness. With concerns over slowing global growth still a major theme and the Fed expected to remain dovish, Gold is protected from severe downside shocks. A solid daily close above $1300 is likely to open a path towards $1324.

Ministers from Germany, the Netherlands, Ireland and France all made clear in their comments that UK will need to present a clear plan before being granted another Brexit extension.

Ireland's Foreign Minister Simon Coveney said "everybody this week are open to an extension but they certainly want to see a plan attached to that extension."

Dutch Foreign Minister Stef Blok said "I really hope the UK will find a solution to avoid this no-deal Brexit. We are hoping for a specific plan from the UK side on how to avoid this no-deal Brexit."

German Minister Michael Roth "we are of course thinking about an appropriate extension of the deadline and also about a longer extension. They must, however, come with very strict conditions,"

French EU minister Amélie de Montchalin said "we want to understand what the UK needs this extension for... Then come the questions of the conditions: what role the UK wants to play during this extension time, in what kind of decisions it wants to take part."

The euro continues to trade higher against the US dollar on Tuesday after buyers lifted the pair above the pivotal 1.1250 level. The four-hour time frame shows that a bullish inverted head and shoulders pattern has been ignited, with the overall upside target close to the 1.1320 level. EURUSD sellers will need to move price below the 1.1250 level to negate the bullish intraday outlook.

The EURUSD pair is only bearish while trading below the 1.1250 level, key technical support remains at the 1.1216 and 1.1170 levels.

The EURUSD pair is bullish while trading above the 1.1250 level, key resistance is found at the 1.1290 and 1.1320 resistance levels.

The USD slipped yesterday against a number of currencies, as soft economic data and gains by commodity currencies caused it to retreat. Financial releases such as the factory orders growth rate and the recent surge in oil prices caused the USD to retreat. Financial analysts pointed out that the greenback’s strength peaked on Friday as the US employment report was out, yet was not able to find traction since. Also they pointed out that themes such as Brexit and the US-Sino talks may start running out of steam and fail to provide incentives for the markets. Also they mention that on the contrary there seems to be a risk on mood in the markets as worries for a global slowdown seemed to ease somewhat. USD/CAD dropped yesterday as the Loonie got support from a surge in oil prices. The pair dropped and broke the 1.3360 (R1) support line (now turned to resistance), stabilising somewhat short before the 1.3290 (S1) support line. If the surge in oil prices continues, we could see the pair dropping even further. Should the bears dictate the pair’s direction once again, we could see the pair, breaking the 1.3290 (S1) support line and aim for the 1.3235 (S2) support barrier. If on the other hand the bulls take over, we could see the pair, aiming if not breaking the 1.3360 (R1) resistance line and hiver above it.

Pound gets some support as Brexit talks linger on

The pound found some support yesterday, yet remained in check, as nervousness in the markets regarding Brexit talks remains high. Theresa May seems to be seeking a compromise with Jeremy Corbyn on the terms of Brexit in order to obtain the necessary majority in the UK Parliament. Media reported that UK’s PM could offer to remain in a permanent customs union with the EU in order to win support from the Labour party. At the same time Theresa May is to meet Macron and Merkel ahead of the EU summit on Wednesday and EU diplomats seem to settle to the idea of offering an extension despite the lack of progress. In the inner political stage, Tory hard Brexiteers seem to be in an effort oust the PM, as they fundamentally disagree with her efforts. We expect volatility for the pound to rise again as the stakes for the UK are getting higher and the EU summit draws near. Cable kept in a tight range yesterday, however was able to break above the 1.3070 (R1) resistance line. We could see the pair trading with some bullish tendencies should there be further positive headlines about Brexit reel in. Should the pair find fresh buying orders along its path, we could see the pair, aiming if not breaking the 1.3175 (R1) resistance line. On the flip side, if the pair comes under the selling interest of the market, we could see the pair breaking below the 1.3070 (S1) support line once again and aim for the 1.2970 (S2) support level.

Other economic highlights, today and early tomorrow

In today’s American session we get the US JOLTS Job Openings figure for February and later on the API weekly crude oil inventories figure. In tomorrow’s Asian session, we get from Japan, the core machinery orders growth rate for February as well as Japan’s PPI rate for March. As for speakers, please note that Fed’s Richard Clarida and RBA’s Guy Debelle are scheduled to speak.

GBP/USD H4

Support: 1.3070 (S1), 1.2970 (S2), 1.2875 (S3)
Resistance: 1.3175 (R1), 1.3265 (R2), 1.3350 (R3)

USD/CAD H4

Support: 1.3290 (S1), 1.3235 (S2), 1.3175 (S3)
Resistance: 1.3360 (R1), 1.3425 (R2), 1.3510 (R3)

Daily Pivots: (S1) 1.1222; (P) 1.1249; (R1) 1.1287; More.....

EUR/USD is still holding below 1.1273 minor resistance and intraday bias remains neutral first. On the downside, decisive break of 1.1176 will resume the down trend from 1.2555. On the upside, however, break of 1.1273 support turned resistance will indicate short term bottoming. Intraday bias will be turned back to the upside for 1.1448 resistance instead.

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.