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The price of crude oil remained near a five-month high after US and Iran continued their conflict. In a statement, the United States announced that it was labeling the Iranian Revolutionary Guard as a foreign terrorist organization. In response, Iran branded United States’ Central Command in the region a terrorist organization. Iran accused the US of taking innocent lives in the Middle East, such as shooting a civilian aircraft in Iran, 1988. The US said that it mistook the plane for a military aircraft. The upward trend in the crude price is also because of ongoing fighting in Libya.

The euro climbed as the Trump administration moved to impose tariffs worth $11 billion on imports from the region. It said that the move was justified because of the bloc’s subsidies to Airbus. In a statement, US Trade Representative, Robert Lighthizer, said that the tariffs will be removed as soon as the EU ends its subsidies to the company. However, the EU has said that Boeing too receives large subsidies from the federal and states governments. This decision comes as the Trump administration nears the decision on auto tariffs.

Today, traders will focus on the euro as ECB members start their fourth meeting of the year. The bank is expected to leave rates unchanged, but traders will want to know when it plans to start raising interest rates. Regarding economic data, traders will receive the retail sales from Italy and trade data from Finland. In addition, they will continue to pay close attention to Brexit as European leaders deliberate on whether to give Britain another extension.

XTI/USD

The XTI/USD pair continued to move upwards as investors continued to focus on OPEC supply, the new conflict between US and Iran and the ongoing conflict in Libya. The pair is now trading at 64.45, which is above all the short and medium-term EMAs on the four-hour chart. The RSI has moved slightly downwards to the current level of 70, while the momentum indicator has remained above the 100 level. Therefore, the pair will likely continue moving upwards to above the 65 level.

EUR/USD

The EUR/USD pair moved upwards slightly ahead of tomorrow’s interest rates decision by the ECB. The pair is now trading at the 1.1267 level, which is above the weekly low of 1.1182. On the hourly chart, the price is close to the upper line of the Bollinger Bands and slightly near the upper line of the Envelopes indicator. However, the money flow index, which is an important volume-based indicator has shown a deviation, which means that the pair could resume the downward trend.

USD/CHF

The USD/CHF pair has been relatively unmoved below the parity level. The pair is now trading at the 0.9986 level, which is slightly below the middle line of the Bollinger Bands level. The Average True Range (ATR) indicator has moved lower, which is a sign that volatility has rescinded. The pair will likely remain within this range as traders watch out for the inflation numbers from Switzerland, which are expected later today.

GBPUSD is continuing yesterday's rebound on the medium-term ascending trend line, which has been standing since December 2018 and at the same time confirming another touch at the 38.2% Fibonacci retracement level of the upleg from 1.2390 to 1.3380, around the 1.3000 key level. The short-term bias looks positive as the RSI keeps gaining ground slightly below the neutral threshold of 50.

The 40- and then the 20-day simple moving averages (SMA) currently near the 23.6% Fibonacci mark of 1.3150 could be a trigger point for steeper bullish action before meeting the 1.3200 psychological level. Higher, resistance could be faced around the 1.3270 barrier, taken from the peak on March 27, though more buyers could be waiting to enter once the price breaks the nine-month high of 1.3380.

In the alternative scenario, if cable retreats and slips beneath significant obstacles such as the uptrend line, the 38.2% Fibonacci region and the 200-day SMA, it could touch the immediate support at 1.2960. A continuation of the decline could drive the bears until the 50.0% Fibonacci of 1.2885, while a sharper movement could open the door for the 61.8% Fibonacci, which overlaps with 1.2770.

In brief, GBPUSD has reversed to the upside again after finding strong support on the diagonal line, suggesting that a bullish rally could come.

• Rates: EU/US trade conflict enters new phase
  US Treasuries underperformed German Bunds ahead of the US Treasury's mid-month refinancing operation. The US 10-yr yield remains below 2.54% though. The EU/US trade conflict possibly enters a new phase which might harm risk sentiment today with Bunds outperforming US Treasuries.
• Currencies: USD declines ahead of technical resistance and on rising oil price
  The dollar declined off last week ST peak levels. Technical resistance capped further USD gains. Higher oil prices supported commodity currencies and was USD negative, too. USD trading will probably be technical in nature today. The US NFIB small business confidence, EU-US trade tensions and Brexit headlines are potential intraday FX movers

The Sunrise Headlines

• US equity markets were mixed yesterday with gains/losses varying between -0.32% (DJI) and +0.19% (Nasdaq). Asian equities are trading mixed as well, with most indices hovering near opening levels.
• The US is considering tariffs on $11bn of EU imports in response to EU subsidies to Airbus, rival of US based Boeing. The US cites the WTO's finding that the aid to Airbus has “repeatedly caused adverse effects to the US”.
• UK PM May meets German chancellor Merkel and French president Macron today to discuss the request for a delay to the Brexit date from April 12 to June 30. Meanwhile, cross-party talks with the opposition Labour party continue.
• Israel goes to the ballot boxes today to decide whether current PM Netanyahu takes a record fifth term in office. According to the polls, he's running neck and neck with his main contester Benny Gantz, a former military chief of staff.
• The Fed is set to change regulatory requirements for large foreign banks, loosening rules for smaller banks but tightening the rules for banks that hold over $250bn in US assets. The Fed also eased rules for big US banks.
• Rating agency Fitch downplayed fears over the ‘extensive' growth in “triple-B” debt piles, as companies have taken advantage of cheap borrowing costs, but recognises the risks for this type of debt in case of a lengthy economic downturn.
• Today's eco calendar is rather empty. The US prints its March NFIB small business optimism, while Italy releases the February retail sales. The IMF updates its World Economic Outlook. Germany and the US tap the market.

Currencies: USD Declines Ahead Of Technical Resistance And On Rising Oil Price

Technical resistance blocks further USD gains

The dollar fell prey to profit taking yesterday. EMU and US data had limited impact USD trading. Technical considerations prevailed. USD bulls saw no trigger to push the TW dollar (DXY) beyond the 97.50/75 resistance as there is no reason for the Fed to leave its soft wait-and-see bias soon. The EUR/USD 1.12 support also proved resilient of late. A rise in commodities (oil) and commodity related currencies was also weighing on the US dollar. EUR/USD closed at 1.1263 (1.1216 on Friday). USD/JPY reversed part of the intraday losses in line with US equities and US yields to close the day at 111.48 (from 111.73). Asian shares mostly show modest gains even as risk sentiment is dampened by the US considering imposing tariffs on European goods to retaliate for EU subsidies to Airbus. For now, the impact on the euro (EUR/USD 1.1267) is limited. USD/JPY is losing a few ticks (111.35). Commodity currencies remain well bid with the Aussie dollar (AUD/USD 0.7135) and the Canadian dollar (USD/Cad low 1.33) outperforming.

The eco calendar is again thin. The US NFIB small business confidence is expected little changed at 102. The report is no market mover. Maybe there is a slight risk of further USD losses in case of a negative surprise. We also look out for any fall-out from the lingering EU-US trade dispute. If anything, it should be euro negative. Key meetings of UK PM May with German Chancellor Merkel and French president Macron are a wildcard and so is the IMF update on its world economic outlook. However, a downgrade on (EMU) growth shouldn't come as a surprise any more.

Last week, EUR/USD came close to the 1.1177/87 support, but a real test/break didn't occur. For that to happen, unexpected negative EMU news or surprisingly strong US data are needed. Recent data evidence doesn't support this scenario. We keep the view that a sustained EUR/USD break lower isn't evident as we don't expect the Fed to leave its wait-and-see bias anytime soon. For now, EUR/USD is locked in the 1.12 big figure. In a day-to-day perspective, we doubt there is much ammunition for yesterday's EUR/USD rally to continue right now.

Sterling still traded with a tentative negative bias yesterday as the political deadline of April 10/12 is coming ever closer. EUR/GBP returned north of the 0.86 barrier. UK PM will meet Chancellor Merkel and President Macron today. As negotiations between the conservative party and labour haven't yield any results yet, the UK is probably heading for a long Brexit delay. This would avoid a no deal Brexit, but we see this scenario as rather neutral for sterling as uncertainty on the way forward regarding Brexit will persist.

EUR/USD rebounds off 1.12 on USD softness

Daily Pivots: (S1) 145.23; (P) 145.51; (R1) 145.91; More...

GBP/JPY is still staying in consolidation from 148.87 and intraday bias remains neutral. 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.

Daily Pivots: (S1) 125.14; (P) 125.33; (R1) 125.79; More....

EUR/JPY's rebound from 123.65 resumed after brief consolidation and intraday bias is back on the upside. Current rise could target 126.78/127.50 resistance zone. However, on the downside, break of 124.96 minor support will argue that the rebound is completed. And, intraday bias will be turned back to the downside for 123.65 support instead.

In the bigger picture, EUR/JPY is staying well inside medium term falling channel from 137.49 (2018 high). It's also held below 55 week EMA (now at 127.53). Thus, down trend from 137.49 might still extend lower. Break of 118.62 will target 109.03/114.84 long term support zone. On the upside, however, break of 127.50 will solidify the case of medium term bullish reversal. Rise from 118.76 should extend to 133.12 key resistance instead.

Daily Pivots: (S1) 1.1221; (P) 1.1239; (R1) 1.1267; More...

Despite yesterday's recovery, EUR/CHF fails to sustain above 1.1256 minor resistance so far, intraday bias remains neutral first. As long as 1.1256 minor resistance holds, near term outlook remains bearish and further decline is expected. On the downside, decisive break of 1.1154 key fibonacci level will confirm resumption of whole downtrend from 1.2004. That should then pave the way to 61.8% projection of 1.2004 to 1.1173 from 1.1444 at 1.0930. However, break of 1.1256 will indicate short term bottoming and turn bias back to the upside for 1.1310 support turned resistance first.

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) 0.8593; (P) 0.8620; (R1) 0.8649; More...

Intraday bias in EUR/GBP remains neutral as consolidation from 0.8474 is extending. More sideway trading could still be seen. But as long as 0.7822 resistance holds, near term outlook remains bearish. On the downside, firm break of 0.8474 will resume larger down trend for 0.8416 long term projection next. On the upside, though, sustained break of 0.8722 will suggest near term reversal and bring stronger rise back to 0.8840 resistance and above.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Current fall from 0.9305 (2017 high) is a falling leg inside the pattern. Such decline could extend to 100% projection of 0.9305 to 0.8620 from 0.9101 at 0.8416 and possibly below. But for now, we'd expect strong support around 0.8312 support to contain downside and bring rebound.

The DAX 30 has reached the a few resistance trend lines which could cause the the index to make a small bearish pullback. However, price is eventually expected to continue higher and test the next 61.8% Fibonacci retracement level of the wave X vs W.

The DAX 30 has probably completed a wave 3 (green) impulse due to strong bullish price action. The current bearish retracement is most likely a wave 4 (green) and is expected to find support and a potential bounce at the Fibonacci levels of wave 4 vs 3.

Gold prices advanced on Monday, rising 0.61% on the day. The gains came amid an intraday surge in prices. Christopher Neely, an economist with the St. Louis Fed said that quantitative easing will not affect the US economy in a noticeable way. He stated this after Trump said that the economy would be stronger if the Fed had not raised interest rates.

Can XAUUSD Maintain the Gains?

After briefly testing the resistance level at 1301.50, gold prices retreated from the two-week high. We expect the bullish momentum to continue in the near term as XAUUSD could advance to 1307.50. This marks a retest of the support level which will now see a test of resistance. In the medium term, gold prices will continue to consolidate within the established range.

Oil prices surged on Monday amid a host of geopolitical developments. The fighting in Libya escalated which threatens the oil supply. This comes on top of the OPEC oil cuts and the US sanctions on Iran and Venezuela. In addition, the Washington administration designated the Iranian revolutionary guard as a terrorist organization, putting more pressure on the supply side. This impacted oil prices as NYMEX crude oil rose 2.1% and sent oil currencies higher.

Will USDCAD Decline?

After previously rallying to the highs above 1.3416, the USDCAD established resistance after failing to breakout higher. Short term support is now at 1.3136 which will be the downside target for the moment. A break down below this minor support level will see the USDCAD declining further toward the support area of 1.2858.