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Daily Pivots: (S1) 0.9977; (P) 0.9991; (R1) 1.0014; More...

USD/CHF's recovery from 0.9879 extends higher today. 1.0010 minor resistance is breached briefly but not firmly taken out yet. Intraday bias stays neutral first. On the upside, sustained break of 1.0010 will suggest that pull back from 1.0124 has completed. Intraday bias will be turned back to the upside for 1.0124/28 resistance zone. On the downside, break of 0.9879 will resume the fall from 1.0124 to 0.9716 key support.

In the bigger picture, focus is back on medium term trend line (now at 0.9849). Decisive break there 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. Nevertheless, there is still a chance that price action from 1.0128 are forming a consolidative pattern with fall from 1.0124 as third leg. If this is the case, stronger support should be seen between 0.9716 and the trend line to contain downside.

Dollar is lifted mildly in early US session as employment data posted slight upside surprise. But buying in the greenback is not broad based yet. A key factoring limiting Dollar' rise is sluggish wage growth. But after all, the set of numbers look way better than February's. Meanwhile, Canadian Dollar is broadly pressured after poor job data. There is prospect of more downside in the Loonie before weekly close.

Elsewhere in the markets, stocks are generally higher globally, but there is no committed buying. No Trump-Xi summit was announced yesterday but just positive words that progress was made. Trump said "we're getting very close to making a deal", "within the next four weeks or maybe less, maybe more". This is rather empty. UK Prime Minister Theresa May formally seeks Article 50 extensions till June 30. But EU will only provide an answer next week.

In Europe, currently, FTSE is up 0.42%. DAX is up 0.08%. CAC is up 0.34%. German 10-year yield is up 0.021 at 0.017, turned positive, with some conviction. Earlier in Asia, Nikkei rose 0.38%. Singapore Strait Times rose 0.19%. China and Hong Kong were on holiday. Japan 10-year JGB yield rose 0.0082 to -0.03.

US NFP rose 196k, Canada employment dropped -7.2k

US Non-farm payroll employment rose 196k in March, above expectation of 175k. Prior month's figure was revised slightly up from 20k to 33k. Unemployment rate was unchanged at 3.8%, matched expectations. Labor force participation rate, at 63.0%, was little change on net over the past 12 months. However, average hourly earnings growth slowed to 0.1% mom, below expectation of 0.2% mom. Canadian employment contracted -7.2k, slightly better than expectation of -10k. Unemployment rate was unchanged at 5.8%.

Released earlier, Swiss foreign currency reserves rose to CHF 756B in March, up from CHF 739B. German industrial production rose 0.7% mom in February, below expectation of 0.8% mom. Japan leading indicator rose to 97.4 in February, above expectation of 97.2. Overall household spending rose 1.7% yoy in February, versus expectation of 2.0% yoy. Labor cash earnings dropped -0.8% yoy versus expectation of 0.8% yoy rise. Australia AiG performance of construction index rose slightly to 45.6 in March, up from 43.8.

UK PM May writes to EU Tusk to seek Brexit extension till Jun 30

UK Prime Minister Theresa May wrote a formal letter to European Council President Donald Tusk, requesting Article 50 extension till June 20. May said that she's already started talks with opposition leader to agree on a proposal for the Commons that allow an order Brexit. Invitation for discussion was also extended more broadly to other MPs to achieve a consensus. If no single unified approach is achieved, May's Government pledges to look to establish a small number of clear options on future relationship to be put the the House.

May said the steps "demonstrate that the Government is determined to bring this process to a resolution quickly". And, "the government will want to agree a timetable for ratification that allows the United Kingdom to withdraw from the European Union before 23 May 2019 and therefore cancel the European Parliament elections, but will continue to make responsible preparations to hold the elections should this not prove possible".

EU said to mull Brexit flextension rather than more short extensions

While May is seeking Brexit extension till June 30, it's reported that Tusk is considering "flextension" instead. An unnamed EU official was quoted saying "the only reasonable way out would be a long but flexible extension. I would call it a 'flextension'." That is, "we could give the UK a year-long extension, automatically terminated once the Withdrawal Agreement has been accepted and ratified by the House of Commons".

One clear advantage is that even if the Commons cannot approve the WA, "UK would still have enough time to rethink its Brexit strategy. A short extension if possible, and a long one if necessary. It seems to be a good scenario for both sides, as it gives the UK all the necessary flexibility, while avoiding the need to meet every few weeks to further discuss Brexit extensions".

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9977; (P) 0.9991; (R1) 1.0014; More...

USD/CHF's recovery from 0.9879 extends higher today. 1.0010 minor resistance is breached briefly but not firmly taken out yet. Intraday bias stays neutral first. On the upside, sustained break of 1.0010 will suggest that pull back from 1.0124 has completed. Intraday bias will be turned back to the upside for 1.0124/28 resistance zone. On the downside, break of 0.9879 will resume the fall from 1.0124 to 0.9716 key support.

In the bigger picture, focus is back on medium term trend line (now at 0.9849). Decisive break there 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. Nevertheless, there is still a chance that price action from 1.0128 are forming a consolidative pattern with fall from 1.0124 as third leg. If this is the case, stronger support should be seen between 0.9716 and the trend line to contain downside.

Economic Indicators Update

US Non-farm payroll employment rose 196k in March, above expectation of 175k. Prior month's figure was revised slightly up from 20k to 33k. Unemployment rate was unchanged at 3.8%, matched expectations. Labor force participation rate, at 63.0%, was little change on net over the past 12 months. However, average hourly earnings growth slowed to 0.1% mom, below expectation of 0.2% mom.

Canadian employment contracted -7.2k, slightly better than expectation of -10k. Unemployment rate was unchanged at 5.8%.

USD/CAD jumps notably after the release.

PM hopeful of another short extension

I’m not sure what the public fear more, an potentially indefinite backstop or indefinite negotiations. Theresa May requested another short extension from the EU on Friday to get a Brexit agreement through Parliament, as she continued to engage in talks with the opposition Labour Party.

It seems there are differences though between what May deems to be an acceptable extension and what Tusk believes it to be, which is much longer, albeit flexible. This will likely be discussed at the emergency EU summit next Wednesday, with the default remaining that the UK leaves without a deal on 12th April, one week from today.

GBPUSD Daily Chart

For now, that means more uncertainty for sterling traders. That said, barring a shock u-turn from the Prime Minister, her government and Parliament, no-deal remains unlikely.

That’s why we remain range-bound, no closer to exit day – in fact we’re probably further away, we just don’t know how far, which means prolonged economic uncertainty and sluggish growth but also the potential of a softer Brexit or remain.

This creates volatile but range-bound conditions for the pound, in this case between 1.30 and 1.33. We are near the bottom of that range now and have made a series of lower highs since the middle of last month, but I struggle to become bearish on the back of this. Only a breakout can achieve that. And we’re not exactly seeing momentum build heavily as we approach support.

GBPUSD 4-Hour Chart

The Canadian dollar has ticked higher in the Friday session. Currently, USD/CAD is trading at 1.3375, up 0.11% on the day. The spotlight is on employment numbers on both sides of the border. Nonfarm payrolls is expected in at 172 thousand in March, after a dismal gain of 20 thousand in the previous release. Still, this estimate is significantly lower than the December and January releases, both of which were above the 300-thousand level. Wage growth is projected to gain 0.3%, lower than the 0.4% gain a month ago. In Canada, monthly employment is expected to post a small gain of 3.0 thousand in March, after a huge increase of 55.9 thousand in February. Traders should be prepared for movement from the pair in the North American session.

The Canadian economy has been affected by the trade war between the U.S. and China, especially the manufacturing and export sectors. With talks between the two super-economies continuing, there is optimism that China and the U.S. will reach a deal, and that could boost the Canadian dollar. There were reports this week that an agreement is 90% complete, with the remaining issues including enforcement mechanisms and the removal of trade tariffs. The optimism over the trade talks has buoyed share prices in China, with the China 50 index rising to its highest level since March 2018 earlier this week.

Is the U.S. economy experiencing a slowdown? Key indicators have pointed lower, raising concerns about the strength of the economy. Retail sales and durable goods orders recorded declines and the trend continued on Wednesday. ADP nonfarm payrolls plunged to 129 thousand, down from 183 thousand in the previous release. If nonfarm payrolls and wage growth are soft, the greenback could lose ground.

Traders cautious after woeful February report

It's been a mixed start to trading on Friday, as we await the latest jobs report from the US.

US futures are marginally higher but we have lost a little momentum. That may simply be because we're awaiting the latest labour market data from the US, a report that is arguably the most closely followed each month.

It also comes after a dreadful month of job creation in February when only 20,000 were added, although the data has been very inconsistent since the shutdown and another revision may come today.

Broadly speaking the labour market remains very strong and the economy, while slowing, is very healthy. With unemployment running at only 3.8% and wages rising at 3.4% annually, there's clearly nothing to worry about just yet.

That said, the US is not immune from the global slowdown and investors will only accept weak job growth for so long. It will be interesting to see what happens today if we get another bad reading, especially if it isn't accompanied by a big revision to the February number. The market is not expecting this though, with around 180,000 forecast.

The greatest threat to the economic outlook remains the trade war between the US and China. While we have seen clear progress in recent months, the last part of the negotiation is expected to be the most difficult and drawn out. Trump remains optimistic about a deal but less confident about the timing.

EUR/USD

Current level - 1.1227

My outlook is positive, for a break through 1.1250 resistance, towards 1.1330 area. Intraday support lies at 1.1210, but only a slide through 1.1175 will signal a renewal of the general downtrend, towards 1.1015.

USD/JPY

Current level - 111.63

The uptrend is intact, supported at 111.15, heading towards 112.15 resistance.

GBP/USD

Current level - 1.3098

The intraday bias is slightly negative, with a risk of another test at 1.2960 support. Only a break through the crucial high at 1.3260 will signal a rise towards 1.3450.

Notes/Observations

• UK confirmed that PM May sent EU's Tusk a letter asking for an extension to Article 50 until Jun 30th (as speculated) and would EU parliament elections in case it can't ratify withdrawal agreement
• German Feb Industrial data bucks the recent trend and beats expectations

Asia:

• China Vice Premier Liu He stated that new consensus reached on text related to US/China economic and trade agreement; to continue to work hard to conclude trade talks ASAP. Told US President Trump the two sides reached new consensus on important issues, including the trade deal texts.
• Japan Feb Real Cash Earnings saw its fastest decline since Jun 2015 (YoY: -1.1% v +0.8%e); Labor Earnings Y/Y: -0.8% v +0.9%e - BOJ Quarterly Public Opinion of Household Sentiment: Households maintained its 1-year inflation outlook at 3.0% and 5-year inflation outlook at 2.0%

Europe:

• UK PM May said to be writing to EU's Tusk on Friday, Apr 5th to formally request a Brexit extension and seek a termination clause which allowed the UK to leave the day before Euro elections on May 22nd. UK Govt officials were working on a formal letter to labour setting out terms of a deal but the prospects of 2nd referendum being included in any package being played down
• Some UK cabinet ministers reportedly attempting to block a long Brexit postponement. PM May said to not yet secure cabinet support for long extension but ministers fear she would press ahead anyway - EU's Tusk said to offer UK a 12-month extension on Brexit. The plan would allow the UK to leave sooner if a deal was ratified by parliament but needed to be agreed at next week's EU summit

Americas:

• President Trump stated that a China trade deal could be within the next four weeks; something 'very monumental' could come soon. Co;ld have a summit with President Xi in Washington if an agreement was reached. Should know in the next 4 weeks. Talks might continue for four weeks and another two after that to get it on paper
• President Trump: nominations of Cain and Moore to the Fed were not meant to send any signal whatsoever to the Fed
• Fed's Harker (hawk, non-voter): Still in wait and see mode, expects at most one rate hike this year and one hike in 2020
• Fed's Mester (hawk, non-voter): it's possible Fed was done with rate increases; rate rises were still needed if economy met expectations

Energy:

• Saudi Arabia said to have discussed plans to 'ditch the US dollar' from oil trades if the US passed NOPEC as it would expose members of OPEC to US antitrust lawsuits. (Note: NOPEC bill not expected to pass in the US and the threat related to the US dollar could be part of Saudi Arabia's contingency planning)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.0% at 388.0, FTSE +0.1% at 7410, DAX -0.10% at 11975, CAC-40 +0.1% at 5468, IBEX-35 +0.1% at 9538, FTSE MIB +0.3% at 21773, SMI -0.30% at 9535, S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European Indices trade flat in a lackluster session ahead of March US Jobs numbers. Asian Indices were mixed with Tech giants Samsung Electronics and LG Electronics reporting prelim Q1 results which were slightly shy of consensus. US futures trade slightly hgiher following a mixed session yesterday. On the corporate front, Alpiq shares rise after Swiss investors acquire EDF's stake for CHF70/shr; Salini Impregilo gains almost 10% after a A$5.1B contract in Australia. On the earnings front, Eckert & Ziegler gains on final earnings, with EMS Chemie, Kid ASA and Rosenbauer all advancing on earnings. Elsewhere Purple Bricks declines on a downgrade, with Funding Circle another notable decliner as the board acknowledges holders preference to cease investment in new Credit Assets. Looking ahead notable earners include Greenbrier and Northern Technologies.

Equities

• Consumer discretionary: Befesa [BFSA.DE] -4.1% (Placing)
• Energy: Alpiq [ALPH.CH] +9.4%, EDF [EDF.DE] +0.9% (EDF sells Alpiq stake to investors for CHF489M), Saipem [SPM.IT] +3.1% (contract wins)
• Financials: Purplebricks [PURP.UK] -7.7% (Analyst downgrade), Funding Circle [FCH.UK] -7.0% (Investors to cease more investment in new credit assets)
• Healthcare: Eckert & Ziegler [EUZ.DE] +6.8% (Earnings), Novozymes [NZYMB.DK] +2.8% (Raises outlook)
• Industrials: Salini Impregilo [SAL.IT] +8.0% (Australian contract), EMS Chemie [EMSN.CH] +4.5% (Earnings)

Speakers

• Italy Cabinet said to approve a series of growth measures (as expected). Growth Decree contained incentives including measures to encourage a restart of private investment as well as actions to safeguard the "Made in Italy" brand
• Italy Stats Agency (Istat) Monthly Economic Note saw the potential end to contraction in the domestic economy
• Details of PM May letter to Tusk being released; UK to ask for an extension to Article 50 until Jun 30th (as speculated). UK to seek ratification of deal by May 23rd but would prepare for EU Parliamentary elections in the event the UK Parliament fails to ratify a Withdrawal Agreement
• UK Labour Dep leader Watson: Need some more time to explain our party position to PM May. If no confirmatory Referendum ballot was agreed upon with Govt then there could be difficulty with the Govt
• Eurogroup chief Centeno commented ahead of an informal finance minister meeting that were continuing to debate the Euro Zone budget but not yet discussing the size.
• France Fin Min Le Maire: Concerned over growing divergences in member States; region's future at stake if divergences not reduced. Euro Zone budget was the right tool for convergence. Needed to have banking consolidation in Europe. Too soon to discuss top EU and ECB positions. Reiterated that need to understand what the Brexit extension would be for
• German Fin Min Scholz: Glad we came this far with the Euro-Zone budget
• Switzerland Govt said to propose changes to banking law and strengthen the sector against property market losses. Govt to raise bank's risks weights for buy-to-let loans

Currencies/Fixed Income

• EUR/USD was slightly higher after German Feb Industrial Production beat expectations. Focus turning towards next week's ECB meeting but analysts were not expecting any new policy actions expected as ‘inflation was delayed, not derailed'. Draghi to strike an overall cautious tone and the ECB to keep its downside risks assessment on growth. Pair currently at 1.1225 area
• GBP was firmer as speculation was confirmed that PM May sent EU's Tusk a letter asking for an extension to Article 50 until Jun 30th and would EU parliament elections in case it can't ratify withdrawal agreement. Reports circulated that EU was prepared to call for 12-month "flexible" Brexit delay once the UK govt ratified the Withdrawal Agreement. Pair holding below the 1.31 area ahead of the NY morning.

Economic Data

• (SE) Sweden Feb Maklarstatistik Housing Prices Y/Y: 0% v 0% prior; Apartments: 0% v 0% y/y prior
• (DE) Germany Feb Industrial Production M/M: 0.7% v 0.5%e; Y/Y: -0.4% v -1.4%e
• (NO) Norway Feb Industrial Production M/M: -1.8% v -2.2% prior Y/Y: -5.7% v -3.4% prior
• (NO) Norway Feb Manufacturing Production M/M: -0.3% v +0.3%e Y/Y: 3.1% v 4.0% prior
• (DK) Denmark Feb Industrial Production M/M: -1.2% v -7.4% prior
• (ZA) South Africa Mar Gross Reserves: $49.7B v $50.8B prior; Net Reserves: $43.3B v $43.7B prior
• (FR) France Feb Trade Balance: -€4.0B v -€4.6Be
• (FR) France Feb Current Account Balance: -€0.8B v +€0.3B prior
• (ES) Spain Feb Industrial Output NSA Y/Y: -0.2% v 1.8% prior; Industrial Output SA Y/Y: -0.3% v -0.1%e; Industrial Production M/M: -1.1% v -1.0%e
• (CH) Swiss Mar Foreign Currency Reserves (CHF): 756.0B v 740.6Be
• (HU) Hungary Feb Industrial Production M/M: 1.0% v 0.6% prior; Y/Y: 5.9% v 5.1%e
• (CZ) Czech Feb Retail Sales Y/Y: 3.8% v 2.3%e; Retail Sales (ex-auto) Y/Y: 5.1% v 4.5%e
• (AT) Austria Mar Wholesale Price Index M/M: 0.3% v 0.7% prior; Y/Y: 2.9% v 2.3% prior
• (MY) Malaysia end-Mar Foreign Reserves: $103.0B v $102.6B prior
• (UK) Mar Halifax House Prices M/M: -1.6% v -2.8%e; 3M/Y: 3.2% v 2.1%e
• (SE) Sweden Mar Budget Balance (SEK): 12.0B v 41.1B prior
• (RU) Russia Narrow Money Supply w/e Mar 29th (RUB): T v 10.23T prior
• (UK) Q4 Unit Labor Costs Y/Y: 3.1% v 2.9% prior

Fixed Income Issuance

• (IN) India sold total INR170B vs. INR170B indicated in 2021, 2026, 2031, 2039 and 2055 bonds

Looking Ahead

• (EU) European Finance Ministers (EcoFin) hold informal meeting
• (IT) Bank of Italy (BOI) Feb Balance sheet aggregates Target2 Liabilities at €B vs. €482.8B prior
• 05:45 (NO) Norway Sovereign Wealth Fund white paper
• 06:00 (UK) DMO to sell €5.0B in 1-month, 3-month and 6-month bills £1.5B, £1.5B and £2.0B respectively)
• 06:30 (IS) Iceland to sell 2028 RIKB 2028 Bonds
• 06:45 (US) Daily Libor Fixing
• 07:30 (CL) Chile Feb Economic Activity Index (Monthly GDP) M/M: 0.0%e v 0.3% prior; Y/Y: 2.0%e v 2.4% prior; Economic Activity (ex-mining) Y/Y: No est v 3.1% prior
• 07:30 (IN) India Weekly Forex Reserves w/e Mar 29th: No est v $406.7B prior
• 08:00 (UK) Baltic Bulk Index
• 08:00 (PL) Poland Mar Official Reserves: No est v $112.5B prior
• 08:00 (CL) Chile Feb Nominal Wage M/M: No est v 0.8% prior; Y/Y: No est v 3.8% prior
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (US) Mar Change in Nonfarm Payrolls: +177Ke v +20K prior; Change in Private Payrolls: +177Ke v +25K prior; Change in Manufacturing Payrolls: +10Ke v +4K prior
• 08:30 (US) Mar Unemployment Rate: 3.8%e v 3.8% prior; Underemployment Rate: No est v 7.3% prior; Labor Force Participation: 63.2%e v 63.2% prior
• 08:30 (US) Mar Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.4%e v 3.4% prior
• 08:30 (CA) Canada Mar Net Change in Employment: +6Ke v +55.9K prior; Unemployment Rate: 5.8%e v 5.8% prior; Full Time Employment Change: +5.4Ke v +67.4K prior; Part Time Employment: +7.0Ke v -11.6K prior; Participation Rate: 65.7%e v 65.8% prior; Hourly Wage Rate Y/Y: 2.2%e v 2.2% prior
• 09:00 (RU) Russia Mar Official Reserve Assets: $488.6Be v $482.6B prior
• 10:00 (MX) Mexico Mar Vehicle Production: No est v 311.8K prior; Vehicle Exports: No est v 271.1K prior
• 10:30 (TR) Turkey Mar Cash Budget Balance (TRY): No est v -25.9B prior
• 11:00 (EU) Potential sovereign ratings after European close
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 15:00 (US) Feb Consumer Credit: $17.0Be v $17.1B prior
• 15:30 (US) Fed's Bostic (dove, non-voter) discusses Disruption and Opportunity
• 20:00 (CO) Colombia Mar CPI M/M: 0.3%e v 0.6% prior; Y/Y: 3.1%e v 3.0% prior
• 20:00 (CO) Colombia Mar CPI Core M/M: No est v 0.6% prior; Y/Y: No est v % prior
• (MX) Mexico Citibanamex Survey of Economists

It seems that the Japanese yen (unlike the greenback) can’t get rid of poor economic data. Poor February exports figures of -1.20% (prior: -8.40%) in negative territory for the third consecutive time as well as low February wage earnings, down 0.80% following January revised -0.60% figures from a 1.20% increase poses questions over the achievement of Prime Minister Shinzo Abe “Abenomics” program.

Indeed, as the labor market remains at its lowest historical range and considering the country’s CPI ex. food at 0.70% in February, it appears that the program’s objectives of rising wages and prices poses further concerns to investors. Furthermore, the news is also unwelcomed by the BoJ whose loose monetary policy is not enough to approach the 2% inflation target. It is therefore very likely that Japan’s wage growth, a major contributor of consumer prices, remains within the range of 1% by year-end, thus making it very difficult to reach the price target in 2019.

USD/JPY will be largely influenced by today’s US job data figures. It is assumed that March Non-farm payrolls data should rebound following a massive drop of 20K in February while unemployment rate and hourly earnings figures are expected to be flat.

Currently trading at 111.69, USD/JPY is heading along 111.90 short-term.

Yesterday, the EUR/USD currency pair tried to surpass the 55-hour SMA, currently located at 1.1232.

As apparent on the chart, the pair is being pressured by the 200-hour SMA at 1,1238, thus, it is likely, the pair steps lower to the psychological level at the 1.1200 mark.

On the other hand, the exchange rate is supported by the 100-hour SMA, thus, the Euro could continue trading at the 1.1230 level against the US Dollar.