Sample Category Title

Pivot (invalidation): 0.9965

Our preference Long positions above 0.9965 with targets at 1.0005 & 1.0025 in extension.

Alternative scenario Below 0.9965 look for further downside with 0.9950 & 0.9930 as targets.

Comment Technically the RSI is above its neutrality area at 50.

Pivot (invalidation): 111.15

Our preference Long positions above 111.15 with targets at 111.55 & 111.75 in extension.

Alternative scenario Below 111.15 look for further downside with 110.85 & 110.60 as targets.

Comment Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Pivot (invalidation): 1.3115

Our preference Short positions below 1.3115 with targets at 1.3025 & 1.2990 in extension.

Alternative scenario Above 1.3115 look for further upside with 1.3150 & 1.3195 as targets.

Comment As Long as the resistance at 1.3115 is not surpassed, the risk of the break below 1.3025 remains high.

Pivot (invalidation): 1.1225

Our preference Short positions below 1.1225 with targets at 1.1195 & 1.1175 in extension.

Alternative scenario Above 1.1225 look for further upside with 1.1245 & 1.1260 as targets.

Comment A break below 1.1195 would trigger a drop towards 1.1175.

Investors have found fresh reasons to continue buying risk assets after a robust first quarter performance. A brighter manufacturing outlook from the world's two largest economies, the U.S. and China, helped ease concerns about slowing global economic growth. China's factory activity unexpectedly grew in March, at its fastest pace in eight months. The Caixin/Markit Manufacturing PMI entered an expansionary territory after being in contraction for three consecutive months. The government's effort to ease monetary and fiscal policies seems to have started doing its magic; if more positive progress is achieved in Sino-U.S. trade talks, investors should expect further improvement in upcoming economic data.

The U.S. manufacturing sector also rebounded strongly in March from its lowest levels in more than two years, with new orders, employment, and production in the sector all surprising to the upside. The data has helped push U.S. stocks to their highest levels this year, whereas Treasury Bonds recorded their steepest selloff in three months, with yields on 10-Year Treasuries rising 8 basis points. The rise in long term yields led to steepening the yield curve after having inverted last week.

However, it's still too early to conclude that the U.S. economy has made a U-turn. Retail sales dropped 0.2% last month as households reduced spending on furniture, electronics, building materials and clothing. Given that consumer spending accounts for more than two-thirds of U.S. economic activity, it's necessary to see an improvement in spending habits to indicate that momentum has started to build up. Building up too much on one piece of information may be misleading, and that's why investors need to be cautious, especially given that the Fed's dovishness and a positive outcome to U.S.-China trade talks have already been priced in equity markets.

In currency markets, the British Pound saw the biggest moves on Monday. After rising to 1.3149 against the Dollar, the Pound plunged more than 1% to revisit 1.30 as four alternative Brexit options were all rejected in Parliament. Yesterday's defeat increased the probability of a no-Brexit deal with only 10 days remaining for U.K. politicians to make their minds up. Theresa May is likely to make another attempt to win support for her withdrawal agreement, but if she fails for the fourth time, an alternative plan is needed to avoid leaving without a deal. At this stage, it seems extending the Brexit timeline is the most probable scenario. However, if another round of indicative votes saw support for a customs union or a second referendum, we may see a significant rally in the Pound.

• Rates: ISM takes investors by surprise
  US yields added up to 10 bps yesterday on the back of a strong manufacturing ISM, positive risk sentiment and higher oil prices. The former wrong footed some gloomy investors. We won’t consider the sky as cleared yet with ADP employment, services ISM and payrolls still up for release this week. Previous support around 2.5% now serves as resistance.
• Currencies: US dollar nears key resistance levels on solid US eco data
  The dollar extended gains supported yesterday by a strong US manufacturing ISM and higher US yields. Today, the eco calendar is less inspiring. FX traders will look forward to key US data later this week. EUR/USD is nearing the 1.1187/77 support. The day-to-day momentum is USD supportive, but we expect any further USD gains to be modest and very gradual

The Sunrise Headlines

• US equity markets jumped higher yesterday with gains close to 1.25% as global sentiment flourished and after strong ISM results. Asian equities are all moving higher this morning with Japanese indices slightly underperforming.
• UK Parliament again voted down all alternative options to replace PM May’s Brexit deal. A motion to remain in a customs union with the EU came close to find majority. PM May meets with her Cabinet today to discuss how to proceed.
• Australia’s central bank left its policy rate unchanged at 1.5%, as expected, and underscored the strength of employment. The RBA also awaits the effects of a fiscal injection that is expected to be announced by the government later today.
• Japanese companies expect inflation to be at 0.9% a year from now, unchanged from their projection three months ago, underlining the challenges for the BoJ to boost growth and prices in times of a slowing global demand.
• OPEC’s crude oil output declined for a 4th consecutive month. Saudi Arabia continues to cut production aimed at balancing global markets, despite pressure from US President Trump. A barrel of Brent crude oil costs north of $69 a barrel.
• The Greek government is exploring the option to repay part of its loans from the International Monetary Fund ahead of schedule. The early repayment could mean another step toward economic stabilization.
• Today’s eco calendar is meagre with in the US Durable Goods orders (Feb) and Capital goods shipments nondefense and ex-air (Feb). The EMU prints producer inflation data, while ECB chief economist Peter Praet is scheduled to speak.

Currencies: US Dollar Nears Key Resistance Levels On Solid US Eco Data

USD near resistance levels on solid US data

The euro initially profited from a positive risk sentiment yesterday. EUR/USD tested the 1.1250 area. The final EMU manufacturing PMI’s and EMU March inflation printed again below expectations. At first, the negative impact on the euro was limited. Later, the balance tilted in favour of the dollar. US retails sales and a solid manufacturing ISM confirmed that the odds are still much better for the US economy than for EMU. The US-German interest rate differential widened sharply. EUR/USD dropped to the low 1.12 area (close at 1.1213). USD/JPY jumped well north of 111. (close at 111.35). Yesterday’s risk rally is taking a breather in Asia this morning, but most indices easily maintain yesterday’s gain. This pattern also applies to the US dollar. Yesterday’s rise in US yields is slowing. The trade weighed dollar trades near 97.35. USD/JPY is seen around 111.40 as EUR/USD is testing the 1.12 level. The RBA left its policy rate unchanged at 1.50 %, as expected. The bank kept a rather balanced assessment. However, the RBA underlining it will monitor developments when setting policy might be an opening to ease policy if necessary. AUD/USD jumped up and down after the decision, but finally turned south (0.7080 area).

Today, the eco calendar is a less inspiring than yesterday. US durable goods orders/shipments are expected to ease in February after a decent January reading. The market reaction might be more guarded than after yesterday’s ISM’s.

Yesterday’s divergence between US and EMU data pushed EUR/USD for a test of the 1.12 area. Key US eco data later this week (ADP, non-manufacturing ISM, payrolls) will decide whether a break of major USD cross rates beyond recent peak levels will occur. The day-to-day momentum is USD supportive/euro negative. That said, we assume that any further USD gains might only occur in a very gradual way. We don’t expect the Fed to leave its wait-and-see bias anytime soon. Further USD strength might also capture the attention of US politicians and even of some Fed members. Next support beyond 1.1187/77 area is coming in at 1.1110 ahead of the psychological barrier of 1.10. Yesterday sterling traded with a positive bias as MP’s prepared for a new series of plan B-amendments. However, none of the alternatives obtained a majority. Sterling lost modest ground after the vote. The pair is again trading in the 0.8575 area. The UK PM will hold a new round of crisis talks today. This might lead to a next round in the Brexit-carousel later this week (new vote on PM May’s plan?). With all binary options still open, we expect more erratic EUR/GBP trading near current levels.

EUR/USD: testing the 1.12 area as data suggest growing US-EMU growth divergence

EU chief Brexit negotiator Michel Barnier said at an event in Brussels that "over the last days a no-deal scenario has become more likely." Though, he remained optimistic that "we can still hope to avoid it." He urged the UK to "indicate the way forward or indicate a plan... more today than ever". He reiterated the agreement Brexit deal was "the only way" to leave EU in an orderly way.

Meanwhile, Barnier also said EU27 is ready for a disorderly, abrupt Brexit. But he emphasized: "Being prepared for no-deal doesn't mean that everything will be smooth. There will be disruptions, there will be problems. Being prepared means all unforeseen disruptions could be managed by the EU".

General Trend:

• Japanese megabanks track gains in US financials
• Japanese real estate firms decline amid rise in Treasury yields
• Fast Retailing due to report March sales later today
• Chinese IT shares out perform in early trade, property shares lag
• China Iron Ore Futures rise, BHP sees production impact from Cyclone Veronica
• RBA: To monitor developments and set monetary policy to support sustainable growth in the economy and achieve the inflation target over time (April policy statement)
• RBA omits comment noting “central scenario is still for the Australian economy to grow by around 3 per cent this year” from April policy statement
• Kiwi (NZD) declines amid weaker business confidence
• Korean Won (KRW) declines, CPI hits lowest level since 2016
• British Pound (GBP) declines in Asian trading, UK parliament rejected Brexit motions
• Bitcoin rises over 15% during Asian session
• Australia budget expected to be released after the market close
• Australia Feb Retail Sales and Trade data due for release on Wed

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.5%
• (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED
• BHP.AU Updates on Cyclone Veronica impact: To reduce FY19 production by ~6-8Mt (prior 241-250MT)
• (NZ) New Zealand Q1 NZIER Business Confidence: -29 v -17 prior; Capacity Utilization: 92.8% v 92.9% prior
• (AU) AUSTRALIA FEB BUILDING APPROVALS M/M: +19.1% V -1.8%E; Y/Y: -12.5% V -27.0%E

Japan

• Nikkei 225 opened +1.1%
• 8411.JP To cut April 2020 graduate hires by 20%, SMFG is expected to cut graduate hires by 10% - Japanese Press
• (JP) Bank of Japan (BOJ) Q1 Tankan Survey Japan company CPI expectations: 1-yr 0.9% v 0.9% prior; 3-yr 1.1% v 1.1% prior; 5-yr 1.1% v 1.2% prior
• (JP) Japan Economy Min Motegi: Confirms first round of US trade talks to be held in April
• (JP) Japan Fin Min Aso: Reiterates sales tax hike to proceed as planned
• (JP) Japan MoF sells ¥2.2T v ¥2.2T indicated in 0.10% (prior 0.10%) 10-yr JGBs, avg yield -0.060% v -0.002% prior, bid to cover 5.07x v 4.25x prior

Korea

• Kospi opened +0.4%
• (KR) SOUTH KOREA MAR CPI M/M: -0.2% V 0.2%E; Y/Y: 0.4% V 0.7%E (lowest since 2016); CPI Core Y/Y: 0.9% v 1.3%e
• (RU) Russian Interior Min Kolokoltsev has arrived in North Korea – KSNA
• (KR) US Sec State Pompeo: There is no timeline for negotiations with North Korea over its nuclear weapons program, it could be a process of taking one step forward and one step back – Yonhap
• 005380.KR US govt opens safety investigation into 3M Hyundai and Kia vehicles due to fire risks – press
• (KR) South Korea sells KRW1.7T v KRW1.7T indicated in 30-yr bonds; avg yield 1.91% v 2.075% prior

China/Hong Kong

• Hang Seng opened +0.6%; Shanghai Composite opened +0.4%
• (CN) PBOC Adviser Sheng Songcheng: China may decided if it will cut RRR after Q1 data is released; chance is not big for China to cut [benchmark] interest rates this year - China Daily
• (CN) China PBOC seeking police investigation into rumor on RRR cut
• (CN) China PBoC Open Market Operation (OMO): Skips for 10th consecutive session: Net: CNY0 v CNY0 prior
• (CN) China PBoC sets yuan reference rate: 6.7161 v 6.7193 prior

North America

• (US) FEB ADVANCE RETAIL SALES M/M: -0.2% V +0.3%E; RETAIL SALES (EX-AUTO) M/M: -0.4% V +0.3%E

Europe

• (UK) Parliament rejects all 4 Brexit motions; Brexit Min Barclay: Default position continues to be UK to leave EU in 11 days; govt still seeks a deal
• (UK) UK Chancellor of the Exchequer Hammond expected to tell Cabinet on Tuesday the Tories may have to consider referendum since neither party or country could afford election - UK Times
• (UK) Consensus said to be rising in UK Cabinet to reluctantly accept customs union if PM May deal is rejected during a run-off final round of indicative voting - UK Press

Levels as of 1:20 ET

• Nikkei 225, +0.2%, ASX 200 +0.4%, Hang Seng +0.3%; Shanghai Composite +0.5%; Kospi +0.4%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.2%; FTSE100 +0.1%
• EUR 1.1218-1.1195 ; JPY 111.45-111.28 ; AUD 0.7130-0.7078 ;NZD 0.6806-0.6771
• Gold -0.3% at $1,290/oz; Crude Oil +0.3% at $61.75/brl; Copper -0.3% at /lb

Daily Pivots: (S1) 1.1194; (P) 1.1222; (R1) 1.1241; More.....

EUR/USD's fall from 1.1448 resumed after brief consolidation. Intraday bias is back on the downside for 1.1176 low. Firm break there will resume whole decline from 1.2555. On the upside, however, break of 1.1273 support turned resistance will turn bias back to the upside for 1.1448 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.

Daily Pivots: (S1) 1.3027; (P) 1.3089; (R1) 1.3168; More....

GBP/USD is still staying consolidation in 1.2960/3381. Intraday bias remains neutral and further rise is still mildly in favor. On the upside, firm break of 1.3381 will target 61.8% retracement of 1.4376 to 1.2391 at 1.3618 next. However, on the downside, firm 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.