Sample Category Title

Pivot (invalidation): 1.1240

Our preference Short positions below 1.1240 with targets at 1.1210 & 1.1195 in extension.

Alternative scenario nAbove 1.1240 look for further upside with 1.1260 & 1.1285 as targets.

Comment The RSI lacks upward momentum.

Rates: Caution is warranted ahead of next week’s key US eco data
Core bonds might shrug off some more of the overbought conditions going into the weekend, but we expect a correction lower, if any, to be short-lived. Investors eye next week’s key US eco releases (retail sales, ISM’s, ADP, payrolls). A deterioration might amplify global growth doom and benefit core bonds again.

Currencies: dollar maintains benefit of the doubt, for now
The dollar extended gains supported by a rebound in US yields yesterday. Today, the US new homes sales and the Chicago PMI might be good pointers for the reaction of the dollar to next week’s key US eco data. We are not convinced that US eco data will be good enough to sustain further USD gains.

The Sunrise Headlines

• US equity markets posted modest gains with all major indices closing between 0.30%-0.40%. Asian markets are tracking WS with Chinese bourses outperforming (+3%) on positive signals emerging from US-Sino trade talks.
• UK PM May is said to put her Brexit deal for the 3rd time to a vote today but only the withdrawal part of the deal, so it meets the requirements for a delay, and not the part that pertains to the future EU/UK relationship.
• US Treasury Secretary Mnuchin said the trade talks with China are productive, with China pledging better access for foreign tech firms. He added that a resolution could still be months away as the quality of the deal has priority.
• US President Trump said oil prices are “getting too high”. He renewed his criticism on OPEC, asking to increase output. The reaction in oil prices remained limited. A barrel Brent crude oil currently trades just below $68 a barrel.
• St. Louis Fed chief Bullard said it is premature to expect a Fed rate cut as he expects the US economy to rebound in Q2, while New York Fed president Williams downplayed fears of recession risks.
• Japan’s jobless rate dropped to 2.3% in February, a nine-month low and down from 2.5% the month before. Core inflation remained steady at 0.7% in March, while retail sales grew 0.2% in February, below expectations (1.0%).
• Today’s US eco calendar contains the PCE Core(Jan),new home sales (Feb) and the MNI Chicago PMI (Mar). France and Italy print consumer inflation for March. ECB’s Coeuré and Fed’s Kaplan and Quarles speak. UK Parliament votes again.

Currencies: Dollar Maintains Benefit Of The Doubt, For Now

Dollar maintains benefit of the doubt, for now

The dollar maintained the benefit of the doubt on global FX markets yesterday. We didn’t see any specific trigger. The momentum of the previous days simply continued. USD-gains again mainly occurred at the start of the US session. Eco data in the US and Europe were mixed and had no lasting impact on trading. Risk sentiment wasn’t too bad. At the same time, core yields rose with interest rate differentials widening in favour of the dollar. This factor prevailed. EUR/USD drifted further south in the 1.12 big figure and closed at 1.1221 (from 1.1244). USD/JPY finished at 110.63 (from 110.51).

This morning, Asian equity indices mostly show decent gains with China outperforming. The rally was probably supported by positive comments of US officials on the US China trade talks. However, the talks might continue for a while. The (trade-weighted) dollar stabilizes in the 97.20 area. Despite the risk-on, USD/JPY (110.70 area) struggles to make further gains. EUR/USD meanders in the 1.1230 area.

Today, German retail sales and labour market data will be published. French consumer spending and CPI also provide interesting info on the EMU economy, but usually that are no movers of the FX market. US inflation and spending (Jan) data are a bit outdated. The Chicago PMI and new home sales have more market moving potential. The Chicago PMI is expected to ease from 64.9 to 61.0. We are keen the see the dollar reaction in case of a negative surprise. It could be a good pointer for market sentiment ahead of next week’s key US eco data including the ISM’s and the payrolls. We are not convinced that US data will remain strong enough to support further USD gains. EUR/USD is drifting further south in the 1.2/1.15 MT trading range. Euro sentiment is fragile, but US data are also turning mixed. For now, we maintain the view that there is no compelling reason for EUR/USD break below the 1.1187/1.12 support in a sustainable way even as we understand downside risks have increased.

Sterling momentum deteriorated yesterday as UK PM/ failed to agree on any alternative Brexit option and as the UK government indicated that it will hold a new vote only on the withdrawal agreement. However, for now it is unlikely that May’s tactic will yield a positive result. EUR/GBP hovers in the 0.8895 area. We remain cautious on sterling long exposure as long as there is no indication on how this process will turn out.

EUR/USD: drifting lower in the 1.12/1.15 range. However, global uncertainty on growth makes a real trend-move not evident.

The EUR/USD would need to break above the resistance trend line (red) before the end of the wave 2 (purple) retracement could be considered finished. A break below the bottom and 100% Fibonacci level invalidates the wave 2 (purple) pattern and indicates a potential downtrend.

The EUR/USD has reached a very deep 88.6% Fibonacci retracement level (blue box) and price seems to be respecting the level for the moment by going sideways. Price will need to break above the resistance box (orange) before a larger bullish breakout could take place.

Swiss KOF Economic Barometer rose to 97.4 in March, up from 93.0 and beat expectation of 93.9. The improve is predominantly due to "positive impulses" from manufacturing, as driven by the electrical industry, followed by the metal industry, mechanical engineering and the textile industry.

KOF Noted in the release that "recent downward tendency has at least for the time being ended." However, the current reading is still "markedly below its average". Hence, Swiss economy can expect to experience rather weak growth in the coming months.

Full release here.

Ethereum continues to struggle for direction on Friday, with the second largest cryptocurrency by market capitalization contained to a $10.00 price range so far this week. The $135.00 level remains the key weekly pivot, while critical technical support is found at the $124.00 level. The daily time frame is showing that major weekly technical resistance for the ETHUSD pair is located at the $142.00 level.

The ETHUSD pair is only bullish while trading above the $135.00 level, key resistance is found at the $124.00 and $115.00 levels.

If the ETHUSD pair trades below the $135.00 level, key resistance is found at the $142.00 and $160.00 levels.

The euro continues to edge lower against the US dollar on the last trading day of the week, with the pair failing towards the neckline of a bearish head shoulders pattern on the daily time frame. If sellers can force price below the 1.1216 level, further technical selling towards the 1.1170 level will likely occur. Buyers need to move price above the 1.1290 resistance level in order to negate the strong bearish bias surrounding the pair.

The EURUSD pair is heavily bearish while trading below the 1.1216 level, key technical support is found at the 1.1170 and 1.1110 levels.

If the EURUSD pair trades above the 1.1250 level, buyers may test back towards the 1.1290 and 1.1330 resistance levels.

The British pound has fallen towards key trendline support against the US dollar after British PM Theresa May failed to find the backing for a vote on her Brexit bill in UK Parliament. The GBPUSD pair has a strong intraday bearish bias while trading below the 1.3100 level. If bears can force price below the triangle pattern, heavy technical towards the 1.2970 support region seems increasingly likely.

The GBPUSD pair is heavily bearish while trading below the 1.3100 level, key technical support is found at the 1.3040 and 1.2970 levels

If the GBPUSD pair trades above the 1.3100 level, buyers may test towards the 1.3150 and 1.3200 resistance levels.

The Japanese yen was little moved after mixed economic data. In February, the country’s unemployment rate declined to 2.3% from 2.5% the previous month. Investors were expecting it to remain unchanged. In Tokyo, the core CPI increased to 0.9% in March, which was higher than the expected 0.5%. Still, this is much lower than the 2.0% target of the Bank of Japan. The core CPI remained unchanged at 1.1%. On the other hand, retail sales rose by 0.4%, which was lower than the expected 0.9%.

Traders will continue to focus on the United Kingdom as Brexit confusion continues. Today, Theresa May is expected to present her plan to Parliament again. She has pledged to resign if the deal passes. Meanwhile, the country’s statistics office is expected to release key economic numbers. The final reading of Q4 GDP numbers is expected to remain unchanged at 1.3% while business investment is expected to have dropped by minus 3.7%. In February, mortgage lending is expected to have gained to 3.70 billion pounds. However, traders will likely shrug these numbers and instead focus on the Brexit issue.

The euro continued to decline against the USD ahead of key economic data from Europe. In Germany, the unemployment rate is expected to decline to 4.9% from the previous 5.0%. The unemployment change is expected to drop by 10K. In Italy, the CPI is expected to remain unchanged at 1.0% while that of the European Union is expected to remain at 1.5%. In recent days, the euro has weakened significantly against the USD as traders continue to worry about economic growth. Meanwhile, the market will receive the GDP numbers from Canada. The economy is expected to have grown by 1.5%, which is slightly higher than the previous 1.1%. From the US, traders will receive consumer sentiment numbers and new home sales.

EUR/USD

The EUR/USD pair declined to a low of 1.1210. This was the lowest level since March 8. On the 4-hour chart, the price is below the 25-day and 50-day moving averages. It is also along the lower line of the Bollinger Bands. The On Balance Volume indicator too has continued to decline while the RSI has remained close to the oversold level. Today, the pair could continue moving lower as it attempts to move below 1.1200.

GBP/USD

Sterling moved lower as traders wait for the Brexit vote expected later today. The pair is now trading at 1.3070, which is slightly below the important 38.2% Fibonacci Retracement level. On the daily chart, the pair has formed a symmetrical triangle pattern, which could break-out in either direction. This will depend on the progress on the Brexit issue. If this happens, the key points to watch are the 1.3500 and the 1.2800 levels.

USD/CAD

The USD/CAD rose slightly ahead of the Canadian GDP numbers. The pair is now trading at 1.3430, which is slightly higher than the 25-day and 50-day moving averages. The RSI and the Relative Vigor Index have all remained relatively unchanged. There is a likelihood that the upward trend will continue but it will depend on the GDP numbers.

US Treasury Secretary Steven Mnuchin tweeted that this round of trade talks in Beijing has concluded. He described the talks as "constructive". And he looks forward to meeting Chinese Vice Premier Liu He in Washington next week to continue the "important" discussions.

https://twitter.com/stevenmnuchin1/status/1111534387328417792

USDCAD has gained little this week but it managed to hold above the 20-day moving average (MA) and re-enter the 1.34 area, with the technical indicators feeding prospects for a possible positive short-term trading; the RSI holds well above 50 , while the MACD continues to strengthen in bullish territory and above its red trigger line. Also, in Ichimoku indicators, the red Tenkan-sen keeps rising higher the blue Kijun-sen. Yet, the pair is facing strong resistance near its previous peak of 1.3466.

A failure to overcome the two-month high of 1.3466 barrier could send the price down to 1.3370, a challenging point over the last three months. Lower, support could be next found around 1.3285 where the 50-day MA is currently positioned, while a decisive close below the 200-day MA (1.3190) could stage a steeper sell-off.

Alternatively, if 1.3466 proves easy to get through, the spotlight will turn to the 1.3540-1.3600 area, a former resistance zone in 2016 and 2017. On top of that, the bulls would need to clear the 19-month high of 1.3663 to push the rally towards the 1.3792 peak, the highest level reached since April 2017.

In the medium-term picture, USDCAD turned neutral after violating the downtrend started from the 1.3663 peak by forming a higher low at 1.3111 and a higher high at 1.3466. Should the market continue the upward pattern, the outlook may turn brighter. A run above 1.3663 would turn the outlook strongly bullish.