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The Euro consolidates above cracked Fibo support at 1.1240 (76.4% of 1.1176/1.1448) in European session on Thursday after bears extended to new low at 1.1234 (the lowest since 11 Mar).

Bears may take a breather on deeply oversold stochastic and weakening momentum, before resuming as last week’s bull-trap and negative sentiment continue to weigh.

Broken Fibo level at 1.1280 (61.8%) marks initial barrier, with falling 20SMA (1.1305) expected to cap stronger upticks and keep bears intact.

Close below 1.1240 Fibo support would open way for test of key support at 1.1176 (2019 low posted on 7 Mar).

Res: 1.1261, 1.1280, 1.1305, 1.1317
Sup: 1.1240, 1.1221, 1.1200, 1.1176

The US dollar is strengthening against the basket of world currencies. The dollar index (#DX) has set new weekly highs. Demand for the US currency is supported amid the "dovish" rhetoric of key Central Banks. Yesterday, President of the European Central Bank, Mario Draghi, said that interest rates rise could be postponed for a longer period. Earlier, the RBNZ announced that in the near future it was ready to consider the issue of introducing additional expansionary actions. Investors are still concerned about the inversion of the US government bonds yield curve.

The situation concerning Brexit is in the spotlight. Yesterday, British lawmakers rejected all eight options for Brexit. We recommend following current information on this issue. Today, financial market participants will assess important economic releases from the US.

The "black gold" prices have been declining due to the growth of crude oil inventories in the US. At the moment, futures for the WTI crude oil are testing the mark of $59.00 per barrel.

Market Indicators

• Yesterday, there was the bearish sentiment in the US stock market: #SPY (-0.52%), #DIA (-0.14%), #QQQ (-0.64%).
• The 10-year US government bonds yield has been declining and has updated annual highs. Currently, the indicator is at the level of 2.35-2.36%.

The news feed on 28.03.2019:

• Report on US GDP at 14:30 (GMT+2:00);
• Pending home sales index in the US at 16:00 (GMT+2:00).

EURGBP returned to neutrality after plunging below the 38.2% Fibonacci retracement level of the downleg from the 15-month high of 0.9110 to the 22-month low of 0.8415 on February 19; prices are consolidating within the 0.8715 resistance and the 0.8470 support. The technical indicators, however, are pointing to positive momentum in the near term.

The stochastics are heading upwards after the blue %K line crossed above the red %D line in the oversold zone, suggesting plenty of scope for additional upside moves. Moreover, a positive divergence seems to be occurring, as the MACD is improving above its trigger line at the same time prices are holding a downward pattern since early January. Despite these indications, the market action is still developing below the 20- and 40-day simple moving averages (SMAs).

If the price successfully surpasses the mid-level of the Bollinger Band (20-SMA), more gains could follow until the 23.6% Fibonacci mark of 0.8620, which stands near the 40-SMA. Even higher, the upper Bollinger Band currently at 0.8667 could act as major resistance for the bulls, while on top of that buying interest could increase until the 38.2% Fibonacci of 0.8715 and the 0.8725 resistance. A jump above these lines could switch bias from neutral to a more bullish one in the very short term.

Alternatively, further downside could drive the price south and towards the 22-month low of 0.8470. A failure to hold inside the Bollinger bands would shift the focus to the 0.8380 low reached on May 2017.

A drop below 0.8470, would turn the short and the medium-term outlook into bearish, while a climb above 0.8715 would bring the bullish view into play only in the short term.

The pair returned to strength and rallied back above 200SMA on Thursday, extending recovery into second straight day, following strong fall on Mon/Tue, when it was down 6.5%.

Turkish central bank took a number of ‘back door’ steps in order to support the national currency which fell over 6% last Friday.

The CBRT on Tuesday kept two auctions shut in attempts to fight back negative impact from increased foreign cash buying as Turks lose the confidence and fear fresh currency crisis.

Tightening the monetary policy gave positive results initially, as the action gave positive results and brought lira well below the low that preceded last Friday’s fall, however, negative consequences could be anticipated in the longer term.

Near-term action remains highly volatile, with fresh recovery returning above 200SMA (5.4748) and emerging above top of thick daily cloud (5.1816), after two-day fall was contained by cloud base at 5.3026, was bullish signal.

The pair is regaining bullish momentum and MA’s return to positive configuration that supports recovery.

Holding above 200SMA keeps bullish bias, with close above daily cloud needed to further improve near-term outlook, as recovery already retraced over 50% of 5.8410/5.3037 fall.

Res: 5.5724, 5.6246, 5.6358, 5.7142
Sup: 5.4962, 5.4748, 5.4627, 5.4105

EUR/USD

Current level - 1.1255

My outlook remains counter-trend, for a reversal and rise towards 1.1330, en route to 1.1450 peak.

USD/JPY

Current level - 110.14

The pullback after 110.70 peak seems corrective and my outlook is positive, for a rise towards 111.00 area.

GBP/USD

Current level - 1.3176

The pair is rather set for a break through 1.3150 support, en route to 1.2960 zone.

• US dollar continues to inch higher despite falling yields as more central banks join dovish bandwagon
• Pound comes under pressure after indicative votes produce no majority for any option and May’s offer to quit fails to win enough support for her deal
• Kiwi and aussie rebound from lows but euro extends declines

Dollar defies lower US yields as other government bond yields fall more

The US currency rose to fresh two-week highs on Thursday, with the dollar index approaching the 97.0 level. Support for the dollar comes even as the yields on US Treasuries continue to drop, with the yield on 10-year notes reaching a 15-month low of 2.34% and deepening the negative spread with the 3-month note.

The inverted yield curve that took shape last week has triggered fears of a US and global recession, pushing more central banks to turn dovish. The RBNZ adopted an easing bias at its policy meeting this week, while persisting weakness in the Eurozone has driven German bund yields back to negative territory.

As long as this trend continues, the greenback is unlikely to weaken significantly as US yields still look relatively attractive among the major advanced economies even after the recent slump. Dollar strength hasn’t been so pronounced against the safe-haven yen however, with dollar/yen moving back towards last week’s 6-week lows and flirting with the 110 handle again.

Aussie and kiwi attempt rebound

The battered Australian and New Zealand dollars were attempting to recover from yesterday’s dramatic sell-off, particularly the kiwi, which slumped by 1.6%. The response was triggered from an unexpected dovish tilt by New Zealand’s central bank, which said a rate cut was the more likely next move of its official cash rate. Investors now anticipate the Reserve Bank of Australia, which meets next week, to also switch to a more dovish stance. The aussie was struggling as a result and last stood at $0.7085, after losing its grip above the $0.71 level yesterday.

Things are not looking good for the euro either, as worries persist about the health of the Eurozone economy. The single currency got a modest but short-lived boost yesterday after ECB President Mario Draghi yesterday expressed confidence about the resilience of the domestic economy. However, in later remarks, Draghi suggested that the timing of a rate hike could be pushed further back, sending the euro to a 2½-week low of $1.1231.

Traders will be watching the Eurozone economic sentiment index due at 10:00 GMT, hoping to see signs of an easing in the slowdown.

Pound breaks below recent range as Brexit remains deadlocked

The indicative votes held in the British Parliament on Wednesday failed to produce a clear path for a way forward in the Brexit process. MPs voted on eight different options, but none achieved a majority, though the proposal for a customs union and a second referendum did obtain the most votes. A second round of votes will likely be held next Monday so it’s still possible that a majority can be reached for at least one of the options as the least popular alternatives are eliminated.

But traders were unhappy with the ongoing uncertainty, which seems set to drag on further, and the pound broke below the bottom of its 3-day trading range at $1.3155 to hit a low of $1.3123.

Also weighing on sterling was the statement from the DUP party, the small Northern Irish party that prop-up May’s government, that they are still opposed to the Prime Minister’s Brexit deal. The pound touched a one-week high of $1.3269 yesterday after some key Eurosceptic figures in May’s Conservative party said they are willing to back the deal if the DUP was to support it. But the DUP’s opposition means a third meaningful vote on May’s divorce deal is unlikely this week.

However, talks between the government and the DUP are ongoing so sterling will likely remain volatile to any headlines pointing to a breakthrough.

US and China to resume trade talks

Apart from Brexit developments, Sino-US trade talks will also be in the spotlight as the two sides begin another round of discussions in Beijing to resolve their months-long trade dispute. Reports that US officials see progress in their talks with China helped ease some of the risk-off sentiment prevailing today, though markets remain cautious as some sticking points remain.

In terms of data, revised US GDP estimates for the fourth quarter will be watched along with a number of appearances by FOMC members, including Fed Vice Chair Richard Clarida at 13:30 GMT and Fed Governor Michelle Bowman at 14:00 GMT. The speech by RBNZ Governor, Adrian Orr, will also attract attention at 20:00 GMT.

European Central Bank (ECB) President Mario Draghi made additional dovish comments on Wednesday, saying they may postpone hiking interest rates if required. However, on a more positive tone he said they are aiming towards hitting inflation targets of 2%. He also added a comment on banks saying they could be bringing forward measures that can safeguard the favorable implication of negative rates for the economy in an attempt to improve the overall banking system. European banking stocks including Deutche Bank and BNP Paribas rallied in trade on Wednesday, with many analysts pointing at Draghi's comments for the reason. EURUSD moved lower yesterday breaking our (R1) 1.1260 support level now turned to resistance. If the EUR gets in buying trend we could see the pair climb over the (R1) 1.1260 resistance level and aim even higher for the (R2) 1.1300 resistance line. Even higher we could see the pair reaching the 1.1340 resistance barrier. However if traders support a selling momentum for the EUR we may see the common currency moving towards the (S1) 1.1220 support line and break even lower for the (S2) 1.1175 support level.

Brexit: Teresa May offers to quit under certain conditions

British Prime Minister Theresa May said on Wednesday she is willing to quit if her deal passes on Thursday. Sterling moved up by 0.5 percent on Wednesday on a report that former British foreign minister Boris Johnson, could back Theresa May’s Brexit deal after her promise to step down. The Conservative Eurosceptics are aiming for better negotiations on the terms and future of the UK’s relationship with the EU. Cable later corrected as no progress was made and Brexit remains in a deadlock. Caution is advised as the GBP could come under strong volatility. EURGBP traded in a tight range yesterday with our (R1) 0.8525 resistance level being in between. In a bullish scenario we could see the pair advancing towards the (R2) 0.8590 resistance barrier and even higher for the (R3) 0.8655 resistance level. In the opposite direction, if we see the GBP being purchased we could see EURGBP moving lower for the (S1) 0.8455 support barrier. Even lower we could see the (S2) 0.8385 support level and the (S3) 0.8315 support barrier.

Other economic highlights, today and early tomorrow

In today’s European session, we get CNB interest rate decision while in the American session we get the US GDP for Q4. After that we get from the Eurozone, Germany’s inflation data from March and later on the US Pending Home Sales figure for February. As for speakers, please note that ECB’s Luis De Guindos, FOMC Members Quarles, Clarida, Bowman, and Williams, Bullard, SNB Governor Board Member Maechler, and RBNZ Governor Orr Speaks

EUR/USD Daily chart

Support: 1.1220 (S1), 1.1175 (S2), 1.1130 (S3)
Resistance: 1.1260 (R1), 1.1300 (R2), 1.1340 (R3)

EUR/GBP H4

Support: 0.8455 (S1), 0.8385 (S2), 0.8315 (S3)
Resistance: 0.8525 (R1), 0.8590 (R2), 0.8655 (R3)

US Treasury Secretary Steven Mnuchin said he's looking forward to "productive meetings" as he arrived in Beijing with Trade Representative Robert Lighthizer for another round of trade negotiations. Mnuchin told reporter that "ambassador Lighthizer and myself are pleased to be back here in Beijing, and we look forward to productive meetings."

China's Ministry of Commerce confirmed that Vice Premier will hold meetings with Lighthizer and Mnuchin tonight. And, discussions will resume for a full day on Friday. Spokesman Gao Feng said there were some progress achieved during previous phone calls. However, there remains a lot of work to do.

Chinese Premier Li Keqiang told business executives at the Boao forum that there is no trust deficit with the US and hoped that the trade talks could achieve results. Li also pledged that China must protect intellectual property or there is no hope for transformation in the country. He also sounded upbeat on the economy and said "changes" in March exceeded expectations.

Besides, Li said China is "quickening the full opening of market access for foreign investors in banking, securities and insurance sectors." Scope of foreign banks, bank and non-bank card payments will be "expanded sharply". Restrictions on securities and insurance brokers will also be removed. Li emphasized the measures will be "implemented this year in a relatively forceful way". In addition, China is drafting rules to relax the restrictions on foreign acquisitions of Chinese listed corporations.

The precious metal posted declines right after hitting a 4-week high. Gold prices fell for a second consecutive day as it lost 0.45% on the day on Wednesday. However, price action remains largely flat in the medium to longer term horizon. This aptly reflects the broader market outlook which remains cautious.

Will Gold Maintain the Range?

Gold prices extended declines from the resistance level of 1320.81 as expected. Price action is currently attempting to post a reversal, just a few pips above the support area of 1306. The near term retracement could potentially push gold prices to correct the recent declines. However, this could keep the precious metal maintaining a sideways range within the said levels. A break below 1306 is required for further declines that could see price attempting to test the next lower target of 1290.

Investors continued to remain cautious despite the market’s moderate risk appetite. This was reflected in the safe haven yen which managed to rise modestly on the day. The yen posted modest gains of 0.15% on the day after previously easing back. The better than expected trade deficit figures from the U.S. helped to soothe investors’ nerves.

Is the USDJPY Reversing?

The USDJPY currency pair failed to capitalize on the gains from Tuesday and price action has been trending lower in the near term. With price above the support level of 109.84, we expect the minor correction to be limited. However, if the currency pair breaks the support, then we could expect a deeper correction to the downside. For the moment, we expect USDJPY to stall its pullback and resume the move to the upside.