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During Thursday's trading session, the currency exchange rate traded sideways to end the trading day at 110.60. On Friday morning, the rate was located at the monthly pivot point at the 110.53 mark.

In regards to the near-term future, most likely, the rate will pass through the support level of the weekly S2 at 110.40 to depreciate to the weekly S3 at the 109.91 mark. It is expected that the rate will end the trading session at the 110.00 level.

On the other hand, the support level of the weekly S2 at 110.40 might support the rate to push it to trade sideways at 110.60.

During Thursday's trading session, the rate was supported by the 200-hour simple moving average to end the trading day at 1,305.00. On Friday morning, the yellow metal was located at the 1,311.76 mark.

It is expected that gold might appreciate against the US Dollar to surge to the upper boundary of the descending medium pattern line at 1,315.50.

Besides, the simple moving averages will support the surge during the day!

Notes/Observations

• EU avoid a hard Brexit from occurring next week; gives UK an extra two weeks unconditional extension to Apr 12th
• Weaker EU data prompted risk aversion flows; German 10-year turns negative for the 1st time since Oct 2016
• Major European PMI data misses expectations (Misses: France, Germany)

Asia:

• Australia Mar Preliminary PMI Manufacturing 52.0 v 52.9 prior
• Japan National CPI comes in a bit light Y/Y: 0.2% v 0.3%e; CPI Ex Fresh Food (Core) Y/Y: 0.7% v 0.8%e v 0.8% prior
• Japan Mar Preliminary PMI Manufacturing: 48.9 v 49.9e (2nd straight contraction)
• Japan Fin Min Aso reiterated plans to raise sales tax as planned in October; reiterates govt stance that domestic economy in moderate recovery

Europe:

• EU Tusk on Leader Summit draft conclusions: EU could agree on Brexit extension until May 22nd with extension conditional on Withdrawal Agreement approved by UK parliament during week of Mar 25th (next week). EU offered Brexit delay, postponing no-deal risk from March 29th but no extension possible beyond elections to European parliament. Reiterated stance withdrawal agreement could not be renegotiated and any unilateral commitments, Statements or other acts should be compatible with withdrawal agreement. Confirmed if UK lawmakers back the deal, UK would leave in 'orderly' way by May 22nd otherwise if UK lawmakers did not agree to Brexit deal, UK would leave EU on April 12th.
• PM May decided that she was willing to take Britain out of the EU without a deal if she could not secure her Brexit deal through UK parliament - Graham Brady (1922 Chairman) said to tell PM May that MPs wanted her to quit because of the way she had handled the Brexit process
• EU said to be considering 9 month delay if May's Brexit deal fails for a third time in parliament next week

Americas:

• President Trump said to consider Stephen Moore and Herman Cain for Federal Reserve Board

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.44% at 379.04, FTSE -0.75% at 7,299.85, DAX -0.58% 11,482.52, CAC-40 -0.78% at 5,336.94, IBEX-35 -0.67% at 5,336.94, FTSE MIB -0.85% at 21,190.50, SMI -0.34% at 9,421.90, S&P 500 Futures -0.40%]
• Market Focal Points/Key Themes: European Indices trade sharply lower reversing earlier strength after both France and Germany Manufacturing PMI missed forecasts and entered into contractionary territory. US Index futures also trade lower following the decline in European Indices. On the corporate front Schaffner Holding declines over 6% after guiding 2019 Revenue lower; while Compenenta also declines on earnings. Interoll trades higher on record high earnings, with Smith Group, Henry Boot, and Hapag Lloyd also trading higher on earnings. Elsewhere Targovax falls over 30% after a 10.5M placing, Pearsons trades higher following an analyst upgrade while Adidas and Puma edge higher after weaker earnings from Nike after the close in the US. Looking ahead notable earners include Tiffany & Co, Destination Xl and Hibbett Sport among others.

Equities

• Consumer discretionary: Adidas [ADS.DE] +0.5%, Puma [PUM.DE] -0.5% (Nike's earnings), Smiths Group [SMIN.UK] +1.5% (earnings; plans unit listing), Debenhams [DEB.UK] -22% (Consent solicitation to bondholders)
• Financials: Deutsche Bank [DBK.DE] +0.5% (annual report), Commerzbank [CBK.DE] +1% (Supervisory Board meeting resulted in no decisions on possible merger with Deutsche Bank), Credit Suisse [CSGN.CH] -1.5% (annual report), RPC Group [RPC.UK] -1% (offer), Swedbank [SWEDA.SE] -1% (update on money laundering)
• Healthcare: Targovax [TRVX.NO] -34% (placing), Novartis [NOVN.CH] n/c (Alcon spin-off update), Roche Holding [ROG.CH] -0.5% (FDA alert)
• Industrials: Schaffner Holding [SAHN.CH] -6% (profit warning), Hapag-Lloyd [HLAG.DE] +3% (final earnings)
• Technology: Interroll [INRN.CH] +5.5% (earnings), Learning Technologies [LTG.UK] +5% (analyst action)

Speakers

• SNB's Maechler: FX reserves could not be hedged
• Norway Central Bank (Norges) Bank Dep Gov Nicolaisen: Households are optimistic on outlook as wages were rising faster than prices and the employment situation was good

Currencies/Fixed Income

• Weaker EU data prompted risk aversion flows and sent the German 10-year Bund yield into negative territory for the 1st time since Oct 2016. Senitment cemented after the major European PMI data (France, Germany, Euro Zone) missed expectations and were all in contraction territory.
• EUR/USD declining over 0.5% in the session to probe back below the 1.13 level in the aftermath of the disappointing PMI data.
• GBP/USD saw its initial gains erode to test back below 1.31. The pair briefly saw some positive flows after EU avoid a hard Brexit from occurring next week and gave the UK an extra two week of an unconditional extension now set at Apr 12th
• USD/JPY lower on safe-haven flows to test 110.50 in the session.

Economic Data

• (CN) Weekly Shanghai copper inventories (SHFE): 259.2K v 264.6K tons prior
• (FR) France Q4 Final Wages Q/Q: 0.2% v 0.2% prelim
• (RU) Russia Narrow Money Supply w/e Mar 15th (RUB): 10.32T v 10.30T prior
• (TW) Taiwan Feb Unemployment Rate: 3.7% v 3.7%e
• (FR) France Mar Preliminary Manufacturing PMI: 49.8 v 51.4e (1st contraction in 3 months); Services PMI: 48.7 v 50.6e; Composite PMI: 48.7 v 50.7e
• (DE) Germany Mar Preliminary Manufacturing PMI: 44.7 v 48.0e (3rd straight contraction); Services PMI: 54.9 v 54.8e; Composite PMI: 51.5 v 52.7e
• (HK) Hong Kong Q4 Current Account Balance: $42.1B v $48.0B prior; Overall Balance of Payment (BoP): +$24.0B v -$41.72B prior
• (EU) Eurozone Mar Preliminary Manufacturing PMI: 47.6 v 49.5e (2nd straight contraction and lowest since Apr 2013); Services PMI: 52.7 v 52.7e; Composite PMI: 51.3 v 52.0e
• (EU) Euro Zone Jan Current Account: €36.8B v €16.2B prior
• (IS) Iceland Feb Wage Index M/M: 0.2% v 0.3% prior; Y/Y: 5.6% v 5.8% prior - (IT) Italy Jan Current Account Balance: €0.0B v €4.5B prior

Fixed Income Issuance

• (IN) India sold total INR180B vs. INR180B indicated in 2024, 2029, 2033 and 2046 bonds

Looking Ahead

• 05:30 (EU) ESM's Regling with Eurogroup chief Centeno
• 06:00 (EU) Daily Euribor Fixing
• 06:00 FR) France Debt Agency (AFT) announces upcoming issuance
• 06:00 (ZA) South Africa to sell ZAR650M in I/ L 2029, 2033 and 2050 bonds
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week Auction Rate unchanged at 7.75%
• 07:00 (IE) Ireland Feb PPI M/M: No est v 0.2% prior; Y/Y: No est v -8.9% prior
• 07:00 (UK) DMO to sell €4.5B in 1-month, 3-month and 6-month bills £1.5B, £1.5B and £1.5B respectively)
• 07:30 (IN) India Weekly Forex Reserves w/e Mar 8th: No est v $402.0B prior
• 07:30 (IS) Iceland to sell 1.5% Feb 2026 RIKB inflation-linked Bonds
• 07:45 (US) Daily Libor Fixing
• 08:00 (CL) Chile Feb PPI M/M: No est v -1.8% prior
• 08:30 (CA) Canada Jan Retail Sales M/M: +0.4%e v -0.1% prior; Retail Sales (Ex-Auto) M/M: +0.1%e v -0.5% prior
• 08:30 (CA) Canada Feb CPI M/M: 0.6%e v 0.1% prior; Y/Y: 1.4%e v 1.4% prior; CPI Core- Common Y/Y: 1.8%e v 1.9% prior; CPI Core- Median Y/Y: 1.8%e v 1.8% prior; CPI Core- Trim Y/Y: 1.8%e v 1.9% prior; Consumer Price Index: 134.4e v 133.6 prior
• 09:00 (PL) Poland Feb M3 Money Supply M/M: +0.6%e v -1.4% prior; Y/Y: 9.0%e v 8.8% prior
• 09:00 (UK) Baltic Dry Bulk Index
• 09:00 (IN) India announces upcoming bill issuance (held on Wed)
• 09:45 (US) Mar Preliminary Markit Manufacturing PMI: 53.4e v 53.0 prior; Services PMI: 55.5e v 56.0 prior; Composite PMI: No est v 55.5 prior
• 10:00 (US) Feb Existing Home Sales: 5.10Me v 4.94M prior
• 10:00 (US) Jan Wholesale Inventories M/M: 0.1%e v 1.1% prior; Wholesale Trade Sales M/M: No est v -1.0% prior
• 11:00 (CO) Colombia Central Bank Interest Rate Decision
• 11:00 (EU) Potential sovereign ratings after European close
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 14:00 (US) Feb Monthly Budget Statement: -$277.0Be v +$8.7B prior
• 15:00 (CO) Colombia Jan Economic Activity Index (Monthly GDP): 3.0%e v 1.9% prior

The US dollar is recovering losses against currency majors. It should be recalled that the US currency was under pressure after the Fed comments. The regulator reported it would not consider interest rates rise in the current year. Optimistic economic data support the US dollar. Thus, the number of initial jobless claims dropped to 221K, while experts expected 226K. Philadelphia Fed manufacturing index rose to 13.7 instead of the forecasted value of 4.6. The dollar index (#DX) closed the trading session in the positive zone (+0.67%).

Financial market participants continue to assess the situation concerning trade negotiations between Washington and Beijing. Mnuchin and Lighthizer will go to China for a new round of talks next week. However, the conclusion of a deal is still far away, as US President Donald Trump expects China to increase imports of American goods.

The British pound weakened significantly against the US dollar due to the controversy concerning Brexit. Yesterday, a summit of 27 EU countries was held, on which the leaders of the countries decided on the UK exit. Thus, the leaders of the countries gave the British Prime Minister Theresa May a two-week reprieve until April 12. During this time, she should either convince parliamentarians to vote for the Brexit agreement offered earlier, or present a new agreement, or choose the option to exit without a deal with Brussels. The EU wants Britain to exit the union before May 23 – the date of the election to the European Parliament. If the exit doesn't take place, it will have to be held before June 30, i.e., before the convening of the new EU Parliament.

Meanwhile, the situation is heating up since it seems that the residents of the UK want to stay in the block. More than a million people have signed a petition on the website of the British Parliament, calling on the government to withdraw Brexit notification.

The "black gold" prices have moved away from annual highs. At the moment, futures for the WTI crude oil are testing the mark of $59.60 per barrel.

Market Indicators

• Yesterday, the bullish sentiment was observed in the US stock market: #SPY (+1.13%), #DIA (+0.89%), #QQQ (+1.56%).
• The 10-year US government bonds yield is at the level of 2.50-2.51%.

The news feed on 22.03.2019:

• German manufacturing PMI at 10:30 (GMT+2:00);
• A number of indices of economic activity in the Eurozone at 11:00 (GMT+2:00);
• Reports on inflation and retail sales in Canada at 14:30 (GMT+2:00);
• Statistics on economic activity in the US at 15:45 (GMT+2:00);
• Existing home sales in the US at 16:00 (GMT+2:00).

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.14245
Open: 1.13739
% chg. over the last day: -0.35
Day's range: 1.13614 – 1.13907
52 wk range: 1.1214 – 1.2557

The USD index stabilized after the long downfall on Wednesday. The USD is additionally supported by the positive reports from the US. The Philadelfia PMI grew by 13.7, which is more than the market expectations of 4.6. Earlier Federal Reserve noted that they will not increase the interest rates this year. Right now the quotes are consolidating with the key range being 1.13600-1.13900. You should open positions from these levels and wait for today's economic releases.

The Economic News Feed for 22.03.2019:

Industrial PMI index (GER) – 10:30 (GMT+2:00);

Array of Business Activity Reports (EU) – 11:00 (GMT+2:00);

Business Activity Reports (US) – 15:45 (GMT+2:00);

Secondary Real Estate Sales (US) – 16:00 (GMT+2:00);

The indicators do not provide precise signals, the price has crossed 50 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the overbought zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.13600, 1.13350, 1.13000
Resistance levels: 1.13900, 1.14100, 1.14450

If the price fixes above 1.13900, expect the quotes to grow toward 1.14200-1.14500.

Alternatively, the quotes can fall toward 1.1300-1.13000.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.31922
Open: 1.31129
% chg. over the last day: -0.51
Day's range: 1.31127 – 1.31583
52 wk range: 1.2438 – 1.4378

Yesterday the Bank of England, as expected, kept the key parameters of the monetary policy at the same level. The National Statistic Service published a positive retail sales report for February. GBP/USD is in a major sell-off and updated the key extremums due to the risk of the hard Brexit. You should track relevant info on this subject. GBP/USD quotes are consolidating around 1.31000-1.31600. You should open positions from the key levels.

The Economic News Feed for 22.03.2019 is calm.

The indicators do not provide precise signals, the price is testing 50 MA which acts as a strong dynamic resistance.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which points towards a bearish mood.

Trading recommendations

Support levels: 1.31000, 1.30300, 1.30000
Resistance levels: 1.31600, 1.32250, 1.33000

If the price fixes below 1.31000, expect the quotes to fall toward 1.30500-1.30200.

Alternatively, the quotes can recover toward 1.32000-1.32400.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.32963
Open: 1.33612
% chg. over the last day: +0.49
Day's range: 1.33520 – 1.33772
52 wk range: 1.2248 – 1.3664

USD/CAD started to grow. Yesterday the quotes covered 75 points and updated the local maximums. Right now the pair is consolidating around 1.33450 and 1.33750 while the investors are waiting for more economic reports. You should open positions from these levels and keep an eye on the oil quotes dynamics, as well as the US Treasury bonds` yield.

At 14:30 (GMT+2:00) Canada will publish the inflation and retail sales reports.

The indicators do not provide precise signals: 50 MA crossed 200 MA.

The MACD histogram is in the positive zone but below the signal line which gives a weak signal to buy USD/CAD.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.33450, 1.33150, 1.32900
Resistance levels: 1.33750, 1.34000, 1.34300

If the price fixes above 1.33750, expect the quotes to grow toward 1.34000-1.34300.

Alternatively, the quotes can fall toward 1.33200-1.32900.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 110.615
Open: 110.854
% chg. over the last day: +0.11
Day's range: 110.535 – 110.898
52 wk range: 104.56 – 114.56

USD/JPY stabilized after a sharp fall on Wednesday, March 20. Right now the trading instrument is testing the key support and resistance levels at 110.500 and 110.850. The quotes can descend further since USD is under pressure after the Federal Reserve comments. The regulator will not adjust the interest rates this year. You should open positions from the key levels.

During the Asian trading session, Japan published a weak inflation report.

The price fixes below 50 MA and 200 MA which points to the power of the buyers.

The MACD histogra started to descend which points to the bearish mood.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line which also sugessts you should sell USD/JPY.

Trading recommendations

Support levels: 110.500, 110.350, 110.000
Resistance levels: 110.850, 111.150, 111.450

If the price fixes below 110.500, expect the qutoes to fall toward 110.000.

Alternatively, the quotes can grow toward 111.150-111.400.

The USD was stronger yesterday as a correction at higher grounds took place yesterday after the drop caused by the FOMC interest rate decision on Wednesday. Investors seemed to favor USD long positions across the board as the market rebounded after the initial bearish shock. The USD also got a boost from unexpectedly stronger industrial data yesterday as well as US-Sino trade frictions. It would be characteristic that in a recent Reuters poll, Japanese companies do not expect the US and China to strike a deal anytime soon, which is in contrast of what the market had started to hope for in the past few weeks. We expect volatility to continue for USD pairs today, especially should there be any headlines about the US-Sino relationships, ahead of next week’s scheduled negotiations. EUR/USD dropped heavily yesterday rallied yesterday, breaking the 1.1390 (R1) support line (now turned to resistance) and bounced on the 1.1340 (S1) support level in the American session, aiming one again on the 1.1390 (R1) resistance line. We could see the pair rising as today’s financial releases could favor the EUR side of the pair. Should the pair find fresh buying orders along its path, we could see the pair breaking the 1.1390 (R1) resistance line and hover above it. On the other hand, should the market favour the pair’s short positions, we could see the pair breaking the 1.1340 (S1) support line.

Pound drops on Brexit uncertainty yet corrects higher upon Brexit delay.

The pound weakened yesterday as the Brexit uncertainty was running high, yet corrected higher late in the American session as it was announced that the EU had granted an extension to the Brexit date. EU Leaders yesterday, told Theresa May that should the UK parliament reject the Brexit deal once again next week, the UK would have until the 12th of April to decide whether to request a longer delay or leave without an agreement in place. It should be noted that should the UK ask for a prolonged delay, it is also expected to take part in the EU Parliament elections. It seems like the EU has temporarily stopped the Brexit clock as it tries to avoid any political blame for a hard Brexit, while at the same time wants to add pressure on the UK to make up its mind. We could see the GBP taking a breather for now, while attention turns once again in the inner UK political scene. Cable dropped yesterday breaking the 1.3175 (R1) support line (now turned to resistance) and at some point also broke the 1.3070 (S1) support line before correcting higher. Should the pound find itself once again under Brexit pressure, we could see the pair trading in a bearish market. Should the bears take over once again, we could see the pair breaking the 1.3070 (S1) support line and aim for the 1.2970 (S2) support barrier. Should the bulls dictate the pair’s direction, we could see the pair breaking the 1.3175 (R1) resistance line and aim for the 1.3265 (R2) resistance level.

Other economic highlights, today and early tomorrow

In today’s European session we get from Germany and the Eurozone the preliminary PMI’s for March. In the American session, we get Canada’s CPI rates for February and the retail sales growth rates for January. From the US we get the Baker Hughes active oil rig count. Also please note that ECB’s De Guidos will be speaking during today’s European session and Chicago Fed President Charles Evans will be speaking during Monday’s Asian session.

EUR/USD

Support: 1.1340 (S1), 1.1300 (S2), 1.1260 (S3)
Resistance: 1.1390 (R1), 1.1430 (R2), 1.1480 (R3)

GBP/USD H4

Support: 1.3070 (S1), 1.2970 (S2), 1.2895 (S3)
Resistance: 1.3175 (R1), 1.3265 (R2), 1.3350 (R3)

• Dollar recoups Fed losses as other currencies soften
• Stocks climb amid renewed trade optimism
• Pound trims losses as EU offers short extension
• Euro plunges after Germany’s manufacturing PMI signals more pain ahead

Dollar roars back, recoups Fed losses

The US dollar staged a remarkable comeback on Thursday, advancing against a basket of six major currencies to recoup all the losses it recorded following the Fed meeting, even without any positive US catalyst or news. What is particularly striking, is that US Treasury yields were little changed, which implies that traders haven’t changed their mind about the US outlook or monetary policy, bur rather that the dollar’s rebound may have been owed primarily to weakness in other currencies (see below).

Stocks march higher, aided by renewed trade hopes

Meanwhile, US stock markets closed firmly in the green, with the S&P 500 adding 1.09% to touch highs last seen in early October. The trigger wasn’t clear, but it may have been a combination of looser financial conditions after the Fed’s dovish pivot, and renewed optimism around trade following some encouraging reports. Specifically, that Trump simply wants China to ‘double or triple’ the amount of US goods it has offered to buy as a means to eliminate the bilateral trade deficit – a condition that if met could ‘seal the deal’.

China has already shown on several occasions it’s comfortable going down this road and purchasing US goods, but is less willing to make the structural reforms that US officials like Lighthizer are advocating. Hence, if Trump is indeed willing to ‘settle’ for goods purchases, then a near-term deal may well be in store.

Pound trims losses as EU agrees to brief Brexit extension

The British currency remained in the spotlight yesterday, recording hefty losses during the early European session as uncertainty over what happens next in the Brexit saga mounted. While the pound was still the worst performer among the G10 currencies, it did manage to recover a good chunk of its losses later on as the tone by EU officials on an extension seemed more constructive. The euro was also on the back foot, seemingly in sympathy to the pound, while the BoE meeting proved to be a non-event.

The EU offered a short no-strings-attached extension until April 12, with the prospect of extending it until May 22 if UK lawmakers vote for PM May’s deal in the next three weeks. Otherwise, it will either be a no-deal exit on April 12 or the UK will probably need to participate in the upcoming EU Parliament elections and get a much longer delay, of perhaps two years. As for the pound, uncertainty will remain elevated as April 12 draws nearer, implying that the near-term risks still seem tilted to the downside, particularly since May’s deal will probably be rejected again. The caveat is that any signs for a long extension could trigger a meaningful rebound.

Euro plunges as Germany’s manufacturing PMI collapses

The single European currency took a significant hit in early European trading on Friday, after Germany’s preliminary manufacturing PMI for March collapsed deeper into contractionary territory. The print fell to 44.7 from 47.6 in February, missing the forecast for a slight rebound.

This is particularly worrisome as it implies that euro area growth may have slowed even further in Q1, and amplifies the risk that deteriorating sentiment in manufacturing could spill over and ‘infect’ the so-far resilient services sector. Overall, these vindicate the ECB’s ‘shock and awe’ decision to push back the timing of its first rate increase, and increase the likelihood that even further stimulus may be considered before long, spelling downside risks for the euro.

Canadian inflation and retail sales data coming up

The main releases left on the economic calendar for today are from Canada, which will be on the receiving end of inflation and retail sales figures for February and January respectively.

In the US, preliminary Markit manufacturing and services PMIs for March will be in focus.

The pair returns to red on Friday and focuses pivotal supports at 110.35/22 (Fibo 23.6% of 104.59/112.13 / 55SMA) after recovery attempts on Thursday were short-lived and stayed below 30SMA (111.06) maintaining bearish bias.

Rising bearish momentum on daily chart helps bears, along with converging and south-turning daily MA's in bearish configuration.

Sustained break below 55 SMA would expose psychological 110.00 support and open way for further easing towards next pivot at 109.25 (Fibo 38.2%).

The pair is on track for strong bearish weekly close that would add to negative outlook.

Broken 30SMA marks an upper trigger and break here would ease existing bearish pressure, but plethora of MA's above (between 111.17 and 111.44) continues to weigh and only break above 200SMA (111.44) would neutralize and shift focus higher.

Res: 111.06, 111.17, 111.25, 111.44
Sup: 110.35, 110.22, 110.00, 109.25

Brexit extension means more sterling volatility for longer

Sterling is as volatile as you would expect one week from the initially scheduled Brexit day as traders continue to weigh up the risks of no-deal Brexit against what an extension does for May's deal, or the prospect of other options still on the table including a second referendum. The offer of an extension provided some reprieve for the pound which had fallen back to recent range lows over the previous 48 hours, but whether it will continue to be supported will depend on just what Parliament does with that time.

The Brexit timeline has repeatedly been updated but with European elections taking place in May, I struggle to see how another short-term extension can be agreed which means it's either May's deal, no-deal or a much longer extension. While I still think May's deal will ultimately get over the line as MPs resist having to request a long extension, it will probably go right to the wire which means we now have three weeks of drama, rather than one, and many more twists and turns to come. Sterling is unlikely to stabilise any time soon.

Euro dragged lower by shocking German manufacturing PMI

The situation has just got far worse for Germany's manufacturing sector which was already going through a rather unpleasant period. The PMI reading for March really does paint a very worrying picture for the sector and its ability to recover from the slump it's in. Not only was this the worst reading in six and a half years, it was also accompanied by the first decrease in employment in three years as backlogs of work declined at their fastest rate in nearly a decade.

With numerous headwinds facing the sector in Germany – including a slowdown in the automotive sector, Brexit, US/China trade and a global economic slowdown – there's little to be optimistic about. Thankfully, the services sector is offsetting some of the pain but that doesn't make it any less worrying. That was quite clearly reflected in the euro in the aftermath of the release as it slipped below 1.13 against the dollar from near 1.14 previously.

Will USD breaking out of long term trend propel gold higher?

The dollar is back on the decline this morning after enjoying quite a turnaround a day earlier, reversing Wednesday's losses in full and more, which came as the Fed sent out a much more dovish message than markets were expecting. The bounce on Thursday certainly gave us food for thought and once again sends the message that there's still plenty of support for the greenback around these trend lows. Still, it's back in the red this morning and a move below this week's lows could break a 10-month trend a see the greenback spiral lower.

This would naturally be good news for gold bulls, with the yellow metal typically performing well when the dollar is weak. The softness that we've seen in the dollar over the last couple of weeks has lifted gold but perhaps not as much as you'd expect, which may be a bearish signal. That said, if the dollar breaks its trend then I would expect that to rapidly change. For now, the gold rally continues to look like more of a corrective move than a continuation of the longer rally it's enjoying. A break above $1,320 may well change that.

USDJPY eyes more recovery following its price halt on Thursday. As long as it stays above the 110.35 support zone, more price strength is expected. On the upside, resistance comes in at 111.50 level. Above this level will turn attention to the 112.00 level. Further out, we expect a possible move towards the 112.50 level. A cut through here will open the door for more gain towards the 113.00. On the downside, support comes in at the 110.50 level where a break will target the 110.00 level. Below that level will turn focus to the 109.50 level and then lower towards the 109.00 level. On the whole, USDJPY faces further upside pressure on further recovery.