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After a quiet week, USD/JPY has posted gains on Thursday. In the North American session, the pair is trading at 111.41, down 0.02% on the day. On the release front, there are no major U.S. events for a second straight day. Later in the day, the focus shifts to the Bank of Japan, which will release the minutes of the February policy meeting.

The Bank of Japan minutes are unlikely to surprise the markets, as policymakers appear content to stick to current monetary policy. There is little pressure on the BoJ to raise interest rates, especially with the Federal Reserve and ECB putting a freeze on rate hikes for the time being. At the same time, the BoJ is concerned that the Japanese yen could rise if the global economy takes a downturn in 2019, which would weigh on exports and push low inflation levels even lower. If the yen does move higher, the BoJ will have to consider additional stimulus in order to keep the currency in check. Bottom line? The safe-haven yen is unlikely to record significant gains in the near future, barring unforeseen geopolitical tensions.

Investors will also be keeping an eye on the Federal Reserve, which holds a policy meeting on Wednesday. The Fed is widely expected to maintain the benchmark rate at a range between 2.25 – 2.50 percent. Investors will be expecting the Fed to play a dovish tune in the March rate statement. The Fed’s balance sheet will also be under scrutiny, with the policymakers expected to announce when they will stop reducing the $4 billion balance sheet. The Fed has been reducing assets by $50 billion a month, but there has been criticism that this tightening is choking economic growth. The Fed will also publish its new dot plot, which is used to convey its interest rate outlook.

GBPCAD is losing momentum after finding a strong resistance obstacle around the nine-month high of 1.7795 in the preceding week. The technical indicators are slowing down, mirroring the market’s behavior over the last days as the RSI is flattening in positive territory. The MACD is also holding in the bullish area, however, it slipped below the trigger line, creating a bearish crossover.

In case the pair changes its short-term direction to the downside, the bears would probably challenge the 20-day simple moving average (SMA) currently around 1.7550 and then could hit the immediate support at the 23.6% Fibonacci retracement level of the upleg from 1.6590 to 1.7795, around 1.7510. A break lower, could last until the 40-day SMA and the 1.7350 support, which stands around the 38.2% Fibonacci.

Alternatively, additional increases may drive the price towards the nine-month high of 1.7795. Above the latter, the 1.7980 resistance, registered on April 2018 comes into view.

In the more medium-term picture, the slightly bullish correction shifted to a stronger positive tendency and is likely to remain favorable as long as prices remain well above the short-term SMAs.

GBPUSD risk continues to point higher despite price hesitation. Support stands at 1.3250 level. Further down, support comes in at the 1.3200 level where a break will turn focus to the 1.3150 level. Further down, support lies at the 1.3100 level. Below here will set the stage for more weakness towards the 1.3050 level. On the upside, resistance stands at the 1.3300 with a turn above here allowing for additional strength to build up towards the 1.3350 level. Further out, resistance stands at the 1.3400 level followed by the 1.3450 level. On the whole, GBPUSD faces further upside pressure on more strength.

Daily Pivots: (S1) 1.3303; (P) 1.3334; (R1) 1.3368; More...

USD/CAD's break of 1.3289 suggests resumption of fall from 1.3467. Intraday bias is back on the downside for 1.3068/3112 support zone. Decisive there will indicate larger reversal and turn outlook bearish. On the upside, though, break of 1.3371 minor resistance will turn intraday back to the upside for 1.3467 resistance.

In the bigger picture, structure of the medium term rise from 1.2061 (2017 low) to 1.3664 is not clearly impulsive. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.3157) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high). Firm break of the channel support should confirm reversal target 1.2061 low again.

Daily Pivots: (S1) 111.28; (P) 111.45; (R1) 111.61; More...

USD/JPY is staying in consolidation from 112.13 and intraday bias remains neutral. As long as 110.35 support hold, near term outlook remains bullish. On the upside, break of 112.13 will resume the rally from 104.69 to 114.54 resistance next. However, firm break of 110.35 should confirm near term reversal and turn outlook bearish for 108.49 support and below.

In the bigger picture, strong rebound from 104.69 argues that decline from 118.65 (2016 high) has completed with three waves down to 104.69, after failing 104.62. More importantly, the rise from 98.97 (2016 low) could be resuming. Decisive break of 114.54 resistance will add more credence to this bullish case and target 118.65. This will now be the favored case as long as 110.35 support holds. However, firm break of 110.35 will mix up the medium term outlook again and turn focus back to 104.69 low.

Daily Pivots: (S1) 0.9994; (P) 1.0011; (R1) 1.0027; More....

Outlook in USD/CHF is unchanged and intraday bias remains on the downside for 0.9936 support. Decisive break there will carry larger bearish implication. In that case, deeper decline could be seen back to 0.9716 support first. On the upside, though, break of 1.0052 minor resistance will turn bias back to the upside for retesting 1.0124 instead.

In the bigger picture, USD/CHF drew strong support from medium term trend line and rebounded. That suggests rise from 0.9186 is still in progress. Further break of 1.0128 will confirm up trend resumption and target 1.0342 key resistance. Nevertheless, break of 0.9926 support will be the first signal of medium term reversal and bring another test on the trend line.

Daily Pivots: (S1) 1.3190; (P) 1.3247; (R1) 1.3309; More....

Intraday bias in GBP/USD remains neutral at this point. Further rise is expected as long as 1.2960 support holds. 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 now 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.

Daily Pivots: (S1) 1.1319; (P) 1.1340; (R1) 1.1362; More.....

No change in EUR/USD's outlook. The corrective rebound from 1.1176 could extend higher. But upside should be limited below 1.1419 resistance to bring down trend resumption. On the downside, below 1.1294 minor support will turn bias to the downside for 1.1176 low first. Break of 1.1176 will target 100% projection of 1.1814 to 1.1215 from 1.1569 at 1.0970 next.

In the bigger picture, down trend from 1.2555 medium term top is still in progress. Bearishness is affirmed by sustained trading below falling 55 week EMA. 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 is met. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1569 resistance will now indicate completion of such down trend and turn medium term outlook bullish.

The forex markets are having no clear direction for the moment. In particular, positive data from Europe were generally ignored by currencies even though yields and stocks are lifted. At the same time, there is no clarity regarding Brexit after Commons Speaker John Bercow ruled out meaningful vote on the same Brexit deal yesterday. Sterling edged higher earlier in European session but quickly retreated back. Prime Minister Theresa May may finally tell us what's next after her Cabinet meeting.

Staying in the currency markets, Canadian Dollar is currently the strongest one for today, with help from oil prices. However, it should be noted that WTI crude oil, hitting 59.80, is now in key resistance zone around 60 and reversal could happen any time. New Zealand Dollar is the second strongest, followed by Euro. Australian Dollar, Dollar and Yen are the weakest ones. Nevertheless, given than most pairs are stuck in tight range, the picture can easily change in US session.

In other markets, FTSE is currently up 0.53%. DAX is up 1.13%. CAC is up 0.54%. German 10-year yield jumps 0.029 to 0.117, back above 0.1 handle. Earlier in Asia, Nikkei dropped -0.08%. Hong Kong HSI rose 0.19%. China Shanghai SSE dropped -0.18%. Singapore Strait Times rose 0.25%. Japan 10-year yield dropped -0.008 to -0.044.

UK government looking for Brexit vote solutions

There are reports that EU is going to offer UK a conditional Brexit extension in the summit later this week. With that change in circumstance, Prime Minister Theresa May could bring her deal back to the Commons for another meaningful vote. Additionally, it's reported that UK could theoretically ask for a long Brexit delay but leave the EU before it runs out.

As Brexit Minister Stephen Barclay noted, Bercow already "pointed to possible solutions" to the current crisis. He added "you can have the same motion but where the circumstances have changed." Also, Barclay noted "the speaker himself has said that where the will of the House is for a certain course of action, then it is important that the will of the House is respected." Thus, both an extension or a shift in support, could indicate a change in context.

However, we'd point out that whether there is another vote on Brexit deal or not, and through what workaround, the fundamental question is not solved. That is, is there enough votes to the current Brexit deal through? Without enough votes, all solutions are just solutions to the problem of Brexit vote, not to Brexit itself.

EU officials give strong warnings to UK for clarity and purpose for Brexit extension

European Commission spokesman Margaritis Schinas warned that "We are now exactly 10 days away form the United Kingdom's withdrawal for the European Union". And, "It will be for the Prime Minister and Her Majesty's government to decide on the next steps and then to inform us accordingly and swiftly. The European Council in the art 50 constellation is on Thursday,"

Germany's Europe Minister Michael Roth warned that "our patience as the European Union is being sorely tested at the moment." He added "I can only call once again on our British partners in London to make concrete proposals at last on why they want an extension."

French EU affairs minister Nathalie Loiseau also complained that "this uncertainty is unacceptable". She added: "We need an initiative, we need something new because if it's an extension to remain in the same deadlock… How do we get out of this deadlock? – this is a question for the British authorities." Also, "Grant an extension – what for? Time is not a solution, it's a method. If there is an objective and a strategy and it has to come from London."

UK unemployment rate dropped to 3.9%, wage growth solid at 3.4%

UK unemployment rate dropped to 3.9% in the three months to January, down from 4.0% and beat expectation of 4.0%. That's also the lowest level since the period between November 1974 to January 1975. For men, unemployment rate dropped to 4.0%, lowest since 1975. For women, unemployment rate dropped to 3.8%, lowest since 1971.

Average weekly earnings including bonus rose 3.4% yoy, unchanged from December and beat expectation of 3.2% yoy. Average weekly earnings excluding bonus rose 3.4% yoy, down from December's 3.5% and matched expectations. Also release, jobless claims rose 27.9k in February, above expectation of 13.1k.

German ZEW improved significantly as major risks considered less dramatic

German ZEW Economic Sentiment improved notably to -3.6 in March, up from -13.4 and beat expectation of -11.0. German ZEW Current Situation, however dropped to 11.1, down from 15.0 and missed expectation of 13.0. Eurozone ZEW Economic Sentiment improved to -2.5, up from -16.6 and beat expectation of -15.1. Eurozone ZEW Current Situation also dropped to -6.6, down from -3.0.

ZEW President Professor Achim Wambach said in release that the significant improvement shows that "major economic risks are considered to be less dramatic than before". Those include possible delay in Brexit and renewed hope for a deal. Also, "progress made in the negotiations between China and the US to end the trade war between the two nations may also have contributed". Still the indicators point to "relatively weak growth" in first half in Germany.

Australia house price dropped -2.4% qoq, -5.1% yoy in Q4

Australia house price index dropped -2.4% qoq in Q4, deepened from Q3's -1.5% qoq and missed expectation of -2.0% qoq. Sydney led the way by dropped -3.7% qoq, followed by Melbourne at -2.4%. Hobart (up 0.7%) and Adelaide (up 0.1%) bucked the trend.

Through the year growth in residential property prices fell 5.1% yoy in the December quarter 2018. Falls were recorded in Sydney (-7.8 per cent), Melbourne (-6.4% yoy), Darwin (-3.5% yoy), Perth (-2.5 % yoy) and Brisbane (-0.3% yoy).

Chief Economist for the ABS, Bruce Hockman said: "While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne."

RBA awaits more data to resolve tensions in domestic data

In the March meeting minutes, RBA noted the "tension" between ongoing improvement in job data and slowdown in output growth in H2 2018. Leading indicators pointed to further tightening in the job market and wages growth picked up in Q4. Growth slowed but business and public spending remained positive. However, there continued to be "considerable uncertainty" around consumption outlook, given fall in house prices.

Taken into account the available information, RBA judged that current monetary policy stance was "supporting jobs growth and a gradual lift in inflation". But "significant uncertainties around the forecasts remained". The scenarios of a rate hike and rate hike were "more evenly balanced" than over the preceding year. And, "it would be appropriate to hold the cash rate steady while new information became available that could help resolve the current tensions in the domestic economic data."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1319; (P) 1.1340; (R1) 1.1362; More.....

No change in EUR/USD's outlook. The corrective rebound from 1.1176 could extend higher. But upside should be limited below 1.1419 resistance to bring down trend resumption. On the downside, below 1.1294 minor support will turn bias to the downside for 1.1176 low first. Break of 1.1176 will target 100% projection of 1.1814 to 1.1215 from 1.1569 at 1.0970 next.

In the bigger picture, down trend from 1.2555 medium term top is still in progress. Bearishness is affirmed by sustained trading below falling 55 week EMA. 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 is met. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1569 resistance will now indicate completion of such down trend and turn medium term outlook bullish.

Economic Indicators Update

The Canadian dollar has posted slight gains in the Tuesday session. Currently, USD/CAD is trading at 1.3310, down 0.20% on the day. On the release front, Canada releases its annual budget, which should be treated as a market-mover.

All eyes are will be on the Federal Reserve, which holds a policy meeting on Wednesday. The Fed is widely expected to maintain the benchmark rate at a range between 2.25 – 2.50 percent. Investors will be expecting the Fed to play a dovish tune in the March rate statement. The Fed’s balance sheet will also be under scrutiny, with the policymakers expected to announce when they will stop reducing the $4 billion balance sheet. The Fed has been reducing assets by $50 billion a month, but there has been criticism that this tightening is choking economic growth. The Fed will also publish its new dot plot, which is used to convey its interest rate outlook.

Is the Canadian economy heading into a recession? Despite some strong employment numbers, there are worrying signs. The economy recorded a weak 0.4% gain in Q4 on an annualized basis and has been listless early in 2019. David Wolf, a former senior official at BoC, has projected that the Canadian dollar could sink to its record low of 1.60 (62 cents U.S.). Weak oil prices and the global trade war have hurt the Canadian economy and dampened the critical export sector, and the Canadian dollar, which is down 1.40% in March, could face further headwinds.