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Risk appetite is having a mild comeback in Asia today and commodity currencies are taking advantage of that. Meanwhile, Yen, Dollar and Sterling are also soft. The greenback shrugs off strong rebound in treasury yields overnight. Yen is weighed down mildly by BoJ's downgrade on exports outlook. Meanwhile, Sterling lacks direction after UK voted for seeking Brexit delay. Yet, it's uncertain what's next except there will be another meaningful vote on May's deal.

Over the week, Sterling remains the strongest one. No-deal Brexit is now politically ruled out even though it's still technically possible. Canadian Dollar is the second, following up trend resumption in oil price. Yen is the weakest one, followed by Dollar, and then Aussie.

In Asia, Nikkei is trading up 0.98%. Hong Kong HSI is up 0.95%. China Shanghai SSE is up 1.54%, back above 3000 handle. Singapore Strait Times is up 0.29%. Japan 10-year JGB yield is up 0.0058 at -0.035, still negative. Overnight, DOW rose 0.03%. S&P 500 dropped -0.09%. NASDAQ dropped -0.16%. 10 year yield rose 0.019 to 2.630. 30-year yield rose 0.035 to 3.045. Let's see if 30-year yield could extend the strong rebound before weekly close.

Yet another vote on May's Brexit deal ahead after parliament voted for seeking extension

UK parliament passed the motion to seek Brexit delay by 413 to 202 votes. Under the motion, if a Brexit deal is approved, the government will seek 30 days Article 50 extension till June 30, 2019. If a deal is not approved, the length of the extension will depends on the purpose of it. But in the latter case, it will most likely be a long extension.

Prime Minister Theresa May is expected to bring her twice-defeated Brexit deal back to the Commons for another meaningful vote on Tuesday March 19, just ahead of EU Council meeting on March 21-22. Meanwhile, May also promised that she will give Parliament the chance to take over on March 25 if her deal is defeated again. The development after March 25 is wide open, with possibilities of a softer Brexit, a second referendum and a general election.

Trump: We'll have news on China in three to four weeks, one way or the other

Trump indicated at the White House that it may take another three to four weeks to know whether there would be a trade deal with China. He said "we'll have news on China. Probably one way or the other, we're going to know over the next three to four weeks." He added that China has been "very responsible and very reasonable". And he repeated the usual rhetoric that "if that one gets done, it will be something that people will be talking about for a long time."

Separately, Treasury Secretary Steven Mnuchin also confirmed that there will be no Trump-Xi summit this month. He added that both sides are "working in good faith" to try to reach a deal "as quickly as possible." While there's a lot of work to do, Mnuchin said "we're very comfortable with where we are".

China's Xinhua news agency said again that Chinese Vice Premier Liu He spoke by telephone with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer and the two sides made further substantive progress on trade talks. As usual from the Chinese side, no other detail was unveiled.

BoJ stands pats, expects exports to show some weakness

BoJ kept monetary policy unchanged today as widely expected. Short term interest rate is held at -0.1%. The central bank will continue to buy JGBs to keep 10-year yield at around zero percent. But yields are allowed to move upwards and downwards to some extent. Annual pace of monetary expansion is kept at around JPY 80T. Goushi Kataoka and Yutaka Harada dissented again in 7-2 vote.

BoJ continues to expect the economy to continue its "moderate expansion". However, it noted that the economy is "being affected by the slowdown in overseas economies for the time being". In particular, exports are projected to "show some weakness" for the time being. CPI is still "likely to increase gradually toward 2 percent".

Separately, Japanese Finance Minister Taro Aso warned BoJ against insisting on the 2% inflation target. He said "things could go wrong if insist too much on achieving the 2 percent inflation target". Earlier in the week, he said "no one in the public would be angry even if the inflation target isn't achieved."

On the data front

New Zealand BusinessNZ manufacturing PMI rose to 53.7 in February up from 53.0. Eurozone will release CPI final in European session. Later in the day, Canada will release manufacturing sales. US will release Empire State manufacturing, industrial production and U of Michigan consumer sentiment.

USD/JPY Daily Outlook

Daily Pivots: (S1) 111.27; (P) 111.56; (R1) 111.98; More...

Intraday bias in USD/JPY remains neutral at this point as it's staying in range of 110.35/112.13. As long as 110.35 support holds, near term outlook remains bullish and rise from 104.69 is expected to resume. On the upside, break of 112.13 will target 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.

Economic Indicators Update

BoJ kept monetary policy unchanged today as widely expected. Short term interest rate is held at -0.1%. The central bank will continue to buy JGBs to keep 10-year yield at around zero percent. But yields are allowed to move upwards and downwards to some extent. Annual pace of monetary expansion is kept at around JPY 80T. Goushi Kataoka and Yutaka Harada dissented again in 7-2 vote.

BoJ continues to expect the economy to continue its "moderate expansion". However, it noted that the economy is "being affected by the slowdown in overseas economies for the time being". In particular, exports are projected to "show some weakness" for the time being. CPI is still "likely to increase gradually toward 2 percent".

Full BoJ statement here.

Separately, Japanese Finance Minister Taro Aso warned BoJ against insisting on the 2% inflation target. He said "things could go wrong if insist too much on achieving the 2 percent inflation target". Earlier in the week, he said "no one in the public would be angry even if the inflation target isn't achieved."

Trump indicated at the White House that it may take another three to four weeks to know whether there would be a trade deal with China. He said "we'll have news on China. Probably one way or the other, we're going to know over the next three to four weeks." He added that China has been "very responsible and very reasonable". And he repeated the usual rhetoric that "if that one gets done, it will be something that people will be talking about for a long time."

Separately, Treasury Secretary Steven Mnuchin also confirmed that there will be no Trump-Xi summit this month. He added that both sides are "working in good faith" to try to reach a deal "as quickly as possible." While there's a lot of work to do, Mnuchin said "we're very comfortable with where we are".

China's Xinhua news agency said again that Chinese Vice Premier Liu He spoke by telephone with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer and the two sides made further substantive progress on trade talks. As usual from the Chinese side, no other detail was unveiled.

AUD/USD is gaining bullish momentum and it could break the 0.7100 resistance. Similarly, NZD/USD is trading nicely above the 0.6820 support and it may continue to climb higher.

Important Takeaways for AUD/USD and NZD/USD

• The Aussie Dollar formed a solid support near 0.7040 and climbed higher against the US Dollar.
• There is a major bullish trend line in place with support at 0.7050 on the hourly chart of AUD/USD.
• NZD/USD traded higher and broke the 0.6820 and 0.6830 resistance levels.
• There is a crucial contracting triangle in place with resistance at 0.6855 on the hourly chart.

AUD/USD Technical Analysis

After a strong rejection near the 0.7200 resistance, the Aussie Dollar declined below 0.7050 against the US Dollar. The AUD/USD pair traded close to the 0.7040 support level before it started a fresh upward move.

The pair traded as low as 0.7041 on FXOpen and later recovered above 0.7050. There was a break above the 0.7075 resistance and the 50 hourly simple moving average. The pair cleared the 50% Fib retracement level of the recent decline from the 0.7097 high to 0.7041 low.

The recent upward move was strong as the pair even broke the 0.7080 resistance to open the doors for more gains. It is now trading nicely above the 76.4% Fib retracement level of the recent decline from the 0.7097 high to 0.7041 low.

Therefore, there are high chances of an upside break above the 0.7097 swing high. In the mentioned case, the pair could even break the 0.7100 and 0.7120 resistance levels.

On the other hand, if there is a downside correction, the pair might find support near the 0.7075 and 0.7060 levels. There is also a major bullish trend line in place with support at 0.7050 on the hourly chart of AUD/USD.

Overall, the pair remains well supported on the downside and it could continue to move higher towards the 0.7120 and 0.7140 levels.

NZD/USD Technical Analysis

The New Zealand Dollar also started a decent upward move after it corrected towards the 0.6800 support level against the US Dollar. The NZD/USD traded as low as 0.6808 and later started a fresh upward move.

It broke the 0.6820 resistance level and the 50 hourly simple moving average. Besides, there was a break above the 50% Fib retracement level of the recent decline from the 0.6864 high to 0.6808 low.

However, there is a strong resistance formed near the 0.6850 and 0.6860 levels. There is also a crucial contracting triangle in place with resistance at 0.6855 on the hourly chart. At the moment, the pair is trading close to the 76.4% Fib retracement level of the recent decline from the 0.6864 high to 0.6808 low.

In the short term, there could be a minor downside correction, but the 0.6835 and 0.6830 levels are likely to act as strong supports. The next key support is at 0.6820, below which the pair could move into a bearish zone.

On the upside, a convincing break above the 0.6860 resistance may open the doors for more gains. The next major resistance is near the 0.6875, above which the NZD/USD pair is likely to test the 0.6900 resistance level in the near term.

UK parliament passed the motion to seek Brexit delay by 413 to 202 votes. Under the motion, if a Brexit deal is approved, the government will seek 30 days Article 50 extension till June 30, 2019. If a deal is not approved, the length of the extension will depends on the purpose of it. But in the latter case, it will most likely be a long extension.

Prime Minister Theresa May is expected to bring her twice-defeated Brexit deal back to the Commons for another meaningful vote on Tuesday March 19, just ahead of EU Council meeting on March 21-22. Meanwhile, May also promised that she will give Parliament the chance to take over on March 25 if her deal is defeated again. The development after March 25 is wide open, with possibilities of a softer Brexit, a second referendum and a general election.

https://twitter.com/HouseofCommons/status/1106259654491992066

STOCKS

Global indices remains mixed. Dow is struggling to breach a key resistance and can fall if it fails to break it. DAX, Nikkei and Shanghai looks to remain range bound. The rally in the Indian indices seems to have paused. Sensex and Nifty can witness a dip in the near term before resuming the overall uptrend.

Dow Jones (25,709.94, +7.05, +0.03%) seems to be not getting strong and fresh buyers to take it beyond the 21-day moving average resistance level of 25,786. A strong break above this resistance is needed for the index to move higher to 26,000 and 26,150 levels again. But, while below 25,786, a fall breaking below the support at 25,500 targeting 25,100 cannot be ruled out in the near term.

DAX (11,587.47, +15.06, +0.13%), as mentioned yesterday can remain range bound between 11,400 and 11,650 for some time. The bias within this range is bullish and the index is likely to break the range above 11,650 eventually and target 11,800.

Nikkei (21,504.73, +217.71, +1.02%), though has been volatile over the last few days, is managing to hold above the 100-day moving average support at 21,297. A break below this support will bring renewed pressure and drag the index to 21,000. But while Nikkei sustains above the 100-day moving average, a test o 21,600 is possible.

Shanghai (3,042.77, +52.09, +1.74%) fell to test 2970 as expected yesterday and has reversed sharply today. A sideways consolidation in a sideways range between 2950 and 3100 within which a rise to 3050 and 3070 is possible while it sustains above 3000.

Sensex (37,754.89, +2.72, +0.01%) and Nifty 50 (11,343.25, +1.55, 0.01% ) have closed on a flat note yesterday. An intermediate dip to test the supports at 11,300 on the Nifty and 37,600 on Sensex looks likely. If Sensex and Nifty declines below these supports, then the downmove can extend to 37,250-37,150 (Sensex) and 11,225-11,200 (Nifty).

COMMODITIES

Gold, Silver and Copper witnessed a sharp fall yesterday. While gold has room to dip further, silver and copper has key support near current levels. Oil looks mixed. While Brent has come-off from a key resistance and can dip further, WTI is managing to hold above a key support.

Gold (1294) and Silver (15.20) fell in line with our expectation. However, the quantum of fall in both were much deeper than what we had anticipated. While below 1300, gold can revisit of 1290 and 1280 levels in the near term. Silver on the other hand, has a key support at 15.10. While it hold, a bounce to 15.35 and 15.45 is possible. But a break below 15.10 can test 15 or even 14.85

Copper (2.89) fell sharply yesterday as against our expectation for a rise to 2.95 and is poised at a crucial support. A bounce from current levels can take it back to 2.93. But a break below 2.89 can drag it to 2.87 and 2.84 in the coming days.

Brent (67.13) has come-off after testing 68. The expected break above 68 seems to be getting delayed as the 64-68 sideways range continues to remain intact. While below 68, Brent can break 67 and fall to 66.30 or even 65.80 in the coming sessions.

But unlike Brent, WTI (58.5) has not seen any pull-back yesterday and is managing to sustain above 58. This keeps the possibilities alive of WTI moving higher to 59.5 and 60.3. Support is at 57.9, a break below which will negate the expected upmove mentioned above and in turn will drag WTI lower to 57.15 or 56.75.

FOREX

Overall currencies are mixed. Rupee looks strong while Euro, Yuan, Pound may weaken a bit against the US Dollar in the coming sessions.

Dollar-Index (96.70) bounced a bit yesterday. Note that the daily candles show immediate support ay 96.25 which if holds could gradually take the index to higher levels of 97.25-97.75 again in the medium term. Only on a break below 96.25, if seen would we consider further bearishness in the Dollar Index towards 95.75 or lower. Preference is for a bounce from 96.25.

Euro (1.1315) is likely to test immediate resistance near 1.1350 or higher at 1.14 from where a fall is likely to be seen in the coming sessions towards 1.1250-1.1200. Medium term looks bearish.

Euro-Yen (126.43) has resistance at 126.8 on the daily candles. A rejection from there could push it back to 125-124 levels in the near term. View is bearish for Euro-Yen and could support a possible fall in Euro as well.

Dollar Yen (111.75) has risen a bit yesterday and could be headed towards our target resistance near 112.50 in the next 1-2 sessions.

Aussie (0.7084) is trading between 0.70-0.7150 and is likely to remain in the said region for the coming week too.

Pound (1.3244) is holding below 1.34 and could be headed towards 1.31 before again bouncing back from there. Near term looks bearish.

USDCNY (6.7254) has broken above 6.72, the trend resistance on the daily charts and while the pair moves up it could target 6.74/75 in the coming week. 6.70 could be a decent support for the medium term.

Dollar-Rupee (69.3625) has scope of falling towards 69.10-05 or even 68.87 in the near term. While below 69.50, downside momentum could remain intact. On the upside trade could be restricted near 69.75.

INTEREST RATES

The US yields are mixed. The 2YR (2.47%), 5Yr (2.43%) and the 10Yr (2.63%) have dipped from 2.48%, 2.44% and 2.64% levels while the 30Yr (3.05%) is up by 2bps.

The UK-US 10YR (-1.41%) has broken above immediate resistance contrary to our expectation. Unless the spread falls back immediately, it could continue to rise towards -1.37% pulling the Pound up in the near term.

The UK yields are trading higher. The 20Yr (1.67%) may head towards 1.71%, while the 10Yr (1.22%) could rise towards 1.26%.

The 10YR GOI (7.5533%) has risen and could test 7.60% before again falling from there. A break above 7.60% could take it higher towards 7.65% which could be in favor of Rupee weakness in the medium term. Watch yield movement near 7.60%.

Key Highlights

• The US Dollar found support near 110.75 and rebounded against the Japanese Yen.
• A major bullish trend line is formed with support at 111.15 on the 4-hour chart of USD/JPY.
• The US Initial Jobless Claims for the week ending March 19, 2019 increased from 223K o 229K.
• The US Industrial Production report for Feb 2019 will be released today, which may rise 0.4% (MoM).

USDJPY Technical Analysis

After a major decline from the 112.13 high, the US Dollar found support near 110.75 against the Japanese Yen. The USD/JPY pair corrected higher above 111.20 and it seems to be following a bullish path.

Looking at the 4-hours chart, the pair gained traction this week and climbed above the 111.00 resistance. There was even a close above 111.15 and the 100 simple moving average (red, 4-hours).

The pair recently traded above the 50% Fib retracement level of the last decline from the 112.13 high to 110.75 low, which is a positive sign. On the upside, the main resistance is near the 112.00 level, above which the pair could climb above the 112.13 high.

The next key resistances are 112.40 and 112.65. On the downside, there are many supports above 111.00. There is also a major bullish trend line is formed with support at 111.15.

If USD/JPY declines below the trend line and the 100 SMA, there could be a sharp bearish reaction below the 111.00 and 110.75 support levels. The next main support is at 110.60, followed by 111.40.

Fundamentally, the US Initial Jobless Claims figure for the week ending March 19, 2019 was released by the US Department of Labor. The market was looking for a minor increase in claims from 223K to 225K.

The result was lower than the forecast as the US Initial Jobless Claims increased from 223K to 229K. The 4-week moving average came in at 223,750, down 2,500 from the previous week’s unrevised average of 226,250.

The report added that:

The advance number for seasonally adjusted insured unemployment during the week ending March 2 was 1,776,000, an increase of 18,000 from the previous week’s revised level. The previous week’s level was revised up 3,000 from 1,755,000 to 1,758,000.

In the short term, the US Dollar could correct lower, but USD/JPY seems to be well supported on the downside near 111.15 and 111.10.

Economic Releases to Watch Today

• Euro Zone CPI for Feb 2019 (YoY) – Forecast +1.5%, versus 1.5% previous.
• Euro Zone CPI for Feb 2019 (MoM) – Forecast +0.3%, versus -1.0% previous.
• US Industrial Production Feb 2019 (MoM) – Forecast +0.4%, versus -0.6% previous.

Wall Street rally stalls on talk of trade deal delay

Wall Street indices closed in the red yesterday following a Bloomberg report that any US-China trade deal would not be concluded this month. PM May won endorsement from politicians to request a Brexit extension from Europe.

US30USD Daily Chart

The US30 index closed lower yesterday, capped by speculation that the proposed Trump-Xi summit to sign off on a trade deal at the end of this month would be postponed

The 200-day moving average is at 25,149 and has remained untested since February 12

The NY Empire state manufacturing index is expected to extend the recent positive run in March, with estimates suggesting a reading of 10 from 8.8 last month.

DE30EUR Daily Chart

The Germany30 index gave back early gains to close lower yesterday

The index is still sandwiched between resistance at the 200-day moving average at 11,795 and rising trendline support near 11,370

Euro-zone consumer prices are seen unchanged at +1.5% y/y in February, echoing the picture painted by Germany’s data yesterday.

CN50USD Daily Chart

China A50 shares closed marginally lower yesterday, and could fall further if the market takes to heart the chance any US-China trade deal will be delayed until April

The 38.2% Fibonacci retracement level of the 2019 rally is at 12,111

Foreign direct investment data for February are due today after rising 4.8% y/y in January.

I'll take one centimetre of snow at Heathrow please

Wall Street's three-day rally came to an end overnight after Bloomberg reported any signing of the US-China trade deal would be delayed until April. The fact it wasn't an official announcement likely explains the shallowness of the Wall Street pull back. As delays go, a couple of months is a minor irritation in the quest for macro-economic clarity, not a 'deal-breaker.' Just ask the British after one centimetre of snow falls at Heathrow, or two years of Brexit negotiations. Now those are proper delays.

Speaking of delays, UK Prime Minister Theresa May finally won a vote in her own Parliament. The Commons backed her proposal for a yet another meaningful vote next Tuesday. The Faustian bargain being that if Parliament votes for the Brexit deal they voted down on Monday she will ask for a three-month extension. If they vote it down again, she will ask the European Union (EU) for a very long delay, possibly more than a year. Right now, a centimetre of snow at Heathrow is looking like a wonderful alternative.

Speaking of the EU, President Trump told the Irish Prime Minister Leo Varadkar on a visit to America, that the US could cause the EU 'pretty severe' economic pain if the EU did not engage with the US on trade talks. It will no doubt take the froth of Varadkar's upcoming St. Patrick's Weekend but reinforces my previous point. Potential trade wars will not end with China. Trump's tariff turret will swing towards Europe. Like many a general before him, he is not scared of fighting a war on two fronts.

Following on from poor China data yesterday, the trade story should have seen equities wobble quite badly, but stocks have proven remarkably resilient. The S&P fell 0.1%, the Dow Jones was flat, and the Nasdaq fell 0.16%. This likely means no news is good news, and the trade talks remain on track, even if the timing is not.

Looking ahead, Asia's highlight today will be the Bank of Japan (BOJ) rate decision. No change is expected but given the global macro outlook and Japan's recent run of poor data, we can possibly expect a more dovish stance in the text. We do not expect any actual policy changes. The BOJ is still in the middle of a full-blown quantitative easing (QE) programme of its own. It's likely to adopt a wait-and-see attitude and let other central banks do the heavy lifting for now.

FX

The US dollar strengthened modestly overnight as equities sank and bond yields rose after the Bloomberg trade story broke. The gains were modest however, reflecting the market's disappointment there is still no deal, but we can take comfort in the fact that trade talks remain on track. The Australian dollar fell 50 points to 0.7050 reflecting its high beta to China, while the Euro fell only slightly to 1.1300. Sterling fell 90 points to 1.3240 in volatile trading as it gave back some Brexit-induced gains. The modest dollar strength should continue in Asia as regional currencies play catch-up to the falls in the majors overnight.

Equities

Short of a major surprise from the BOJ today, Asian equities should trade sideways on profit taking and weekend squaring of long positioning.

Oil

Oil held steady overnight even as the dollar rose. Brent crude saw profit-taking sellers and fell 0.58% to USD67.16. On the other hand, WTI rose 0.49% to USD58.54. Brent suffered on the potential trade talk delays while WTI remained firm on falling exports from Saudi Arabia and lower official inventories. We expect a sideways day for both contracts in Asian trading as energy markets await more trade clarity.

Gold

Gold fell USD12 to USD1,296.00 an ounce overnight as a higher dollar and rising US bond yields held the yellow metal below the waterline. The size and speed of the fall is somewhat concerning. This could imply that gold's story is being dictated to by other markets moves and not by gold itself. Gold still has strong technical support at 1280.00 an ounce, and this is the critical level that must hold for gold bulls in the days ahead.

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