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The cross is in step fall which commenced in mid-European and extends into American session on Thursday.

Strong acceleration broke through key supports at 0.8692 (Fibo 61.8% of 0.8312/0.8306, Apr/Aug 2017 ascend) and 0.8668 (22 Mar spike low), hitting the lowest levels since early June 2017.

Strong bearish signal is generating on probe through 0.8692/68 pivots, with close below to confirm and open way towards 0.8600 (bear-channel support line) and 0.8547 (Fibo 76.4%) in extension.

The single currency came under increased pressure after dovish ECB minutes and fresh strength of the dollar as fears about escalation of tensions over Syria eased, while sterling maintains firm tone.

Bearish daily techs remain supportive but bears may lose traction on approach to 0.8600 target as RSI is entering oversold territory.

No firmer reversal signal seen so far, however, strong bears may take a breather before continuing, with upticks expected to be capped under 0.8700 and offer better selling opportunities.

Falling 10SMA (0.8724) marks pivotal barrier, break of which would sideline immediate bearish threats.

Situation in Syria remains in focus.

Res: 0.8700; 0.8724; 0.8740; 0.8764
Sup: 0.8640; 0.8600; 0.8547; 0.8500

Daily Pivots: (S1) 0.8700; (P) 0.8719; (R1) 0.8741; More...

EUR/GBP drops to as low as 0.8656 so far and the break of 0.8666 confirms resumption of fall from 0.8967. More importantly, this should also indicate resumption of whole decline from 0.9305. Intraday bias is back on the downside, for 61.8% projection of 0.9305 to 0.8745 from 0.8967 at 0.8621 first. Sustained break there will page the way to 100% projection at 0.8407. On the upside, above 0.8691 minor resistance will turn intraday bias neutral first. But outlook will now stay bearish as long as 0.8796 resistance holds.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Markets

The German Bund and US Note future lost ground shortly after European noon as risk sentiment improved following the latest Trump tweet. He downplayed chances of an imminent air strike against Syria. Weak EMU industrial production figures earlier on the day were ignored. The move in the Bund was undone after ECB Minutes revealed a deep split inside the board on the degree of slack in the EMU economy. It caused a minor dovish reaction, lifting the Bund back towards opening levels. The influential camp of President Draghi, vice-chair Constancio and chief economist Praet which thinks that the economy still has some breathing room before generating upward price pressure currently holds a narrow majority. ECB Coeuré tried to find some middle ground today by suggesting that existing/more economic slack doesn’t mean that policy will remain unchanged. Minutes also showed some concern about the potential negative impact on the global economy from the US/Chinese trade conflict. A proposal to announce that the ECB was close to meeting the objective of putting inflation on a sustained path toward the medium-term goal eventually didn’t make the statement. US jobless claims printed near expectations and continue to point to a strong US labour market. Import/export prices disappointed. Neither of them influenced trading. The German yield curve steepens at the time of writing with yield changes ranging between -0.8 bps (2-yr) and +1.3 bps (30-yr). The US yield curve bear steepens with yields 2.8 bps (2-yr) to 3.7 bps (30-yr) higher

Global markets started the day in some kind of wait-and-see modus as the US yesterday announced to take action against Syria. However, Trump’s latest tweet suggested that the action might not come as soon as ump indicated earlier. Equities staged a cautious rebound and so did the dollar. We see today’s intraday gain in USD/JPY and the setback in EUR/USD in the first place as a correction on recent post-payrolls USD softness. At the same time, poor EMU production data reinforced the intraday decline of EUR/USD. The minutes of the March ECB meeting brought no major surprise, but most ECB governors apparently see good reasons to stay cautious on the pace of any policy normalization. US data (import prices and jobless claims) were marginally weaker than expected, but had little impact on USD trading. EUR/USD is changing hands in the 1.2315 area. USD/JPY trades in the 107.20 area.

Sterling faced a temporary setback on a batch of poor eco data yesterday. However, this intermezzo didn’t change the constructive sentiment that reigned of late. The UK and the EU reaching a transition deal and the prospect of a potential BoE rate hike in May kept sterling well bid. We didn’t see much hard news to support a sterling rebound today. UK Davis said the UK Parliament could block a Brexit deal if there isn’t enough clarity on what the final relationship with the EU will look like, but should this analysis be considered as sterling supportive? Whatever, EUR/GBP dropped below 0.87. The 0.8652 support is again within reach. Admittedly, the intraday decline of EUR/USD was partially to blame. However, the intraday price action of cable was also constructive. For now, the UK currency maintains the benefit of the doubt, even as the data are mixed, to say the least..

News Headlines:

Swedish CPI rose 0.3% M/M and 1.9% Y/Y (from 1.6%). The CPIF measure, favoured by the RIksbank, also rose 0.3% and 2.0% Y/Y (from 1.7%), reaching the Bank’s inflation target. However, both measures were slightly below consensus. The market questioned the central bank’s intention to start raising rates later this year, given its asymmetrical bias to prevent an inflation undershoot. EUR/SEK jumped to the highest level in year, nearing the EUR/SEK 10.40 level.

Daily Pivots: (S1) 151.06; (P) 151.59; (R1) 152.49; More...

GBP/JPY's rise resumed after brief retreat and reaches as high as 152.50 so far. Intraday bias is back on the upside. Current rebound from 144.97 would extend towards 156.59 high. Nonetheless, as such rise is viewed as a correction, we'll look for sign of loss of upside momentum as it approaches 156.59 high. On the downside, below 151.15 minor support will turn intraday bias neutral first. But further rally is expected as long as 150.58 resistance turned support holds.

In the bigger picture, the outlook is turning mixed again. On the one hand, the cross was rejected by 55 month EMA (now at 154.20) after breaching it briefing. On the other hand, there was no sustainable selling pushing it through 38.2% retracement of 122.36 to 156.59 at 143.51. The most likely scenario is that GBP/JPY is turning into a sideway pattern between 143.51 and 156.59. And more range trading would now be seen before a breakout, possibly on the upside.

The pair bounced above 107 handle of fresh risk-on mode and hit session high at 107.26, on renewed probe though the base of thick daily cloud (107.16). Falling cloud marks very strong barrier which capped attempts in previous few sessions and sustained break higher is needed to generate initial bullish signal for eventual break out of week-long congestion, with confirmation on lift above recent peaks at 107.50 zone. Bullish setup of daily techs remains supportive, but news from Syria need to be closely monitored for fresh signals.

Res: 107.50; 107.67; 107.90; 108.00
Sup: 107.16; 107.06; 106.80; 106.61

Daily Pivots: (S1) 1.2344; (P) 1.2369 (R1) 1.2393; More....

Focus is back on 1.2302 minor support in EUR/USD. Break will turn bias to the downside for 1.2214 support first. And firm break there will revive the case of rejection by 1.2516 key fibonacci level and turn outlook bearish. On the upside, above 1.2396 will extend the rise from 1.2214 to 1.2475 and then 1.2555.

In the bigger picture, key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 remains intact despite attempts to break. Hence, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive. Firm break of 1.1553 support will add more medium term bearishness. However, sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862 in medium term.

Daily Pivots: (S1) 106.53; (P) 106.89; (R1) 107.13; More...

While intraday bias in USD/JPY stays neutral, focus is back to 107.48 temporary top with today's rebound. Break will resume whole rise from 104.62 and target 38.2% retracement of 114.73 to 104.62 at 108.48 9 which is close to 108.12. This resistance zone will be crucial in determining the medium outlook. On the downside, below 106.61 minor support will bring deeper fall to 105.65. Break of 105.65 support will indicate that the rebound from 104.62 is completed and target a test on 104.62 low. This will also retain medium term bearishness for down trend resumption later.

In the bigger picture, medium term down trend from 118.65 (2016 high) is still in progress and extending. Build up in downside momentum argues that it might be extending the whole corrective pattern from 125.85 (2015 high). 100% projection of 118.65 to 108.12 from 114.73 at 104.20 will be a key level to watch as firm break there could bring downside acceleration. And in that case, 98.97 key support level (2016 low) would at least be breached. This bearish case will now be favored as long as 108.12 support turned resistance holds.

Daily Pivots: (S1) 1.4151; (P) 1.4187; (R1) 1.4214; More....

Intraday bias in GBP/USD remains neutral first. But further rise is expected with 1.3964 support intact. Above 1.4222/43 will target 1.4345 high. Firm break of 1.4345 will resume medium term rally and target 61.8% projection of 1.3038 to 1.4345 from 1.3711 at 1.4519 next.

In the bigger picture, as long as 1.3651 resistance turned support holds, medium term outlook in GBP/USD will remain bullish. Rise from 1.1946 is at least correcting the long term down trend from 2007 high at 2.1161. Further rally would be seen back to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. However, GBP/USD fails to sustain above 55 month EMA (now at 1.4267) so far. Break of 1.3651 will be the first sign of medium term reversal and turn focus to 1.3038 support for confirmation.

Brent crude oil futures surged on Wednesday, hitting a fresh more three-year high of 73.07. The oil completed the third green day in a row yesterday, however, it ended the day well below its peak. Today, the price is heading lower, suggesting a potential bearish correction of the sharp buying interest.

In the 4-hour chart, the technical indicators are endorsing the downside retracement as both are moving lower. The RSI has dipped slightly lower and is developing near the overbought territory. The stochastics are also pointing downwards and are approaching the negative level.

Should the price pause its uptrend, the next support level could come from the bottom taken on Wednesday around the 23.6% Fibonacci retracement level near 70.50 of the upleg from 61.75 to 73.07. Slightly below this level, the 20-simple moving average is another support level and the price needs to drop below it before it touches the 68.90 barrier.

On the flip side, if the bulls retake control, price advances may stall initially near the latest highs at 73.07, and subsequently near the psychological figure of 74.00.

The Euro extended weakness after release of ECB minutes and broke below key support at 1.2327 (daily cloud top / Fibo 38.2% of 1.2215/1.2396 gull-leg).

The minutes of ECB’s last month meeting showed strong concerns about trade war and its impact on confidence.

Inflation remains the key issue, as confidence in inflation path increases but inflation convergence will proceed gradually.

The ECB is also worried that recent strength on Euro could affect inflation and pointed on necessity of further monetary support after bond buying program ends.

Cautious tone from the ECB put the single currency under fresh pressure. Bearish signal of penetration of daily cloud needs confirmation on today’s close below 1.2327 pivot, which would complete reversal pattern on daily chart and keep the downside vulnerable.

Fresh weakness pressure strong support at 1.2305 (10SMA / 50% retracement) and could extend towards next pivot at 1.2284 (Fibo 61.8% of 1.2215/1.2396 upleg).

Slow stochastic is reversing from overbought territory on daily chart and 14-d momentum breaking into negative zone, supporting bearish near-term scenario.

However, geopolitical tensions remain as one of key factors which could influence the market action in coming sessions.

Res: 1.2327; 1.2340; 1.2379; 1.2400
Sup: 1.2305; 1.2284; 1.2257; 1.2215