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Emerging currencies positive

Amidst all the noise, subdued inflation and solid global growth are good for selected emerging-market currencies: MXN, THB, INR, IDR and ZAR should be bought on the dips.

Trade-war fears eased on Chinese President Xi Jinping's conciliatory, optimistic remarks at the Boao Forum for Asia. Global stocks rebounded as US President Donald Trump acknowledged the remarks positively. But markets are still jittery: USD/RUB highlights this, clearing 64.20 in early trading. In general, forex markets remain choppy and difficult to read.

Today will see various announcements: UK manufacturing data, the US consumer price index and the US Federal Reserve's minutes of its Open Market Committee. US CPI inflation is expected to rise, with the core rate jumping to 2.1%, keeping USD contained. The FOMC March minutes will give insight into the Fed's choice of three or four rate hikes for 2018.

Italy's uncertainty

After March elections and the slow process of forming a government, the Italian economy is showing signs of weakness. A slowdown in February's producer price index and industrial production month-to-month of 0.30% and -0.50% (prior: 0.80% and -1.80%) underline a decline in manufacturing morale, due to current political uncertainty. A major laggard is consumer goods (-2.40%; prior: +0.10%), but energy turned positive (+8.10%; prior: -6.90%). March manufacturing and economic confidence are lower at 109.1 and 106 (prior: 110.4 and 108.5), a pessimistic view on growth.

However, seen broadly, Italy's economy remains stable, with an unemployment at a six-year low (10.90% in February), inflation accelerating (March's consumer price index year-to-year +1.10%) and improving consumer confidence (117.50 as of March 2018, its highest since 31 January 2016). This supports our positive view of the Eurozone. Gaining 0.85% this week, EUR/USD bullishness started last Friday continues, bouncing from a 1.2215 low and heading to the 1.2390 range in the short-term (200-day moving average: 1.1963).

The EUR is getting stronger as we could see from yesterday's EUR/JPY analysis. The EUR/USD follows but contrary to EUR/JPY; we can see a rectangle consolidation which is not a sign of a healthy trend. That implies a range-bound price action with two possible bouncing spots. 1.2420-40 is the zone for shorts – POC (s). If the price reaches the zone, we might see a rejection towards 1.2350 and 1.2315. However, if the price drops to 1.2244-68, we might see a bounce towards 1.2315 and 1.2350. The short-term movement will stay within the range as long as this rectangle holds.

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

M H4 - Monthly Camarilla Pivot (Very Strong Monthly Resistance)

M L3 – Monthly Camarilla Pivot (Monthly Support)

M L4 – Monthly H4 Camarilla (Very Strong Monthly Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

EUR/USD

Current level - 1.2369

The outlook remains positive, for a rise towards 1.2420-40 dynamic resistance.  Crucial on the downside is 1.2330 and a violation of the latter will signal a reversal of the whole rise since 1.2210.

USD/JPY

Current level - 107.04

A violation of 107.50 peak will target 108.30 resistance area. Key support is projected at 106.60.

GBP/USD

Current level - 1..4194

The uptrend is still on track, targeting 1.4240 peak. Crucial on the downside is 1.4140 low.

Thick daily cloud continues to limit recovery leg from 104.63 for the fifth consecutive day, with growing risk of stall, as bulls failed to close above cloud base in four consecutive attempts.

loud is spanned between 107.18 and 109.34 and continues to heavily weigh, as Tuesday spike into cloud (daily high was at 107.40) was short-lived and mainly offset by today’s action which so far holds in red.

Initial warning signals come from south-turning daily RSI and sideways-moving 10SMA, while slow stochastic continues to trend lower after reversal from overbought territory on Monday.

Immediate outlook is expected to remain negative while recent highs at 107/40/50 stay intact.

The pair eyes US CPI data for fresh signal, with upbeat results needed to spark fresh action higher for eventual break and close within daily cloud.

Conversely, disappointing US inflation numbers could be a catalyst for fresh weakness and signal formation of lower base.

Close below 10SMA (106.71) would be initial negative signal, which needs confirmation on extension and close below converged 20/30SMA’s (106.27).

Res: 107.10, 107.18, 107.50, 107.97
Sup: 106.71, 106.60, 106.27, 106.00

Cable hit new two-week high above 1.42 barrier in early European trading on Wednesday, extending strong bullish sequence from 1.3965 trough (05 Apr) and looking for full retracement of 1.4244/1.3965 fall.

Daily MA's in positive setup and fresh bullish momentum underpin the action for final push towards key 1.4244 barrier (26/27 Mar double top).

Batch of data from the UK is due today (Construction, Industrial and Manufacturing production and trade data), with overall positive forecasts.

Upbeat releases could give fresh boost to sterling for eventual break through 1.4244 pivot.

Initial supports lay at 1.4200 and 1.4170 (session low) with stronger dips expected to hold above 1.4080 (converged north-heading 10/20SMA's) to keep bulls in play.

Res: 1.4222, 1.4244, 1.4277, 1.4300
Sup: 1.4200, 1.4170, 1.4124, 1.4080

The Euro remains bid on Wednesday and extends bull-leg from 1.2215 base into fourth straight day, probing through cracked pivot at 1.2376 (Fibo 61.8% of 1.2476/1.2215 bear-leg).

Bullish daily techs continue to support as the pair is gaining fresh bullish momentum and rising thick daily cloud continues to underpin.

The dollar remains under pressure on concerns about trade war, despite more conciliatory tone heard the US and China leaders, keeping the single currency at the front foot.

Close above 1.2376 will be bullish signal for extension through psychological 1.24 barrier and test of 1.2418 (20-d upper Bollinger band).

Bulls may show hesitation on approach to 1.24 barrier as slow stochastic is overbought on daily chart, with consolidation expected to hold above daily cloud top (1.2327) to keep bulls intact.

Speech of the ECB President Draghi, US CPI data and FOMC minutes are key events today.

Res: 1.2400, 1.2418, 1.2446, 1.2476
Sup: 1.2350, 1.2340, 1.2327, 1.2300

Upside risks continue to dominate the EUR/USD exchange rate. The pair lingered near the upper boundary of a medium-term channel early on Tuesday prior to breaching this pattern to the upside and surging up to the 1.2365 mark.

Given that technical indicators are located near their highs for the second consecutive session, it is possible that the bearish pressure eventually manages to take over the pair and thus initiate a short-term correction south.

It seems that the 23.60% Fibonacci retracement at 1.2360 could be a rather probable point of reversal, as the Euro remained near this line during the Asian session.

In terms of downside potential, the monthly PP and the 55-hour SMA at 1.2320 is the nearest southern target, while stronger support is the 100– and 200-hour SMAs near 1.23.

Bulls have still refused to abandon their positions for the third consecutive session, thus managing to push the Sterling even higher against the US Dollar. The pair found some minor resistance at the weekly R1, but was nevertheless pressured higher up to the weekly R2 circa 1.42.

The Pound might still want to use the slight upside potential that is apparent until a downward-sloping trend-line at 1.4220 prior to initiating a corrective move south. The nearest support that might hinder the pair is the 55-hour SMA and the weekly R1 at 1.4150.

Given that this trading session includes several noteworthy fundamentals, this support cluster is expected to be breached, thus widening the southern potential down to the 100– and 200-hour SMAs located in the 1.4075/95 range.

USD/JPY has managed to maintain its sideways movement for the fourth session in a row.

Despite being restricted by the 55– and 100-hour SMAs, the US Dollar breached this support and edged slightly higher on Tuesday. However, a surge did not follow, as the pair had already been pushed back to the 107.00 mark by Wednesday morning.

The rate is moving closer to the bottom boundary of a three-week channel up. Given its inability to reach the upper line of this pattern last week, it is likely that a bearish breakout occurs soon and thus sends the pair towards 106.00 during the following days.

However, technical indicators are still bullish for this session, demonstrating that a test of the weekly R1 or the 38.20% Fibo circa 107.80 and 108.00 is the most likely scenario.

XAU/USD continues to appreciate for the third consecutive session. The most recent surge occurred on Tuesday after the pair hit the strong support of the 55-, 100– and 200-hour SMAs circa 1,333.00. As a result, Gold breached a three-week channel early today and is currently targeting the medium-term channel near 1,355.00.

Technical indicators are located in the overbought territory; thus, it is more likely that bears strengthen their positions and push the pair back lower.

Meanwhile, this session includes several significant fundamentals from the US, so today's trading range is expected to be wide. The upper boundary is the aforementioned medium-term channel, while the nearest support is set by the distant 55-hour SMA and the 23.60% Fibo circa 1,335.00.