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A tidal wave of risk aversion engulfed financial markets on Friday, after President Donald Trump announced that the U.S will impose tariffs on up to $60 billion ofChinese imports.

This bold and frightening move by Trump has already triggered retaliatory actions from China, who fought back by disclosing plans to impose tariffs on up to $3 billion of U.S imports. With fears likely to heighten over a trade war negatively impacting global growth, risk aversion could become a dominant market theme moving forward.

Escalating trade tensions between China and the U.S have exposed global equity markets to significant downside risks. Asian stocks suffered severe losses this morning, following Wall Street’s gut-wrenching declines overnight. The negative sentiment from Asian markets could contaminate European shares and trickle down to Wall Street. With the Dow Jones Industrial Average closing more than 720 points lower on Thursday amid trade war fears, U.S equity bears could attack once again this afternoon.

Sterling slips post BoE meeting

Sterling sharply appreciated against the Dollar before abruptly surrendering gains on Thursday, after the Bank of England kept its interest rates unchanged at 0.5%.

Although monetary policy remained unchanged in March, a key takeaway from the meeting was the 7-2 split vote, which was seen as hawkish. The agreement on a Brexit transition deal with the E.U and signs of wage growth acceleration are likely to boost expectations of a rate hike in May.

There is a possibility that Sterling’s current weakness could be thanks to the BoE expecting the economy to take a ‘temporary hit’from the recent severe weather conditions. With the Pound highly sensitive to monetary policy speculation, expectations of higher U.K interest rates could offer some support further down the road.

Taking a look at the technical picture, the GBPUSD has found itself under pressure, with prices trading around 1.4110 as of writing. A daily close below 1.4100 could encourage a decline back towards 1.4000. Alternatively, if bulls can defend 1.4100 then prices could challenge 1.4180.

Yen gains on risk aversion

The Yen proudly marched to a 16-month high against the Dollar on Friday, as traders frantically sought safety in safe-haven assets amid growing fears of a global trade war.

With uncertainty likely to heighten as trade tensions escalate, the Yen may remain a risk-averse trader’s best friend. Taking a look at the technical picture, the USDJPY is under intense pressure on the weekly charts with prices trading around 104.70 as of writing. A solid weekly close below 105.50 could invite a decline lower towards 104.00.

Commodity spotlight – Gold

Gold bulls were back in action on Friday with prices venturing towards $1340 thanks to a vulnerable Dollar and a sell-off in global equity markets.

It has certainly been an incredible trading week for the yellow metal, as heighted fears of a global trade war accelerated the flight to safety. With risk aversion in the air and the Dollar under pressure, Gold has the potential to appreciate further. From a technical standpoint, Gold could challenge $1355 if bulls are able to secure a weekly close above the $1340 level. Alternatively, a failure for bulls to secure control above $1340 could encourage a decline back towards $1330.

Daily Pivots: (S1) 128.98; (P) 130.00; (R1) 130.50; More....

EUR/JPY drops to as low as 128.94 so far. Break of 129.34 indicates resumption of whole decline from 137.49. Intraday bias is back on the downside for 61.8% projection of 137.49 to 129.34 from 132.40 at 127.36 next. On the upside, break of 131.05 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, current development argues that rise from 109.03 (2016 low) has completed at 137.49, on bearish divergence condition in weekly MACD. Deeper fall should be seen to 38.2% retracement of 109.03 to 137.49 at 126.61 first. Sustained break there would pave the way to 61.8% retracement at 119.90. On the upside, break of 137.49 is needed to confirm medium term rise resumption. Otherwise, risk will now stay on the downside even in case of strong rebound.

The Bank of England Interest Rate Decision was as expected and left rates unchanged at 0.5%. The BOE Minutes, BOE Quarterly Inflation Report and the Monetary Policy Statement were released at the same time. BOE Asset Purchase Facility was left unchanged, as expected, at £435B. While no change in rate was expected, the tone and language used hinted that the Bank is gearing up to increase rates as early as May. The votes were 7 Hold v 2 Hike. The two dissenters sited widespread evidence of near-zero slack in the labour market and accelerating wage growth. GBPUSD opened at 1.41600 and spiked up to 1.42164, before reversing lower to 1.41277 as the rally was faded after this data was released.

US President Trump approved a list of tariff exempted countries including Member countries of the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea. These exemptions will last until May 1st, at which point current discussions on global excess capacity will be reviewed. The notable ally missing from the list is Japan. Canada and Mexico are on the list pending the conclusion of NAFTA negotiations.

German Markit Manufacturing PMI (Mar) was 58.4 v an expected 59.8, from 60.6 previously. Markit Services PMI (Mar) was 54.2 v an expected 55.0, from 55.3 previously. Markit PMI Composite (Mar) was 55.4 v an expected 57.0, from 57.6 prior. The slip in these data points suggests that the December reading was a short-term high. For Manufacturing, it was the highest reading since before the financial crisis and, for Services, it was the highest since June 2011. EURUSD fell from 1.23702 to 1.23511 following this data release.

Eurozone Markit Manufacturing PMI (Mar) was 56.6 v an expected 58.1, from 58.6 previously. Markit Services PMI (Mar) was 55.0 v an expected 56.0, from 56.2 previously. Markit PMI Composite (Mar) was 55.3 v an expected 56.7, from 57.1 prior. This data softened from highs in December. This puts growth on the back foot in the Eurozone and suggests a slowing in industry. EURUSD slipped further from 1.23593 to 1.23078 after the released data hit the headlines.

UK Retail Sales (YoY) (Feb) was 1.5% v an expected 1.3%, from 1.6% previously, which was revised down to 1.5%. Retail Sales (MoM) (Feb) was 0.8% v an expected 0.4%, against a prior 0.1%, which was revised down to -0.2%. Retail Sales Ex-Fuel (YoY) (Feb) was 1.1% v an expected 1.2%, from 1.5% previously, which was revised down to 1.3%. Retail Sales Ex-Fuel (MoM) (Feb) was 0.6% v an expected 0.4%, against a prior 0.1%, which was revised down to -0.2%. This data shows a pickup in retail sales in February but the softer revisions take the wind out of the sails somewhat. Combined with the December and January data it shows consumer spending declined over the three months, with bad weather playing its part. GBPUSD spiked to a high of 1.41799 before selling off to 1.41328 following this data release.

US Initial Jobless Claims (Mar 16) were 229K v an expected 225K, from 226K previously. Continuing Jobless Claims (Mar 9) were 1.828M v an expected 1.890M, from 1.879M previously, which was revised up to 1.885M. Jobless Claims data has been in a downtrend since the high after the financial crisis. It fell further yesterday, as job creation is sustained and more individuals resume work. Continuing Jobless claims was expected to tick up a little but showed a fall instead. USDJPY fell from 105.489 to 105.257, moved by this data.

US House Price Index (MoM) (Jan) was 0.8% v an expected 0.4%, from 0.3% previously, which was revised up to 0.4%. This data recovered after falling over the last few months, in what has become a seasonal move. Statistically, this reading is one of the worst for House prices in the US, as it represents the January data, but today’s data shows it is the best January since 2009. The YoY figure is reading at 7.3%, showing a strong US housing market.

US Markit Manufacturing PMI (Mar) was 55.7 v an expected 55.5, from 55.3 previously. Markit Services PMI (Mar) was 54.1 v an expected 55.8, from 55.9 previously. Markit PMI Composite (Mar) was 54.3 v an expected 55.7, from 55.8 prior. Manufacturing was expected to maintain its strong improvement since a low in May 2016 and is performing well. Services data is more of a worry and softened a little as expected. USDCAD moved higher, from 1.29012 up to 1.29258 as a result of this data.

BOC’s Wilkins gave a speech at the Rotman School of Management, in Toronto. Some of her comments were: there may be a case for taking longer to bring inflation back to target than usual. Six to eight quarters in some situations. A fine balancing between moving too quickly or too slowly on rates is needed. Moving too quickly on rates could have outsized effects, given high levels of household indebtedness but moving too slowly could allow more financial vulnerabilities to build. Interest rates are a blunt tool, difficult to use for financial stability goals. The BOC is concerned about cyber risk and the rapid pace of financial innovation.

Japanese National Consumer Price Index (YoY) (Feb) was 1.5% v an expected 1.7%, against a prior 1.4%. National Consumer Price Index Ex-Fresh Food (YoY) (Feb) was as expected at 1.0%, against a prior 0.9%. USDJPY sold off from 105.325 to 104.633 as a result of this data.

EURUSD is up 0.32% overnight, trading around 1.23402.

USDJPY is down -0.43% in early session trading at around 104.820.

GBPUSD is up 0.12% this morning, trading around 1.41140.

USDCAD is down -0.27% in early trade at around 1.29035.

Gold is up 1.07% in early morning trading at around $1,342.80.

WTI is up 1.28% this morning, trading around $65.02.

Daily Pivots: (S1) 147.71; (P) 148.93; (R1) 149.59; More....

Despite dropping sharply from 150.29, GBP/USD is holding above 147.03 minor support. Intraday bias remains neutral first. While another rise cannot be ruled out, we maintain the view that rebound from 144.97 is a corrective move. Therefore, strong resistance is expected from 150.92 (50% retracement of 156.59 to 144.97 at 150.78) to bring fall resumption. On the downside, below 147.03 will bring retest of 144.97 low first. Break will extend the decline from 156.59 to 143.51 medium term fibonacci level next. However, sustained break of 150.92 will pave the way back to retest 156.69 high.

In the bigger picture, the case for medium term reversal continues to build up. There is bearish divergence condition in daily MACD. 146.96 support was taken out. And GBP/JPY was rejected by 55 month EMA. Break of 38.2% retracement of 122.36 to 156.59 at 143.51 will pave the way to 61.8% retracement at 135.43 and below. This will now be the preferred case as long as 150.92 resistance holds.

The British pound has reversed sharply from a nine-week trading high against the U.S dollar, hitting 1.4076, as risk-off trading sentiment returned after the Trump administrations imposed further trade tariffs on China. The GBPUSD pair retreated from the 1.4220 level, as the BoE meeting minute revealed that the outcome of Brexit remains the number one concern for Bank of England policy makers. Traders now look towards the 1.4088 support level, the BoE Quarterly Bulletin, and a scheduled speech from MPC voting member Gertjan Vlieghe.

The GBPUSD pair is still intraday bullish whilst trading above the key 1.4088 level, buyers may test towards the 1.4146 and 1.4200 levels.

Should the GBPUSD pair move below the 1.4088 support level, a price correction back toward the 1.4060 and 1.4000 support levels may occur.

The U.S dollar has moved sharply lower against the Japanese yen, after the Trump administration imposed sixty billion U.S dollars of tariffs on Chinese imports. The USDJPY pair has fallen to a new 2018 trading-low during today’s Asian session, hitting 104.60, as investors seek the perceived safety of the Japanese yen currency. Traders are increasingly watching the downside technical levels breakdown on risk-aversion, with the bearish head and shoulder pattern across the lower time-frame charts now playing-out.

The USDJPY pair is strongly bearish below the 105.24 level, further losses towards 103.90 and 103.00 seem increasingly possible.

Should the USDJPY pair move above the 105.24 level, a correction towards the 105.50 and 106.00 resistance levels may occur.

Daily Pivots: (S1) 1.5907; (P) 1.5955; (R1) 1.6038; More....

EUR/AUD is staying in range below 1.6039 and intraday bias remains neural first. More consolidation could be seen. But still, further rise is expected as long as 1.5791 support holds. Break of 1.6039 will resume larger rally to 61.8% projection of 1.5130 to 1.5976 from 1.5621 at 1.6130 first. Break there will target 100% projection at 1.6444 next. However, break of 1.5791 minor support will be an early sign of near term reversal. In such case, focus will be turned back to 1.5621 support.

In the bigger picture, current development suggests that rise from 1.3624 is not completed yet. And it's still in progress for 1.6587 key resistance level. We'd be cautious on strong resistance from there to limit upside, on bearish divergence condition in daily MACD. But for now, break of 1.5153 support is needed to indicate medium term reversal. Otherwise, outlook will stays bullish even in case of deep pull back.

Daily Pivots: (S1) 0.8679; (P) 0.8710; (R1) 0.8757; More...

Intraday bias in EUR/GBP is turned neutral with a temporary low for at 0.8666. 0.8686 key support level was breached briefly, without sustained trading below. Hence, there is no confirmation of resumption of fall from 0.9305. On the upside, break of 0.8757 minor resistance will turn bias back to the upside to extend recent sideway pattern with another rise, towards 0.8967. Nonetheless, break of 0.8666 again and sustained trading below 0.8686 will resume whole fall from 0.9305 and target 0.8303 key support next.

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.

Daily Pivots: (S1) 1.1642; (P) 1.1683; (R1) 1.1716; More...

EUR/CHF break of 1.1672 minor support indicates that rebound from 1.1445 has completed at 1.1748. And, the corrective pattern from 1.1832 is extending with another falling leg. Intraday bias is turned back to the downside for 55 day EMA (now at 1.1634). Sustained break will target 1.1445 support and possibly below. But we'd expect strong support from 1.1355 cluster support (38.2% retracement of 1.0629 to 1.1832 at 1.1372) to complete the correction and break up trend resumption. On the upside, above 1.1748 will bring retest of 1.1832 high instead.

In the bigger picture, a medium term top should be in place at 1.1832 on bearish divergence condition in daily MACD. But there is no indication of long term reversal yet. As long as 1.1198 resistance turned support holds, we'd still expect another rise through prior SNB imposed floor at 1.2000.

Currency pair USD/JPY

The USD/JPY broke below the support line (dotted blue), which invalidated the previous wave count and indicates a potential downtrend. Price seems to have built an ABC (green) in a larger wave 4 (blue) and could be in an impulsive breakout.

The USD/JPY could be building a wave 3 (green) momentum

Currency pair EUR/USD

The EUR/USD is retesting the resistance trend line (red) and a bullish break could start a potential wave 3 (blue) of 3 (purple). A break below the support zone (green) could indicate a larger trend change.

The EUR/USD seems to have completed 5 bullish waves (green) which could complete a wave 1 (blue). An ABC correction (green) could now take place within wave 2 (blue). A break above the trend line at 138.2% Fib increases the chance of a bullish breakout.

Currency pair GBP/USD

The GBP/USD seems to have completed a wave 3 (green) and could now be building a wave 4 (green) retracement.

The GBP/USD could use the Fibonacci levels of wave 4 (green) as support.