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For the 24 hours to 23:00 GMT, the USD rose 0.21% against the JPY and closed at 106.05.

In the Asian session, at GMT0400, the pair is trading at 106.25, with the USD trading 0.19% higher against the JPY from yesterday's close.

Earlier today, data indicated that Japan's final leading economic index dropped to a level of 105.6 in January, while the preliminary print had indicated a revised fall to a level of 106.8. The index had registered a level of 107.4 in the previous month. Moreover, the nation's final coincident index eased to a level of 114.9 in January, less than an initial estimate indicating a revised fall to a level of 119.7. In the prior month, the index had registered a level of 120.2.

The pair is expected to find support at 105.85, and a fall through could take it to the next support level of 105.45. The pair is expected to find its first resistance at 106.48, and a rise through could take it to the next resistance level of 106.71.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 105.74; (P) 106.02; (R1) 106.37; More...

Intraday bias in USD/JPY remains neutral as range trading continues inside 105.24/107.67. With 107.67 resistance holds, near term outlook remains bearish and deeper fall is expected. On the downside, break of 105.24 will resume larger decline from 118.65 and target 100% projection of 118.65 to 108.12 from 114.73 at 104.20 next. On the upside, firm break of 107.67 resistance will indicate near term reversal, on bullish convergence condition in 4 hour MACD. In such case, outlook will be turned bullish for 110.47 resistance next.

In the bigger picture, current development argues that the corrective pattern from 118.65 is extending. The solid break of 61.8% retracement of 98.97 to 118.65 at 106.48 now suggests that the pattern from 125.85 high is possibly extending. Deeper fall could be seen through 98.97 key support (2016 low). This bearish case will now be favored as long as 110.47 resistance holds.

Daily Pivots: (S1) 0.9486; (P) 0.9518; (R1) 0.9543; More...

With a temporary top in place at 0.9550, intraday bias in USD/CHF is turned neutral first. Another rise expected as long as 0.9423 holds. However, considering bearish divergence condition in 4 hour MACD, we'd be cautious on strong resistance from 0.9626 fibonacci level. to limit upside. On the downside, break of 0.9423 will indicate completion of the rebound from 0.9186. And intraday bias would then be turned back to the downside for 0.9356 support and below. Nonetheless, sustained break of 0.9626 will carry larger bullish implications.

In the bigger picture, fall from 1.0342 is seen as a medium term down trend. Current development is raising the chance that it is completed. But there is no confirmation yet. Focus will now be back on 38.2% retracement of 1.0342 (2016 high) to 0.9186 (2018 low) at 0.9626. Sustained break there will add much credence to the case of trend reversal and target 61.8% retracement at 0.9900 and above. However, rejection from 0.9626 will maintain medium term bearishness for another low below 0.9186.

For the 24 hours to 23:00 GMT, the USD declined 0.27% against the CHF and closed at 0.9510.

In economic news, Switzerland’s total sight deposits remained steady at a level of CHF575.9 billion in the week ended 16 March.

In the Asian session, at GMT0400, the pair is trading at 0.9516, with the USD trading 0.06% higher from yesterday’s close.

The pair is expected to find support at 0.9490, and a fall through could take it to the next support level of 0.9465. The pair is expected to find its first resistance at 0.9546, and a rise through could take it to the next resistance level of 0.9577.

Moving ahead, investors would await Switzerland’s SECO economic forecast and trade balance data for February, both slated to release in a few hours.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.19% against the CAD and closed at 1.3079.

In the Asian session, at GMT0400, the pair is trading at 1.3082, with the USD trading a tad higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.3044, and a fall through could take it to the next support level of 1.3007. The pair is expected to find its first resistance at 1.3122, and a rise through could take it to the next resistance level of 1.3163.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

Daily Pivots: (S1) 1.2275; (P) 1.2316 (R1) 1.2376; More....

EUR/USD's break of 1.2335 minor resistance now suggests that pull back from 1.2445 has completed with three waves down to 1.2257. Intraday bias is back on the upside for 1.2445 resistance first. Break there will resume whole rise from 1.2154. Note again that decisive break of 1.2555 will carry larger bullish implication. On the downside, below 1.2257 will turn bias back to the downside to extend the fall from 1.2555 through 1.2154.

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.

Aussie remains under pressure although the RBA minutes contained little surprise. The minutes signaled that policymakers were encouraged by recent economic growth. However, subdued wage growth and elevated household debt have suggested that policymakers would keep the powder dry. Meanwhile, the slowdown in the housing market has diminished the urgency for the central bank raise interest rates.

Policymakers remained concerned about the soft inflation outlook, noting faster wage growth is needed to assure a stronger and more sustainable improvement on inflation. As suggested in the minutes, 'employment had grown strongly and the unemployment rate had fallen over the preceding year. However, the improvement in overall conditions had not yet translated into a definitive pick-up in wages growth, which remained low'. It added that 'further progress on these goals [reducing the unemployment rate and bringing inflation closer to target] was expected over the period ahead, but this process was likely to be gradual'.

On the housing market, RBA indicated that 'conditions in the established housing market had continued to ease in recent months', noting the situation was 'most evident in Sydney'. It added that the growth in housing price had 'clearly slowed in Melbourne, and this had been most apparent in the more expensive parts of the market'.

Policymakers noted that low interest rates have contributed to bringing the unemployment rate down to 5.5% and lifting inflation close to target. It added that 'further progress on these goals was expected over the period ahead, but this process was likely to be gradual'. We expect RBA to stand on the sideline for the rest of the year.

STOCKS

Dow (24610.91, -1.35%) is heading lower in line with our expectations and could fall towards 24500-24000 as we have been mentioning for quite a few days. Near term looks bearish while below 25200.

Dax (12217.02, -1.39%) has also fallen and could come off towards 12100-12000 levels in the next few sessions. Immediate support is seen near 12000 and while that holds, the index could continue to trade sideways in the 12000-12500 region for the medium term.

Nikkei (21268.93, -0.99%) has support at current levels on the 3-day candles. If the falling momentum continues to be strong, a break below 21000 is possible which could open up a downside possibility for the near to medium term towards 20500-20000 levels.

Shanghai (3269.44, -0.30%) has been stable when looked at the weekly candles. There is some scope of testing lower levels of 3200 over this week or the next.

Nifty (10094.25, -0.99%) and Sensex (32923.12, -0.76%) have come down sharply yesterday. Decent support seen in the 10080-10020 region on Nifty which if holds could bring a bounce towards 10200-10300 levels again in the near term. But if the index breaks below 10020 in this week, it could open up chances of a sharp fall in the next couple of weeks. Similarly with the Sensex, an immediate bounce is expected if the support at current levels hold.

COMMODITIES

Brent (66.21) is gradually moving up and could continue to do so towards 67. Trade region of 67-64 is likely to sustain for the coming sessions. Nymex WTI (62.30) may test 63 breaking above immediate resistance on the daily candles. WTI looks that it may face some rejection near 63 and come off towards 62-61 again in the coming sessions.

Gold (1316.30) is likely to trade in the 1320-1310 region with a test of 1300 on the downside. Scope of rising above 1320-1325 looks less likely just now with focus on levels near 1300. Weekly chart shows possibility of 1300-1275.

Copper (3.0850) is stable just now and does not show any bounce from current levels. 3.0-3.05 is an important support region which if produces a bounce could again take Copper up; else a fall below 3.05-3.0 if seen, could be vulnerable to a fresh fall in the medium term.

FOREX

Dollar index (89.88) slightly breached immediate resistance on daily candles near 90.25-90.30 yesterday by seeing a high of 90.35, but has now dipped. A break of support on the daily candles (near 89.80) is likely to happen anytime within the next 1-2 days, with next downside target being 89.0-89.1 (seen as crucial support level on the weekly line chart). We repeat yesterday’s comment regarding the Fed meeting on 21st March:

'A lot could depend on the US Fed meeting this week, where a rate hike is expected. Whether a rate hike and a possible rise in US yields subsequently are positive for Dollar strength or not would have to be seen –the usually positive correlation between bond yields and currency strength has not worked for the Dollar in the past 3-4 months and whether this particular rate hike can reinstate the previous correlation would be something to watch out for in the coming weeks. Our preference is for the negative correlation to continue ie for the Dollar to see a dip.'

Euro (1.235) – As expected, the Euro has bounced from immediate support on daily candles near 1.225 after having seen a low of 1.2258 yesterday. There is immediate resistance now on daily candles near 1.2375 which could be breached in this week itself. The Euro has been seeing sideways movement in the broad 1.215-1.255 zone for the last 8 weeks. A decisive breakout on the upside beyond higher resistance on 3 day candles near 1.255 could be on the cards within the next couple of weeks.

Dollar Yen (106.20) might see a retest of 106.5 which is seen as immediate resistance on daily candles. On 3 day line chart, we see that 106.5 is the resistance provided by earlier medium term support line. The Dollar Yen might be about to turn bearish towards 105 and lower within the next 1-2 weeks. As mentioned yesterday as well, the next possible downside target is support near 105.00-104.75 on daily candles. A break of 105, would be crucial since the Dollar Yen hasn’t been able to move below that level for more than a year.

Euro Yen (131.11) exactly as per our prediction yesterday, has bounced from crucial support near 129.75 on 3 day and weekly candles (also seen on the daily line chart). There is immediate resistance now on daily candles near 131.5 which should produce a dip.

Pound (1.4037) after testing support near 1.38 on 3 day candles last week is now moving up. It could sustain this bullishness in the coming 1-2 weeks and attempt a test of 1.44 (seen as resistance on 3 day candles and 3 day line charts).

Dollar Rupee (65.1725) may see 65.30-40, maybe 65.60, but possibly not more than that.

INTEREST RATES

Global bond yields are expected to react to the Fed meeting this week. We have been expecting US yields to move up in response to a much anticipated rate hike. The 2 Year yield has already moved up to a 9 year high and might well pull up the other longer term yields as well.

US 10 Yr Yield (2.85), 30 Yr (3.086), 5 Yr (2.65), 2 Yr (2.30) : US Yields haven’t seen much movement (as is usual in sessions just before the Fed meeting) Data releases over the past week have put up a contrasting view of the US economy – CPI, Retail Sales, Wage Growth and Housing Starts data indicate a pause in growth while Capacity Utilization, unemployment claims, Industrial Production and Import Prices data indicate a surge in growth. We expect the US Fed to hike rates tomorrow but at the same time strike a balance by not being too hawkish in the press conference. We might be wrong and the Fed could surprise everyone - lets wait and watch. For now, we expect 10 Year yields to move past 3% in the days after the Fed meeting.

Japan 10 Yr Yield (0.043) as per expectation has bounced form support near 0.035% on the short term chart.

Daily Pivots: (S1) 1.3927; (P) 1.4008; (R1) 1.4103; More....

At this point, intraday bias in GBP/USD remains on the upside as the rebound from 1.3711 is in progress. As noted before, current development affirms the case that correction from 1.4345 has completed at 1.3711 already. Break of 1.4144 should confirm this bullish view and target 1.4345 and above. The larger up trend from 1.1946 might be ready to resume. ON the downside, however, break of 1.3888 minor support will dampen this bullish view. Intraday bias would be turned back to the downside to extend the decline from 1.4345 through 1.3711 instead.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down 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 1.4259) so far. Break of 1.3038 support, will suggest that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Sterling remains the strongest one as markets is now preparing for inflation data from UK today. The progress in Brexit negotiation removed one key obstacle for BoE to hike again in May. And CPI data will be a key factor for MPC's consideration. Hence, any upside surprise would likely lead to further rally in the Pound. Yen trades broadly lower this week even though stock markets were generally in risk averse mode. But it should be noted that Yen was actually not that weak considering that it's staying well inside last week's range. And Dollar is not performing much better. In addition to economy data, G20 communique on trade will be watched today as trade war remains a concern of investors.

UK CPI might prompt BoE hawks' comeback

The BoE rate decision this Thursday becomes lively as the transition deal is done. UK CPI data to be released today will be the first key factor. Headline CPI is expected to slow from 3.0% yoy to 2.8% yoy in February. Core CPI is expected to slow from 2.7% yoy to 2.5% yoy. On the one hand, the deal should give BoE policymakers some comfort to restart lifting interest rate from the current ultra low level at 0.50%. On the other hand, any upside surprise in today's inflation data would indeed give some pressure for BoE to act again.

And for the meeting, ahead, while BoE is still expected to stand pat, the statement could turn more relaxed and optimistic given that the Brexit picture is slightly clearer. And more importantly hawks like Ian McCafferty and Michael Saunders might come back to vote for rate hike.

According to a Bloomberg survey, majority of economists expected BoE to vote 9-0 to keep interest rate unchanged at 0.50% later this week on Thursday. And, 54% of economists expected BoE to hike interest rate in May. That's a slight adjustment from 51% at prior survey. However, the data was taken as of March 19. And it's unsure how much regarding the Brexit transition deal was taken into consideration. And that could only be reflected in the next survey.

Recap on Brexit transition deal

To recap, the transition period will last from Brexit day on March 29, 2019 to December 31, 2020. The key terms in the agreement include the followings: EU citizens arriving in the UK between these two dates will enjoy the same rights and guarantees as those who arrive before Brexit. The same will apply to UK expats on the continent; The UK will be able to negotiate, sign and ratify its own trade deals during the transition period; The UK will still be party to existing EU trade deals with other countries The UK's share of fishing catch will be guaranteed during transition but UK will effectively remain part of the Common Fisheries Policy, yet without a direct say in its rules, until the end of 2020;

Northern Ireland will effectively stay in parts of the single market and the customs union in the absence of other solutions to avoid a hard border with the Republic of Ireland. Indeed, UK Prime Minister Theresa May has described the arrangement for Northern Ireland as "unacceptable" as it would effectively shift the existing land border to the Irish Sea and compromise UK sovereignty. Yet, the EU suggested this "backstop option" was a key part of December's phase one agreement with the UK and this would remain effective "unless and until another solution is found".

EU Moscovici at G20: We must absolutely avoid trade wars

European Economics Commissioner Pierre Moscovici he's "cautiously optimistic" that there could be an agreement on the language on trade out of G20 meeting. And he hoped that the G20 communique will show that "how that protectionism is not the solution and we must absolutely avoid that." He warned that "the first risk is the risk of inward looking policies and protectionism."

Regarding US requests to omit the term "multilateral" from there statement, Moscovici blasted that "avoiding multilateralism in a multilateral organization makes no sense." He further added that "a trade war would be stupid. There would be damage on both sides of the Atlantic." Moscovici also reiterated that EU is prepared for counter-measures to US if it's not exempted from the steel and aluminum tariffs. Moscovici noted "but we think the best is to avoid a scale up" because "we must absolutely avoid trade wars."

On the other hand, US Treasury Secretary Steven Mnuchin emphasized in an email statement that "The trip to the G-20 will focus on advancing the Trump administration's global economic agenda to level the playing field for U.S. companies and workers."

Trump to announce USD 60b tariff against China on Friday

It's known that Trump is preparing to impose a package of USD 60b in tariffs against China. It's reported that the package would apply to over 100 products. These products are believed by Trump to use trade secretes stolen from US companies, or forced to hand over in exchange for market access. The theme appears to be consistent with Section 301 intellectual property theft investigation and actions. But no one knows how relevant is that until there a a published list of products. Trump is planning to announce the action by Friday.

China Premier Li pledges to open market

China Premier Li Keqiang said today after a press conference that there is no forced transfer of technology. But he pledged that China will better protect intellectually property. Also, China will further open up the economy, lower import tariffs and allow foreign and domestic companies to compete on equal ground. China commerce ministry said that there is WTO ruling against tariffs directed only at them. And it urged the US to correct the abuse of trade measures. But the MOFCOM didn't comment directly on the reported USD 60b tariff package.

ECB Mersch: Prerequisites there for inflation, but easy policy still needed

ECB Executive Board member Yves Mersch sounded upbeat on his comments yesterday. He said that "all prerequisites for a sustainable adjustment of inflation to our objective are given." The central bank could continue to cut down its asset purchases gradually as inflation outlook improves. He's concerned that there could be excessive market reactions if the asset purchases are reduced too quickly. And that would undo ECB's hard work in the past few years. Overall, for the time being, easy monetary policy is still needed to support inflation.

Little surprise from RBA minutes

The RBA minutes for the March contained little surprise. Policymakers remained concerned about the soft inflation outlook, noting faster wage growth is needed to assure a stronger and more sustainable improvement on inflation. As suggested in the minutes, "employment had grown strongly and the unemployment rate had fallen over the preceding year. However, the improvement in overall conditions had not yet translated into a definitive pick-up in wages growth, which remained low". It added that "further progress on these goals [reducing the unemployment rate and bringing inflation closer to target] was expected over the period ahead, but this process was likely to be gradual".

Also from Australia, house price index rose 1.0% qoq in Q4 versus expectation of 0.0% qoq.

Looking ahead

The European session is very busy today. UK CPI will take center stage while PPI and house price index will also be featured. Germany will release ZEW economic sentiment and PPI. Swiss will release trade balance. Later in the day Canada will release wholesale sales.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3927; (P) 1.4008; (R1) 1.4103; More....

At this point, intraday bias in GBP/USD remains on the upside as the rebound from 1.3711 is in progress. As noted before, current development affirms the case that correction from 1.4345 has completed at 1.3711 already. Break of 1.4144 should confirm this bullish view and target 1.4345 and above. The larger up trend from 1. 1946 might be ready to resume. ON the downside, however, break of 1.3888 minor support will dampen this bullish view. Intraday bias would be turned back to the downside to extend the decline from 1.4345 through 1.3711 instead.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down 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 1.4259) so far. Break of 1.3038 support, will suggest that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Economic Indicators Update