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Yen is staying as the weakest currency for today and selling intensifies entering into European. Meanwhile, Euro is also showing much resilience. And buying also emerges at during the 4 hour period.

Tuesday March 13: Five things the markets are talking about

European equities are drifting following a mixed session in Asia and the ‘mighty' U.S dollar is steady as capital markets wait for this morning's U.S inflation report for clues on the pace of Fed policy-tightening. Treasury yields have nudged a tad higher, while oil has slipped again.

This morning's U.S CPI (08:30 am EDT) could confirm that U.S inflation remains tepid, even as the job market remains tight. Last Friday's Labor Department report showed that U.S wages rose +2.6% y/y in February, below expectations, while the annual wage gain in January was revised down to a +2.8% increase.

Note: The market will also be looking to reports on wholesale prices and retail sales (Mar 14) for guidance ahead of next week's FOMC meeting (Mar 20-21). The Fed is expected to hike rate +25 bps and is scheduled to release their updated forecasts for the path of monetary policy (dot plot) and economic growth.

Politics again is a market focus after President Trump issued an executive order blocking Broadcom from acquiring Qualcomm, thwarting a +$117B hostile takeover in the name of U.S national security.

On tap: China data on industrial production, retail sales and fixed-asset investment are all out on Wednesday and are expected to point to slower growth.

1. Stocks mixed results

In Japan, equities rallied for a fourth consecutive session overnight as a weaker yen (¥107.07) triggered buying, offsetting any weakness in steelmakers and automakers still battered by concerns about U.S tariffs on imported steel and aluminum. The Nikkei average gained +0.7%, while the broader Topix added +0.6%.

Down-under, Australia's S&P/ASX 200 slipped -0.4% on weakness in major mining and oil stocks, while in S. Korea, the Kospi closed out +0.4% higher, supported mostly by Samsung's +3.9% gain.

In Hong Kong, stocks ended little changed on Tuesday as investors considered the impact of a government reshuffle on the mainland. China is merging its banking and insurance regulators and giving new powers to policymaking bodies such as the People's Bank of China (PBoC) in the biggest government shake-up in years. At close of trade, the Hang Seng index was flat, while the Hang Seng China Enterprises index rose +0.4%.

In China, stocks broke a three-day winning streak and ended lower, weighed down by healthcare and consumer stocks and the impact of a government reshuffle. At the close, the Shanghai Composite index was down -0.5%, while the blue-chip CSI300 index was down -0.9%.

In Europe, regional indices trade higher across the board following the mixed session in Asia. Stateside, shares of Qualcomm will be in focus after receiving a presidential order prohibiting Broadcom's proposed takeover.

U.S stocks are set to open in the ‘black' (+0.2%).

Indices: Stoxx600 +0.1% at 379.6, FTSE flat at 7215, DAX +0.2% at 12437, CAC-40 +0.5% at 5301, IBEX-35 +0.8% at 9800, FTSE MIB +0.4% at 22846, SMI +0.1% at 8979, S&P 500 Futures +0.2%

2. Oil prices dip on rise in U.S crude output, gold lower

Oil prices have dipped overnight, extending Monday's losses, as the relentless rise in U.S crude output continues to weigh on the market.

Brent crude futures are at +$64.77 per barrel, down -18c, or -0.3%. U.S West Texas Intermediate (WTI) crude futures are at +$61.18 a barrel, down -18c, or -0.3% from Monday's close.

Note: Both crude benchmarks dropped by around -1% in yesterday's session.

Nevertheless, global healthy demand and ongoing supply restraint by OPEC and Russia is preventing much deeper pullbacks presently. However, U.S production is expected to rise above +11m bpd by late 2018, taking the top spot from Russia, according to IEA.

In it's monthly report yesterday, the EIA noted that the rising U.S output comes largely on the back of onshore shale oil production. Production from major shale formations is expected to rise by +131k bpd in April from the previous month to a record +6.95m bpd.

Traders will take their cues form this week's U.S inventory reports.

Ahead of the U.S open, gold prices are under pressure on a firmer dollar as the market waits for this morning's U.S consumer price data to gauge the outlook for inflation and the Fed's rate hike stance. Spot gold is down -0.2% at $1,319.87 per ounce.

3. Sovereign yields look for guidance

Euro zone sovereign bond yields are little changed, as investors continue to brace themselves for this week's hefty bond supply as well as today's U.S inflation data that could provide clues on the pace of monetary tightening from the Fed.

European bond markets have been well supported since last Thursday's ECB, with policy makers stressing that interest rates will remain “low for some time” even as they take tentative steps towards exiting QE.

Today's inflation data is particularly important, as many analyst are forecasting the Fed will raise interest rates four times this year, compared with the three increases policy makers have penciled in at their December meeting.

Note: Should the Fed signal they intend to accelerate the pace of monetary tightening, it could give a boost to the dollar, which had declined -2.5% in 2018.

A headline print that misses or meets estimates is likely to reaffirm the case for three-rate hikes this year and give the green light to fresh appetite for risk assets.

The yield on U.S 10-year Treasuries has increased +1 bps to +2.88%. In Germany, the 10-year Bund yield has climbed less than +1 bps to +0.63%, while in the U.K; the 10-year Gilt yield is unchanged at +1.494%, the highest in a week.

4. Dollar looks for direction

The USD is little changed against G10 currency pairs with the focus turning to today's U.S CPI data.

GBP/USD (£1.3880) is a tad softer ahead of Chancellor of Exchequer Hammond “Spring Statement” (07:30 am today). Dealers note that the commentary would most likely influence Gilt prices the most, as less issuance is expected throughout the current fiscal year due to higher U.K tax receipts.

USD/JPY (¥107.16) is higher by +0.6% above the psychological ¥107 handle for its best session in five-months with the USD aided by yesterday's U.S Treasury auction results – the highest 3-year bond yield in 11-years.

The market remains on Japanese political watch – Japan's Fin. Min. Aso mighty skip the G20 finance minister meeting in Buenos Aires later this month with calls for his resignation following the recent shenanigans surrounding the cover-up of a government land sale.

Elsewhere, the EUR is little changed, trading atop of €1.2326, while the ZAR declined -0.2% to $11.8403.

5. U.S small business economy heats up

Data this morning from the NFIB (The National Federation of Independent Business) showed that U.S small business owners are showing strong confidence in the economy as the optimism index continues at record high numbers, rising to 107.6 in February vs. 107.1 (e).

The historically high numbers include a jump in small business owners increasing capital outlays and raising compensation. The federation supports +350k small U.S companies.

According to NFIB CEO, Juanita Duggan, “the historically high readings indicate that policy changes – lower taxes and fewer regulations – are transformative for small businesses. After years of standing on the sidelines and not benefiting from the so-called recovery, Main Street is on fire again.”

ECB Governing Council member Philip Lane:

"There's no concern about the current level,"

•  "But if it moves a lot within a short time interval then you have to think about the implications."
• "As these factors convert into higher inflation readings, our confidence that inflation will converge to the target over the medium term improves,"
• "Whenever net asset purchases come to an end, there will still remain considerable monetary accommodation baked into the system,"

EU Chief Brexit negotiator Michel Barnier warned UK:-

• The EU and Britain are hoping to seal a deal this month on a transition period after Brexit, and start talks on the future relationship this spring.
• "One cannot have at the same time the status of a third country and demand at the same time the advantages of the (European) Union,"
• "It is time to face up to the hard facts,"

Earlier today, European Commission President Jean-Claude Juncker in European Parliament on Brexit:-

• "There is increasing urgency to negotiate this orderly withdrawal."
• "As the clock counts down, with one year to go, it is now time to translate speeches into treaties, to turn commitments into agreements."
• "It is obvious that we need further clarity from the UK if we are to reach an understanding on our future relationship."

The DAX index has posted slight gains in the Tuesday session. Currently, the DAX is trading at 12,434.53, up 0.13% on the day. In economic news, there are no eurozone or German indicators for a second straight day. On Wednesday, ECB President Mario Draghi will speak at an ECB conference in Frankfurt and Germany releases Final CPI.

Despite the turbulence surrounding US President Trump’s controversial decision to slap tariffs on steel imports, eurozone stock markets enjoyed a strong week, and the DAX surged with a 4.4% gain. There was concern on the part of investors over the tariffs, which generated harsh criticism from the EU. However, Trump has exempted Canada and Mexico from the tariffs, and has said that Washington could ease the duties on other countries as well. Importantly, there is strong domestic opposition to Trump’s move, including senior Republican lawmakers who have said they will work to overturn the tariffs, which could spark an all-out trade war. So far, the markets are confident that a solution to the tariff tussle will be found.

Is the German industrial sector in trouble? Last week’s numbers were surprisingly soft. Factory Orders in January plunged 3.9%, worse than the estimate of -1.9%. This marked the second decline in the past three months. This was followed Industrial Production, marking a second straight decline. Still, the German economy has performed well, and has led the impressive recovery in the eurozone.

It continues to be a quiet week for the euro. Currently, EUR/USD is trading at 1.2439, up 0.05% on the day. On the release front, there are no eurozone or German indicators on the schedule. The US will release CPI and Core CPI, both of which are expected to slow to 0.2%. On Wednesday, ECB President Mario Draghi will speak at an ECB conference in Frankfurt and Germany releases Final CPI. The US will release key inflation and consumer spending reports.

US employment numbers were a mix on Friday. Wage growth dropped to 0.1% in February, down from 0.3% a month earlier. This missed the estimate of 0.2%, and marked the lowest gain in four months. The news was much better from nonfarm payrolls, which soared to 313 thousand, crushing the estimate of 205 thousand. The mixed readings have eased concerns about the Fed raising rates four times in 2018.

Is the German industrial sector in trouble? Last week's numbers were surprisingly soft. Factory Orders in January plunged 3.9%, worse than the estimate of -1.9%. This marked the second decline in the past three months. This was followed Industrial Production, marking a second straight decline. Still, the German economy has performed well, and has led the impressive recovery in the eurozone.

Are Britain and the European Union heading towards a showdown? Last week, Donald Tusk, president of the European Council, advised Prime Minister May to 'pink' her red lines on Brexit, if Britain wants to maintain a close economic relationship with the bloc. May has insisted that there will be no customs union, and the European Court of Justice will have no jurisdiction over the UK. May set out these positions after the EU published its draft negotiating guidelines for Brexit, and the guidelines warned of 'negative economic consequences” if Britain does not soften its position. Tusk added that he does not want to build a wall with Britain, and the EU could offer Britain a free trade agreement, with zero tariffs. At the same time, Tusk warned that Brexit will make trade between the two sides 'complicated and costly” and the EU would not allow Britain to cherry pick in any future trade arrangement. EU members are expected to sign off on the negotiating guidelines at a summit in late March, which could trigger a nasty response from the May government.

The EURUSD pair has managed to find support and resistance at previously broken trend lines and has pulled back to the 1.23000 level, forming what looks to be wedge across it. This can happen around important levels as sellers and buyers battle for control. The wedge can be a continuation pattern but can also cause a reversal. Until price breaks the pattern and points out its intentions patience is required to avoid being caught in a position against the move. US Consumer Price Index data later today, at 12:30 GMT, is a possible trigger for a breakout. The resistance trend line is found at 1.23492 currently, with the 1.23759 level beyond. The previously broken trend line is found at 1.24380, with the 1.24593 level above. Recent highs are found at 1.25549.

Support is found at the pattern bottom (1.23037). On the 4-Hour chart, the moving averages are quite flat, suggesting that price is building energy for a break out at some point in the future. The 200-period MA is at 1.22993, with the 1.22960 level close by. Further support is found at 1.22400 and 1.22141, with the 1.21640 beyond.

GBPJPY

This pair is moving higher after finding support at the rising blue trend line at 144.842. Support can be seen at the 200 DMA at 148.365, with 146.885 below. The supportive trend line is found at 145.213, with the 144.000 area underneath. A drop below this area would see price move towards 141.216.

Resistance at the 50 and 100 DMAs is found around 149.816 on the daily chart. The 150.178 level is reinforcing the rising red trend line at 150.537. The next key resistance level comes at 153.000, with 154.568 on the way to the broken trend line at 155.500. The 2018 highs are located at 156.597.

WTI crude oil futures have been moving sideways over the last few sessions in the 4-hour chart, signaling weak momentum. The price hit several times the 20-simple moving average but failed to trade lower. Having a look at the bigger picture, oil has lost its aggressive buying interest but remains in bullish territory.

In the 4-hour chart, the RSI indicator is flattening slightly below the 50 level, while the stochastic oscillator posted a bullish crossover within its moving averages above the 20 level.

It is worth mentioning that WTI is developing within the Bollinger band in a sideways channel. To the upside, in case of a jump above the 40-SMA, the price could touch the 62.30 resistance barrier, which is near the upper Bollinger band. A further advance could open the door for the 63.40 level.

In the event of a bearish movement, then the focus could shift to the downside towards 60.10 and near the lower Bollinger band. If this level is breached, it could increase downside pressure and bring about a reversal of the trend until the 58.00 psychological level.

Crude oil continue sideways consolidation. Hourly support and resistance remain at 59.72 (15/02/2018 low) and 64.77 (11/01/2018 high). The technical structure suggests short-term decrease.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness is very likely. For the time being, the pair lies in an upside trend since June 2017. Support lies at 42.20 (16/11/2016) while resistance is located at 77.83 (20/11/2014). Crude oil is trading largely above its 200 DMA.

Silver selling pressures have started, the pair is heading along the 16.45 range. The pair is contained between hourly support and resistance given at 16.25 (12/01/2018 low) and 16.98 (15/02/2018 high). The short-term technical structure suggests further short-term decrease.

In the long-term, the trend remains negative/ sideways. Further downside is very likely. The pair is trading below its 200 DMA. Resistance is located at 21.58 (10/07/2014 high). Strong support can be found at 11.75 (20/04/2009).