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Consumer price inflation decelerated to 1.6% (year-on-year) in March from 2.0% in February. Most categories experienced a slower rate of price growth in March, with decelerating energy prices leading the way. The broader, transportation price growth slowed to 4.6% from 6.6% in February.

Declining food prices (-1.9% y/y) and clothing and footwear prices (-0.9% y/y) weighed on the headline.

The Bank of Canada's core measures softened, with CPI-median edging down to 1.7% (from 1.8%), and CPI-trim to 1.4% (from 1.5%), and CPI-common unchanged at a feeble 1.3%.

Key Implications

Economic data has turned up in Canada in recent months, but softening inflation gives the Bank of Canada scope to fade some of that strength and await confirmation that it will be sustained. The deceleration in the core measures in particular means the Bank of Canada will be in no rush to remove accommodation.

Soft inflation and wage growth is the best evidence that the Canadian economy continues to operate under its potential. With faster economic growth, the output gap will eventually close and begin to exert upward pressure on inflation. However, this is likely to be more of a 2018 story than a 2017 one.

USD/CAD - 1.3510

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term up

 
Original strategy       :

Buy at 1.3400, Target: 1.3580, Stop: 1.3340

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3430, Target: 1.3590, Stop: 1.3370

Position: -

Target:  -

Stop:-

As the greenback has risen again after brief pullback, adding credence to our view that the correction from 1.3535 has ended and upside bias remains for the rise from 1.3223 to extend gain to previous resistance at 1.3535, once this level is penetrated, this would confirm early upmove has resumed and extend headway towards previous chart resistance at 1.3599 later which is likely to hold from here.

In view of this, would not chase this rise here and would be prudent to buy on subsequent pullback as 1.3430 should limit downside. Only below previous resistance at 1.3337 would abort and suggest top is possibly formed, risk weakness to 1.3300-10 but indicated support at 1.3262 should remain intact.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Daily Pivots: (S1) 108.85; (P) 109.17; (R1) 109.63; More....

Intraday bias in USD/JPY remains neutral for consolidation above 108.12. With 110.10 resistance intact, near term outlook remains bearish. Rise from 98.97 is finished at 118.65 and fall from there would extend. On the downside, break of 108.12 will target 61.8% retracement of 98.97 to 118.65 at 106.48. Sustained break there will pave the way back to 98.97 low. Nonetheless, break of 110.10 will be the first sign of near term bottoming and turn bias back to the upside for 112.19 resistance instead.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. Current development suggests that it's not completed yet and is extending. In case of deeper decline, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Daily Pivots: (S1) 0.9954; (P) 0.9971; (R1) 1.0001; More.....

Intraday bias in USD/CHF remains neutral for consolidation above 0.9940 temporary low. Another decline is in favor as long as 1.0008 minor resistance holds. Below 0.9940 will target 0.9812 and below. Fall from 1.0342 is seen as a correction. Hence, we'll look for bottoming signal below 0.9812. Meanwhile, on the upside, above 1.0008 minor resistance will turn bias back to the upside for 1.0107 resistance instead.

In the bigger picture, we're still maintaining that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the cross. However, the corrective nature of the fall from 1.0342 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

Daily Pivots: (S1) 1.2772; (P) 1.2809; (R1) 1.2847; More...

Intraday bias in GBP/USD remains neutral for the moment. With 1.2614 resistance turned support holds, near term outlook remains bullish for further rise. Firm break of 100% projection of 1.2108 to 1.2614 from 1.2365 at 1.2871 will target 161.8% retracement at 1.3184. Still, price actions from 1.1946 are seen as a correction. Hence we'd expect strong resistance below 1.3444 to bring larger down trend resumption. On the downside, break of 1.2614 resistance turned support will turn bias back to the downside for 1.2365 support first.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

USD/CHF - 0.9990

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The greenback rebounded after holding above yesterday’s low at 0.9941, suggesting consolidation above this level would be seen and test of previous support at 1.0008 (now resistance) cannot be ruled out, however, break there is needed to signal low is formed and bring retracement of recent decline from 1.0108 to 10030 but resistance at 1.0067 should remain intact.

On the downside, below said support at 0.9941 would extend recent decline to 0.9935-38 (50% projection of 1.0067-0.9955 measuring from 0.9992) and then 0.9926 (61.8% Fibonacci retracement of 0.9813-1.0108) but reckon 0.9900-05 (1.618 times projection of 1.0108-1.0008 measuring from 1.0067) would hold, bring rebound later. As near term outlook is mixed, would be prudent to stand aside for now.

GBP/USD - 1.2788

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2814

Kijun-Sen level                    : 1.2817

Ichimoku cloud top              : 1.2810

Ichimoku cloud bottom        : 1.2711

Original strategy :

Buy at 1.2710, Target: 1.2850, Stop: 1.2675

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2710, Target: 1.2850, Stop: 1.2675

Position : -

Target :  -

Stop : -

Cable has remained confined within familiar range and further sideways trading is in store, however, downside should be limited to 1.2755-60 (38.2% Fibonacci retracement of 1.2515-1.2906) and reckon 1.2700-10 would hold, bring another rally, break of 1.2755069 would signal the pullback from 1.2906 has ended, bring retest of this level, break there would extend recent upmove to 1.2920-30 (2 times extension of 1.2365-1.2575 measuring from 1.2500), then 1.2950 but loss of near term upward momentum should prevent sharp move beyond 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance). 

In view of this, would not chase this rise here and would be prudent to buy cable on subsequent pullback as downside should be limited to 1.2710 (50% Fibonacci retracement of 1.2515-1.2906), bring another rise. Below 1.2700 would defer and signal top has been formed, risk correction to 1.2660-65 (61.8% Fibonacci retracement of 1.2515-1.2906) and price should stay well above 1.2608-16 (previous resistance now support).

EUR/USD - 1.0700

Original strategy  :

Bought at 1.0690, Target: 1.0790, Stop: 1.0655

Position : - Long at 1.0690

Target :  - 1.0790

Stop : - 1.0655

New strategy  :

Hold long entered at 1.0690, Target: 1.0790, Stop: 1.0655

Position : - Long at 1.0690

Target :  - 1.0790

Stop : - 1.0665

Euro’s retreat after rising to 1.0778 yesterday suggests a temporary top has been made there and consolidation with mild downside bias is seen for marginal weakness from here, however, reckon downside would be limited and bring another rise later to 1.0783-85 (61.8% projection of 1.0602-1.0737 measuring from 1.0700), then 1.0800-10 but loss of near term upward momentum should prevent sharp move beyond 1.0825-30, risk from there is seen for a retreat to take place later.

In view of this, we are holding on to our long position entered at 1.0690. Only below previous resistance at 1.0670 (now support) would abort and signal top is formed instead, bring correction towards previous support at 1.0635 which is likely to hold from here. 

USD/JPY - 109.10

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although yesterday’s anticipated rebound to 109.49 adds credence to our near term bullish view for the erratic rise from 108.13 to bring retracement of recent decline, reckon upside would be limited to 109.86-87 (50% Fibonacci retracement of 111.58-108.13 and previous resistance), however, price should falter below 110.25-30 (61.8% Fibonacci retracement) and bring retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 108.65-70 would suggest top is formed, bring weakness to 108.30-32, break there would signal the rebound from 108.13 has ended, bring retest of this level first. 

The CAC is showing little change on Friday, following strong gains in the Thursday session. Currently the CAC is trading at 5073.50. On the release front, French and Eurozone Manufacturing PMIs both beat their estimates, and the Eurozone current account surplus easily beat expectations. On Saturday, US Treasury Secretary Robert Mnuchin will speak at the International Monetary Fund meeting in Washington. On Sunday, France goes to the polls for the first round of the presidential election.

European investors are holding their breath, as France goes to the polls on Sunday, in the first round of the presidential election. The election campaign has been divisive and turbulent, in one of the tightest elections in years. The four front-runners (in a crowded field of 11) are all within a few percentage points of one another. Given the tightness and unpredictability of the race, final opinion polls have become market-movers. The CEC posted strong gains on Thursday, following an opinion poll which showed Emmanuel Macron opening a slight lead with 25% of the vote, just ahead of far-right candidate Marie Le Pen with 22%. Le Pen's platform includes sharp curbs on immigration and a referendum on France's membership in the European Union. If Le Pen does better than predicted, investor sentiment could send the stock markets lower. A shooting in Paris on Thursday which killed a policeman and a tourist have stretched taut nerves even further, as security and the terrorism threat remain one of the key issues in the campaign. The markets are expecting more volatility ahead of and following the election, and French banks will be staffed throughout Sunday night in order to respond quickly to the election results. Traders should be prepared for volatility from the CEC in the Monday session.

The eurozone economy continues to expand, and this was underscored by strong PMIs out of Europe. Eurozone, French and German PMIs all pointed to expansion in the services and manufacturing sectors. Manufacturing data was particularly encouraging, as Eurozone and French Manufacturing PMIs beat expectations. However, these strong readings failed to move the CAC, as investors are keeping low ahead of the French election on Sunday. There was more positive news as the eurozone's current account surplus jumped to EUR 37.9 billion, well above the estimate of EUR 26.3 billion.

With the US economy in good shape, the markets are expecting interest rates to continue rising in 2017. The Fed has broadly hinted that it will gradually raise rates this year, but it's unclear how many times Janet Yellen will press the rate trigger. Most analysts are expecting two more moves this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The Fed is unlikely to make a move in May, but June is a strong possibility. However, the odds of a June move are showing a surprising amount of volatility, and the latest CME Group reading shows the likelihood a 1/4 point hike have jumped to 58%, up from 51% earlier this week.