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Gold has edged lower on Thursday, following gains in the Tuesday and Wednesday sessions. In North American trade, gold is trading at $1285.38 per ounce. On the release front, it was a busy day in the US which released three key indicators – PPI, Unemployment Claims and the UoM Consumer Sentiment. PPI missed its estimate, but unemployment claims and consumer confidence both beat expectations.

With geopolitical tensions weighing on jittery investors, gold prices have jumped 2.4 percent this week. On Wednesday, gold pushed above $1288, its highest level since November 10. Nervous investors have snapped up the base metal as tensions escalate over Syria and North Korea. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has also sent warships to the Korea peninsula, in a show of strength against North Korea, which continues to test ballistic missiles in defiance of the international community. As well, Donald Trump said in a newspaper interview on Wednesday that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump's comment sent the dollar lower and pushed gold to higher levels.

On Monday, Federal Reserve Chair Janet Yellen said that with the economy close to full employment and 2 percent inflation, Fed policymakers were looking to reduce the support that the central bank was providing the economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in 2008. The Fed plans to raise rates twice more in 2017, with the next rate expected in June. Yellen emphasized that the Fed's policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace.

GBP/USD has edged lower in the Thursday session. In North American trade, GBP/USD is trading at 1.2520. On the release front, the BoE released its quarterly credit conditions survey. It was a busy day in the US which released three key indicators – PPI, Unemployment Claims and the UoM Consumer Sentiment. PPI missed its estimate, but unemployment claims and consumer confidence both beat expectations.

Earlier this week, Federal Reserve Chair Janet Yellen expressed satisfaction with economic conditions. Given that the economy is close to full employment and the Fed's inflation target of 2 percent, Yellen said that the Fed was in a better position to reduce its support for the economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in response to the financial crisis in 2008. Yellen emphasized that the Fed's policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace. What can we expect from the Fed for the remainder of 2017? The Fed is widely expected to raise rates twice more in 2017, with the next rate expected in June. At the same time, some Fed policymakers are in favor of three more rate hikes, which would bring the total this year to four moves.

The pound has posted gains against the US dollar this week, as risk appetite has diminished due to geopolitical tensions. Investors remain cautious over developments in Syria and North Korea. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has also sent warships to the Korea peninsula, in a show of strength against North Korea, which continues to test ballistic missiles in defiance of the international community. Also, Donald Trump said in a newspaper interview on Wednesday that the value of the US dollar was too strong and that he was in favor of a low interest rate policy. Trump's comment sent the dollar lower against its major rivals, including the pound.

After months of legal wrangling, the British government triggered Article 50 at the end of March, officially ushering in the negotiations stage of the Brexit process. However, Britain and the EU are unlikely to commence talks until late in 2017, given that Germany holds elections in September, and the EU will not enter the complex negotiations until a new German government is in place. It's anyone's guess as to how smooth the talks will go, and the fate of the pound could be closely tied to the talks. If the negotiations go well, the pound could recover up to $1.50, its level on the eve of the stunning Brexit vote back in June. On the other hand, if the talks do not go well, analysts are forecasting that the pound could drop as low as $1.10. With the BoE in a neutral stance as far as interest rate policy, the fortunes of the pound appear more closely tied to the success of the Brexit negotiations, rather than to any monetary moves by the BoE.

Headlines

European stock markets opened up to 0.5% lower, but traded in a narrow sideways range afterwards. US stock markets opened marginally lower.

Fewer Americans than forecast filed for unemployment benefits last week (234k vs 245k expected), with applications hovering just above a four-decade low.

US producer prices clocked their first monthly decline since August last month. US producer prices inched lower by 0.1% m/m in March from +0.3% in February. Headline PPI was up 2.3% from a year ago. Excluding more volatile items like food and energy however, producer prices unchanged from the previous month and up 1.6% from a year ago.

Military force cannot resolve tension over North Korea, China said, while an influential Chinese newspaper urged the North to halt its nuclear programme in exchange for Chinese protection.

Global demand for oil is finally close to outstripping supply after nearly three years of surplus production, despite growth in the overhang of unused crude, the IEA said. The agency said oil stocks across the OECD fell by 17.2 million barrels in March.

JP Morgan Chase said its Q1 profit rose 17% as a boost from trading helped results for the nation's biggest bank by assets. Well Fargo said its Q1 profit was flat as the nation's third-largest bank remains stuck in the spotlight for its sales practices scandal than six months later. Citi reported a better-than-expected 17% jump in quarterly profit, boosted by strong fixed-income trading.

The Czech National Bank wanted to take advantage of the "overboughtness" of the koruna to lift its longstanding currency cap earlier than expected, minutes from last week's extraordinary policy meeting reveal. CNB members agreed that a weak crown policy had proved effective and a return to it was "highly unlikely".

Rates

No follow-though action on Trump's comments

Global core bonds traded sideways today near the high's reached in the wake of US president Trump's comments in a WSJ interview. He said that he would prefer the Fed to keep interest rates low, suggesting he will appoint dovish profiles for the vacant FOMC board seats. Trump also thinks that the dollar is getting too strong. The US 5-yr yield (1.8%), US 10-yr yield (2.3%) and German 10-yr yield (0.2%) all fell below key support levels, but the decline didn't accelerate today. After all, the Fed remains an independent institute which will continue its tightening cycle if growth and inflation develop as expected. There was no immediate return action either though as investor's don't want to be wrong-footed during the long Easter weekend. Especially taking into account everything what happened earlier this week. Trump's comments were the third event this week that took markets by surprise and out of their comfort zone, following extreme-left French presidential candidate Mélenchon's rise in the polls and hostile US comments against Syria/North Korea earlier this week. The eco calendar only contained lower weekly jobless claims and lower US PPI data, but didn't influence trading.

At the time of writing, the German yield curve shifts 1.7 bps (5-yr) to 2.5 bps (30-yr) lower. Changes on the US yield curve range between +0.3 bps (5-yr) and +0.8 bps (2-yr). On intra-EMU bond markets, 10-yr yield spread changes versus Germany vary between +2 bps and -2 bps..

Currencies

Dollar already finds its composure

Trump's attempt to talk the dollar down triggered a one off selling wave yesterday eve, but caused no follow through action today. He said: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting—that will hurt ultimately". It looks like markets aren't convinced that Trump can simply talk the dollar down. His progrowth policy, in a context of full employment, not only pushes growth but also inflation higher, obliging the Federal Reserve to increase interest rates. So his talk contradicts the fundamentals.

USD/JPY stabilizes

During Asian trading, USD/JPY was still under some downward pressure as Asian investors reacted on Trump and also as the short term trend is yen positive. Some risk aversion sentiment prevails. So for the yen, Trump's comments went with the trend. However, USD/JPY's fall from 109 at the opening ran out of steam around 108.73 and losses were recouped during the European session when the pair hovered between 108.90 and 109.30. European stocks fell at the opening, but very rapidly started to trade sideways at modestly lower levels, suggesting that geopolitical tensions eased. A similar sign came from the Korean won that stabilized. USD/JPY currently changes hands at 109.15, slightly up from opening levels.

EUR/USD lower as dollar decline considered overdone

The EUR/USD price action differed from USD/JPY. It rose yesterday eve from 1.06 to about 1.0670. After a sideways move in Asian trading, the dollar started to recoup the losses. EUR/USD fell in a stretched move to about 1.0620, largely erasing yesterday's gains. Geopolitical risks play less of a role and the rate differential didn't change much. Sentiment on the euro is negative, due to the upcoming French elections. So, investors considered the post-Trump rally as an opportunity to buy into the dollar or at least considered yesterday's move as unwarranted. The early US data were mixed with lower than expected PPI and lower than expected initial claims.

EUR/GBP retests 0.8484 support

In a session devoid of euro area and UK eco data or other event news, general euro weakness prevailed. EUR/GBP slid slowly lower from a 0.8505 opening to the 0.8484 support, with a new ST low at 0.8475. However, the test of the support isn't over yet. Cable lost some ground after being stronger in Asian overnight trading. When EUR/USD started to slide lower, cable followed and looks ready to test the 1.25 level, which compared to the 1.2540 opening. There was no specific sterling story behind the intraday price action.

USD/CHF - 1.0045

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 1.0047

Kijun-Sen level                    : 1.0049

Ichimoku cloud top                 : 1.0082

Ichimoku cloud bottom              : 1.0071

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the greenback has surged again after staging a strong rebound from 1.0008, suggesting the fall from 1.0108 has ended there and consolidation with mild upside bias is seen for test of resistance at 1.0090, however, a firm break above there is needed to retain bullishness and signal the fall from 1.0108 has ended, bring a retest of 1.0108 but only a break of this week’s high at 1.0108 would confirm recent upmove from 0.9813 has resumed for headway to 1.0140-45 and later towards another previous resistance at 1.0171. 

In view of this, would not chase this rise here and would be prudent to stand aside for now. Below 1.0025-30 would signal an intra-day top is formed, bring another fall to 1.0007, once this level is penetrated, this would revive bearishness and extend fall to previous support at 0.9995, then towards 0.9970 (50% Fibonacci retracement of 0.9831-1.0108). 

GBP/USD - 1.2521

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2537

Kijun-Sen level                    : 1.2529

Ichimoku cloud top              : 1.2486

Ichimoku cloud bottom        : 1.2455

Original strategy :

Buy at 1.2485, Target: 1.2585, Stop: 1.2450

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2480, Target: 1.2580, Stop: 1.2445

Position : -

Target :  -

Stop : -

As cable has retreated after rising to 1.2575, suggesting consolidation below this level would be seen and pullback to 1.2500 is likely, however, reckon support at 1.2480-81 would limit downside and bring another rise later, above said resistance at 1.2575 would add credence to our view that low has been formed at 1.2365 on Monday and extend the rise from there to 1.2585-90 but break of previous resistance at 1.2616 is needed to retain bullishness and extend subsequent upmove to 1.2650-60. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as 1.2481 support should limit downside and bring another upmove later. Below the lower Kumo (now at 1.2455) would defer and suggest top is formed, risk test of 1.2433 (previous resistance) first.

EUR/USD - 1.0632

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.0634

Kijun-Sen level                  : 1.0634

Ichimoku cloud top             : 1.0612

Ichimoku cloud bottom      : 1.0600

Original strategy  :

Sold at 1.0665, Target: 1.0565, Stop: 1.0680

Position : - Short at 1.0665

Target :  - 1.0565

Stop : - 1.0680

New strategy  :

Hold short entered at 1.0665, Target: 1.0565, Stop: 1.0680

Position : - Short at 1.0665

Target :  - 1.0565

Stop : - 1.0680

Although the single currency staged a strong rebound after finding support at 1.0589, as this move from 1.0570 is viewed as retracement of recent decline, reckon upside would be limited and bring retreat later, below the upper Kumo (now at 1.0600) would bring test of said support at 1.0589 but break there is needed to signal the rebound from 1.0570 has ended, bring retest of this Monday’s low, below there would extend the decline from 1.0906 to 1.0550-55 (50% projection of 1.0906-1.0635 measuring from 1.0689), then 1.0525-30.

In view of this, we are holding on to our short position entered at 1.0665. A firm break above intra-day resistance at 1.0678 would abort and suggest low has been formed at 1,0570, bring a stronger rebound to 1.0698-02 (50% Fibonacci retracement of 1.0827-1.0570 and previous resistance).

USD/JPY - 109.20

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 109.15

Kijun-Sen level                  : 109.30

Ichimoku cloud top             : 110.38

Ichimoku cloud bottom      : 109.78

Original strategy  :

Sell at 109.90, Target: 108.90, Stop: 110.25

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 109.90, Target: 108.90, Stop: 110.25

Position :  -

Target :  -

Stop : -

The greenback has recovered after falling to 108.73, suggesting consolidation above this level would be seen and recovery to 109.50 cannot be ruled out, however, reckon 109.82-87 (38.2% Fibonacci retracement of 111.58-108.73 and previous resistance) would limit upside and bring another decline later, below said support at 108.73 would extend recent decline from 118.66 top to 108.40-50 (100% projection of 118.66-111.55 measuring from 115.51) but loss of near term downward momentum should prevent sharp fall below 108.20-25 (1.618 times projection of 112.20-110.13 measuring from 111.58) and 108.00 should hold, bring rebound later.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as said resistance at 109.87 should limit upside and bring another decline later. Above previous support at 110.13 would abort and suggest low is formed, bring a stronger rebound later to the upper Kumo (now at 110.38). 

EUR/GBP - 0.8485

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

Original strategy  :

Sell at 0.8590, Target: 0.8460, Stop: 0.8630

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.8590, Target: 0.8460, Stop: 0.8630

Position : -

Target :  -

Stop : -

 
The single currency has continued trading lower after breaking previous support at 0.8485, adding credence to our view that recent decline from 0.8788 is still in progress and bearishness remains for further weakness to 0.8450, break there would extend the fall from 0.8788 for retracement of early upmove to 0.8420-25 but previous support at 0.8403 should hold from here.

In view of this, would not chase this fall here and would be prudent to sell euro on recovery as 0.8580-90 should limit upside. Above 0.8620-25 would abort and suggest low is formed instead, bring a stronger rebound to 0.8660-65 and possibly towards 0.8680 but price should falter below 0.8700. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

USD/CAD - 1.3251

 
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

 
New strategy             :

Sell at 1.3320, Target: 1.3120, Stop: 1.3380

Position: -

Target:  -

Stop:-

As the greenback finally broke below indicated previous support at 1.3264, adding credence to our view that the erratic decline from 1.3535 top is still in progress, hence consolidation with downside bias is seen for further weakness to 1.3180-85 (61.8% Fibonacci retracement of 1.2969-1.3535), then towards 1.3120-25, however, near term oversold condition should prevent sharp fall below 1.3080-85 and price should stay above previous support at 1.3056 and bring rebound later. 

In view of this, would not chase this fall here and would be prudent to sell on recovery as 1.3290-00 should limit upside and resistance at 1.3327 should hold, bring another decline. Above resistance at 1.3357 would abort and suggest low is formed instead, bring a stronger rebound d to 1.3390-00 but only break of 1.3425-30 would shift risk back to upside and bring retest of 1.3456 resistance first.

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.

Producer price inflation ticked down 0.1 percent in March, snapping six months of gains. Ex-food, energy and trade services, the PPI also slipped 0.1 percent and signals little change in the underlying trend in inflation.

Energy Recovery Pauses, Food Prices Rising

Reflationary pressures continue to look fairly modest, with the PPI for final demand edging back 0.1 percent in March.

As expected, energy was a drag on the headline, down 2.9 percent. Overall prices for goods, however, fell only 0.1 percent on rising prices for food and core goods. Food prices are now up on a year-ago basis for the first time in more than two years, while core goods prices are up 2.3 percent over the past year.

Input Prices for Goods Continue to Rise

After strong gains the first two months of the year, prices for services ticked down 0.1 percent. Increasing only 1.5 percent over the past year, services inflation remains little changed on trend.

Outside of energy, input prices for goods continue to rise. Food & feed and core intermediate goods prices, both for processed and unprocessed, rose over the month.