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US equities opened marginally higher after yesterday's correction as some Fed governors considered valuations as quite high. European equities are trading with gains of up to 0.5% after reversing opening losses.

"Before making any alterations to the components of our stance -- interest rates, asset purchases and forward guidance --we still need to build sufficient confidence that inflation will indeed converge to our aim over a medium-term horizon, and will remain there even in less supportive monetary policy conditions," ECB Draghi said.

India's monetary policy committee has decided to hold the central bank's key policy rate steady at 6.25%, saying the economy appears to be on course to meet its inflation target (4%). The RBI did narrow the interest rate corridor by hiking the reverse repo rate to 6% in order to help manage the weighted average call rate.

The Czech crown surged almost 1.5% to its highest level against the euro since November 2013, after the country's central bank scrapped the EUR/CZK 27.00 cap on the currency it had in place for 3-1/2 years. EUR/CZK currently trades around 26.70.

Filings for US unemployment benefits declined to a five-week low, highlighting a resilient job market, a Labor Department report showed. Weekly jobless claims declined from 259k to 234k (vs 250k expected).

The ECB's inner circle faced a push from heads of member states' monetary authorities to drop the doom and gloom from its rhetoric and present a much more optimistic outlook on the eurozone's economic prospects at its policy vote last month, Minutes showed.

It would make sense, if the US economy continues to grow, for the Federal Reserve to begin trimming its $4.5 trillion balance sheet towards the end of this year, unwinding extraordinary stimulus deployed during the crisis, SF Fed Williams said.

Rates

Core bonds remain resilient

Global core bonds moved according to script until European noon. Equity and oil prices gradually rose, pulling Bunds and US Treasuries somewhat lower. ECB's Draghi urged that it's too early to speculate on an ECB exit as the central bank needs sufficient confidence that inflation converges to their aim. Apart from some minor losses for the euro, markets ignored his comments. During US trading, core bonds again showed their recent resilience. They changed direction even if intraday trends on stock and commodity markets were extended. On top, US weekly jobless claims unexpectedly declined towards the cycle low and ECB Minutes showed that divergence inside the ECB is larger than president Draghi indicated this morning. They eventually decided to keep forward guidance unchanged as changing it could backfire on markets. A retro perspective interpretation? SF Fed governors Williams confirmed that the Fed could start winding down its balance sheet towards the end of the year.

At the time of writing, the German yield curve marginally bull flattens with yield changes ranging between flat (2-yr) and -1.4 bps (30-yr). Changes on the US yield curve are less than 1 bp. On intra-EMU bond markets, 10-yr yield spread changes versus Germany range between -3 bps (Ireland) and +2 bps (Spain/Greece).

The French debt agency successfully launched a new 10-yr OAT (€4.91B 1% May2027) and tapped the on the run 15-yr OAT (€3.1B 1.5% May2031) for a combined €8B, the maximum amount on offer. The auction bid cover (1.98) improved from previous auctions this year and was more in line with average. The Spanish treasury taps the on the run 3-yr Bono €1.86B (1.4% Jan2020), 10- yr Obligacion (€1.27B 1.5% Apr2027) and off the run Obligacion (€0.79B 4.7% Jul 2041). The total amount sold (€3.92B) was near the middle of the eyed €3.5- 4.5B with a neutral auction bid cover of 1.64.

Currencies

USD stabilizes after soft post-Minutes market reaction

The dollar stabilized against the euro and the yen today after yesterday's soft market reaction to the March FOMC Minutes. EUR/USD dropped briefly on soft Draghi comments early in European dealings, but the pair soon returned to waitand- see modus ahead of tomorrow's US payrolls (1.0660 area). USD/JPY rebounded of the Asian lows as equities reversed a poor open (110.75 area).

Overnight, WS's risk off sentiment also affected Asian markets. Most indices showed losses of 0.5%/1.0%, with China outperforming and Japan underperforming. USD/JPY retested this week's lows (110.30 area), but no break occurred. EUR/USD held in the upper half of the 1.06 big figure.

Early in European dealings, ECB Draghi reiterated that it is too early to change the ECB's policy guidance as the ECB president sees no sufficient evidence to materially alter the inflation outlook. The euro tumbled as the Draghi headlines hit the screens. EUR/USD filled bids in the 1.0630 area. However, most of the move was almost immediately reversed. Draghi's assessment didn't bring much news and the reaction on the interest rate markets was non-existent. Later in the session, the Minutes of the March ECB meeting also maintained a soft tone. However, they weren't able to remove investors' feeling that the debate on a change in the ECB's assessment still persists within the governing council. EUR/USD settled in well-known territory in the 1.0650/75 area. USD/JPY gradually rebounded as equities reversed opening losses.

After a few weeks of higher than expected jobless claims, the indicator was again better than expected (weekly claims of 234 000 from 259 000). The dollar hardly reacted just one day before the key US payrolls report. Even so, the dollar stayed away from the recent lows, despite yesterday's soft market reaction to the March Fed Minutes. EUR/USD trades currently in the 1.0660 area. USD/JPY is trading near 100.80. USD traders are counting down to tomorrow's US payrolls.

At its extraordinary monetary policy meeting today, the CNB Bank Board decided to end the CNB's exchange rate commitment (EUR/CZK 27.00 floor). The CNB stands ready to use its instruments to mitigate potential excessive exchange rate fluctuations if needed. EUR/CZK currently trades around 26.60

Sterling: no UK specific news to guide trading

There were no important eco data in the UK today. So, sterling trading was driven by non-UK factors and technical considerations. EUR/GBP also spiked briefly lower on the Draghi headlines early in European trading. The pair dropped to the 0.8510/15 area. However, as was the case for EUR/USD, the decline was almost immediately reversed. From there, EUR/GBP didn't go anywhere, holding a very tight range in the mid 0.85 area. sterling is trading marginally softer against the dollar as the US currency is regaining slightly ground after yesterday's setback. Cable is trading in the 1.2465 area.

EUR/USD - 1.0659

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.0655

Kijun-Sen level                  : 1.0657

Ichimoku cloud top             : 1.0670

Ichimoku cloud bottom      : 1.0662

Original strategy  :

Sell at 1.0725, Target: 1.0610, Stop: 1.0760

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.0725, Target: 1.0610, Stop: 1.0760

Position : -

Target :  -

Stop : -

As the single currency has remained under pressure after recent selloff, bearishness remains for the decline from 1.0906 to extend further weakness to 1.0620, then test of previous chart support at 1.0600, however, a sustained breach below the latter level is needed to retain downside bias for subsequent selloff to 1.0570-75 first.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 1.0720-30 should limit upside. Only a firm break above resistance at 1.0773 would suggest low is formed instead, bring a stronger rebound to 1.0800 but resistance at 1.0827 should remain intact. 

USD/JPY - 110.93

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 110.69

Kijun-Sen level                  : 110.88

Ichimoku cloud top             : 110.93

Ichimoku cloud bottom      : 110.89

Original strategy  :

Sell at 111.10, Target: 110.10, Stop: 111.45

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 111.30, Target: 110.30, Stop: 111.65

Position :  -

Target :  -

Stop : -

As the greenback has rebounded after holding above support at 110.27 (this week’s low), retaining our view that further consolidation would be seen and initial recovery to 111.20-30 cannot be ruled out, however, reckon resistance at 111.46 would cap upside and bring another decline later. Below said support at 110.27 would extend the fall from 112.20 to last week’s low at 110.11 but break there is needed to retain downside bias and confirm medium term decline has resumed for further subsequent fall to 109.80-85 (1.618 times projection of 112.20-111.12 measuring from 111.59) which is likely to hold on first testing.

In view of this, would not chase this fall here and would be prudent to sell dollar on recovery as 111.00-10 should limit upside. Only above 111.46 resistance would abort and prolong choppy trading, risk rebound to 111.59, then towards 111.90-00 later but price should falter well below said resistance at 112.20. 

Daily Pivots: (S1) 1.0635; (P) 1.0662 (R1) 1.0690; More....

EUR/USD dips mildly but without follow through selling. Intraday bias remains neutral first. In case of another recovery, upside should be limited by 1.0772 resistance and bring another fall. As noted before, corrective rise from 1.0339 is completed at 1.0905. And more importantly, larger down trend is probably resuming. Below 1.0635 will turn bias back to the downside for 1.0494. Break will confirm this bearish case and target 1.0339 low. However, above 1.0772 will delay this bearish case and bring another rise back to 1.0905 first.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

Daily Pivots: (S1) 1.2438; (P) 1.2468; (R1) 1.2514; More...

GBP/USD is staying in range of 1.2376/2614. Intraday bias remains neutral for the moment. Outlook remains unchanged that price actions from 1.1946 are viewed as a consolidation pattern pattern. On the downside, break of 1.2376 will turn bias to the downside for 1.2108 support. Decisive break there will be an early sign of larger down trend resumption. On the upside, break of 1.2614 will extend the rise from 1.2108. But upside should be limited by 1.2705/2774 resistance zone to bring larger down trend resumption eventually.

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.

Daily Pivots: (S1) 1.0011; (P) 1.0044; (R1) 1.0081; More.....

Intraday bias in USD/CHF remains on the upside with 1.0007 minor support intact. Rise from 0.9812 should target 1.0169 resistance first. As noted before, corrective decline fall from 1.0342 should have finished with three waves down to 0.9812 already. Break of 1.0169 should confirm this bullish case and target a test on 1.0342 high. On the downside, below 1.0007 minor support will turn bias neutral and bring retreat before staging another rally.

In the bigger picture, USD/CHF is staying in medium term sideway pattern between 0.9443/1.0342. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone.

The final 30 minutes of Wednesday's S&P500 cash session saw the biggest decline in the index since September. The sell-off across US indices (and global futures) was largely attributed to the release of the March FOMC minutes and House Speaker Paul Ryan's comments on the remaining obstacles facing Trump's tax stimulus. The quotes below indicate FOMC officials have grown bolder in expressing their doubts with equity valuations, something similar to Greenspan's irrational exuberance speech 21 years ago.

Technical analysts will tell you the above explanations are fundamental triggers for developments largely apparent in the charts. The 20,800 and 2370 territories in the Dow30 and SP500 acted as previous support, now resistance levels, while the USD index faces rising pressure at 100.80s. We could elaborate further on the relevant pressure points in US 10-year yields and individual USD pairs, but... you get the picture.

As we approach tomorrow's US jobs report, some decisions may have to be made with regards to our existing USD and cross pair Premium trades. Some may say Friday's report is least important of the year as there is no Fed meeting scheduled for this month. The upside surprise in this week's ADP release may suggest the figures could come in above the 180K expected, following the 235K in February. But as we saw in the last report, USD and yields are increasingly to the mercy of the earnings figures. 4 Premium trades remain in FX and 2 in indices. The 2 trades in commodities have not and will not be touched for quite some time.

EUR/GBP - 0.8545

 
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 0.8620, Target: 0.8520, Stop: 0.8660

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 0.8620, Target: 0.8520, Stop: 0.8660

Position : -

Target :  -

Stop : -

 
Euro found support at 0.8511 and has rebounded again, retaining our view that further consolidation above last week’s low at 0.8485 would be seen and another bounce to 0.8590-00 cannot be ruled out, however, renewed selling interest should emerge around 0.8620-25, bring another decline later, below said support at 0.8485 would add credence to our view that top has been formed at 0.8788 and bearishness remains for this fall from there to bring retracement of early upmove, hence further weakness to 0.8470 would be seen but oversold condition should prevent sharp fall below 0.8450, risk from there has increased for a rebound to take place later.

In view of this, we are looking to sell euro on recovery as 0.8620-25 should limit upside. Only above 0.8660-65 would defer and suggest low is possibly formed, risk rebound to 0.8680, then 0.8700 but price should falter below said resistance at 0.8735, bring further choppy trading later.

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 is almost unchanged in the Thursday session, as the pair trades at 1.3430. On the release front, Canadian Building Permits posted a sharp decline of 2.5%, well short of the estimate of a 1.4% gain. In the US, unemployment claims dropped sharply to 234 thousand, easily beating the forecast of 251 thousand. The week wraps up with a host of employment indicators. Canada will publish Employment Change and the unemployment rate, while the US releases three key events - Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate.

The Canadian dollar continues to struggle, and a major reason is weak oil prices. Despite OPEC cutting production levels, the world remains awash in oil, as increasing US production has offset the OPEC cuts. US Crude Inventories continue to show surpluses, most of which have been higher than the forecast. This was the case again last week, with US crude inventories posting a strong gain of 1.6 million. The indicator has posted 12 surpluses in the last 13 weeks, which has helped keep oil prices close to the $50 level.

The Federal Reserve released the minutes of its March policy meeting on Wednesday. At that meeting, the Fed raised rates a quarter-point to 0.75%, but the dovish rate statement disappointed the markets, triggering broad losses for the US dollar. In the minutes, policymakers noted upside risk to the US economy, but remained divided on whether inflation will rise to the Fed target of 2.0%. Most policymakers were in favor of taking steps to trim the $4.5 trillion balance, which has ballooned since the Fed implemented its aggressive quantitative easing program back in 2008. So what's next for the Fed? According to the CME's Fed Watch, the odds of a rate hike at the May meeting are just 5 percent, while the likelihood of a rate hike in June stand at 63 percent. Last week, FOMC member Eric Rosengren called for three more hikes, saying the Fed should raise rates in June, September and December. Rosengren said that employment and inflation levels were close to the Fed's targets, and that three additional hikes were needed in order to prevent the US economy from overheating. However, a majority of FOMC members are in favor of just two more hikes this year.

Daily Pivots: (S1) 110.33; (P) 110.89; (R1) 111.25; More....

USD/JPY is still bounded in range of 110.10/112.19 and intraday bias remains neutral at this point. On the downside, break of 110.10 will resume the whole corrective decline from 118.65 and target 50% retracement of 98.97 to 118.65 at 108.81. On the upside, however, break of 112.19 resistance will indicate short term reversal and turn bias back to the upside for 115.49 resistance.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Nonetheless, sustained trading below 55 week EMA (now at 111.16) will extend the consolidation from 125.85 with another fall through 98.97 before completion.