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The pair maintains bearish bias despite yesterday's Hammer that could be seen as initial reversal signal. Bounce from yesterday's low at 110.25 remains capped under thick falling hourly Ichimoku cloud (spanned between 110.77 and 111.25) and suggests consolidation before final attempts below key 110.00 support zone. Firm bearish setup of daily studies supports scenario. However, attack at 110.00 zone may be delayed on extension above hourly cloud and Friday's close above weekly cloud top (111.36)

Res: 110.77, 111.05, 111.14, 111.36
Sup: 110.52;110.25, 110.09, 109.91

Cable is consolidating above 100SMA (1.2413) which so far contained strong two-day fall from 1.2553 high. Recovery attempts were so far limited, keeping the downside at risk, as the pair is awaiting UK Services PMI data for fresh signals. Negative tone is prevailing on near-term studies and could be boosted if UK data disappoint. This could result in final break below 100SMA and attack at next supports at 1.2360 (daily Kijun-sen) and 1.2345 (daily cloud base), loss of which would generate strong bearish signals. At the upside, key barriers lay at 1.2494/97 (daily Kijun-sen / Ichimoku cloud top) and only sustained break above would sideline downside threats. Daily cloud is narrowing and lowering tops continue to weigh.

Res: 1.2446, 1.2494, 1.2529, 1.2553
Sup: 1.2413, 1.2390, 1.2374, 1.2360

Repeated failure to close below 1.0650 Fibo 61.8% support, despite yesterday’s marginally lower low at 1.0634, signal strong hesitation ahead of key supports at 1.0622 (100SMA / daily cloud top).

Long lower shadows of daily candles of past two days suggest possible basing attempt, as Tuesday’s trading was shaped in Hammer candle.

The notion is supported by slow stochastic reversal from oversold territory.

However, bounce was so far unable to clearly break above 55SMA (1.0672), despite upticks to 1.0683 (session high), keeping upper pivot at 1.0700 (daily Kijun-sen) intact for now.

Close above 1.0700 is needed to generate firmer bullish signal for stronger correction of the downleg from 1.0905 (27 Mar high).

Conversely, prolonged consolidation under 1.0700 could be expected ahead of fresh push lower.

Res: 1.0683, 1.0700, 1.0721, 1.0737
Sup: 1.0665, 1.0650, 1.0634, 1.0622

EUR/USD

Current level - 10672

Despite the minor rebound above 1.0635, the overall outlook remains bearish below 1.0700 resistance, for a tight test of 1.0600 support zone.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 110.72

Yesterday's low at 110.26 signals a reversal of the downtrend from 112.20 and my outlook is positive, for a rise towards 111.20, en route to 112.26 area.

GBP/USD

Current level - 1.2447

The overall outlook is still bearish after the recent break through 1.2465, for a slid towards 1.2375, en route to 1.2235 support area.

USDCAD has turned nicely down from 1.3533, clearly with five waves which is a structure of a bearish turn based on the Elliott Wave principle. As such, we will expect even more weakness since we know that impulses show direction, or change of a trend. That said, at the moment we see price making an intraday drop from around the 61.8 Fibonacci resistance zone, which could be the first sign for a completed correction. As such a breach beneath the 1.3368 level would be further evidence for more weakness to follow.

USDCAD, 1H

Sunrise Market Commentary

Rates: Will FOMC Minutes give more info on the Fed's balance sheet run-off?
FOMC Minutes could give more insight on ending the Fed's reinvestment policy, resulting in a steeper US yield curve. Last week's market reaction (bull steepening) showed that the front end of the curve is also sensitive to the debate as running off the BS is an alternative for hiking rates, according to NY Fed Dudley. We expect 2.3% yield support (US 10y) to hold.
Currencies: USD still looking for a driver. US yields remain key
The dollar still shows a mixed picture. USD/JPY came close to the recent low but no real test occurred as US yields held above key support levels. EUR/USD hovers sideways in the 1.06 big figure. Today, the focus is on the US ADP report and the services ISM. The dollar probably needs really strong data to succeed any sustained gains ahead of the payrolls

The Sunrise Headlines

• US equities managed to overcome initial weakness and eventually closed nearly unchanged in an uneventful trading session. Overnight, Asian stock markets trade mixed with China outperforming after a 2-day holiday.
• Activity in Japan's services sector expanded at the fastest pace in 19 months in March as outstanding business improved, allowing companies to charge more for their goods. The services PMI increased from 51.3 to 52.
• The cost of coal used in steel-making in China has shot up nearly 9% on expectations supply will be crimped in the wake of a cyclone that struck Australia's north-east coast last week.
• Marine Le Pen repeatedly lost her cool during a heated French presidential debate. She was rated the fourth-most-convincing candidate in two snap polls, , while communist-backed Jean-Luc Melenchon came out on top.
• Richmond Fed Lacker unexpectedly stepped down after revealing his involvement in a 2012 leak of confidential information that sparked a criminal investigation, prompted outrage on Capitol Hill and embarrassed the Fed.
• North Korea launched a medium-range ballistic missile off the east coast of the Korean Peninsula this morning, a day before US President Trump meets with Chinese President Xi for the first time.
• Today's eco calendar is interesting with services PMI/ISM's in EMU (final), the UK and the US. Additionally, the US ADP employment report and FOMC Minutes of the March meeting will be released

Currencies: USD Still Looking For A Driver. US Yields Remain Key

USD still looking for a driver. US yields remain key

On Tuesday, a cautious risk sentiment initially weighed on USD/JPY. The pair declined to the 110.30 area, but a real test of the recent low didn't occur. European yields declined while US ones rose weighing slightly on the euro. EUR/JPY touched a new correction low. However, there is no strong enough driver to give the USD clear direction. Markets await the key US eco data later this week. USD/JPY closed the session at 110.74 (from 110.90 on Monday). EUR/USD hovered around the pivot 1.0650 and closed the session at 1.0674, near the topside of the intraday range.

Overnight, Chinese markets reopen in positive territory after regional holiday's. Other regional markets show no clear trend. Japanese equities are struggling not fall in negative territory as the yen is holding strong (USD/JPY in the 110.65 area). Yesterday evening, the debate between the French presidential candidates was no success for Marine Le Pen. The euro gained slightly ground overnight, but we don't expect the theme to have a lasting impact on EUR/USD. The pair is trading in the 1.0675 area. The Aussie dollar stabilizes (AUD/USD 0.7665) after a setback yesterday. The RBA is growing ever more worried on consumer debt and stability.

Today, the EMU calendar contains only the final services PMI. In the US, March ADP employment growth is expected to return to a trend-like 185 000 following an outsized 298 000 gain. Some payback may occur. The March Nonmanufacturing ISM is expected to have eased slightly to 57 from 57.6. As the correlation with the manufacturing ISM is rather strong, we might indeed see some easing, but the level still points to a good growth. Finally, the Fed will publish the Minutes of its March meeting. We look closely to the (unfinished) discussions on future balance sheet tapering. Last week, the dollar correction slowed on decent US eco data and as Fed speakers confirmed further policy normalization in 2017. At the same time, the euro lost momentum as speculation on an early ECB policy normalization eased. However, the dollar rebound has no strong legs as US yields are holding near key support levels. Of late, we advocated that the dollar needs very strong data to regain more ground short term. This assessment remains valid and especially applies to USD/JPY. The pair struggles near the recent lows in the 110 area.

We keep a close eye on US yields nearing key support levels. For EUR/USD, the repositioning away from early ECB normalization has been worked out. We maintain a cautious EUR/USD negative bias, but the decline is slowing. Big EUR/USD gains are unlikely if sentiment would become risk-off. From a technical point of view, USD/JPY last week failed to regain the 111.36/60 previous range bottom. A decline below 110 would signal more trouble ahead. EUR/USD extensively tested the topside of the MT range, but the test was rejected last week. The 1.0874/1.0906 area now looks a solid resistance. EUR/USD might return lower in the previous 1.0875/1.05 trading range.

EUR/USD: correction slows as USD rebound fails to gain traction

EUR/GBP

Sterling corrects off the recent highs

Yesterday, sterling faced heavy selling at the onset of European trading which is a indication that the recent short squeeze has probably run its course. After the early morning repositioning sterling didn't go anywhere. Cable hovered in the mid 1.24 big figure and closed the session at 1.2440. EUR/GBP traded close to, mostly slightly north of 0.8550 for most of the session. A late session up-tick of EUR/USD pushed EUR/GBP to close the session at 0.8580 (from 0.8545 on Monday evening).

Overnight, BRC shop prices declined -0.8% M/M (from -1.0%), in line with expectations. Sterling is holding near yesterday's lows against the euro and the dollar. Later today, the UK services PMI is expected little changed at 53.4. In the past, this indicator had big market moving potential as services are the main driver for UK growth. This remains the case, but of late sterling was more sensitive to price data and, to a lesser extent, to Brexit headlines, rather than to activity data. Even so, we watch whether Brexit is having more impact on services activity. Mid-March, sterling found a better bid after higher than expected UK inflation and a more hawkish tone from the BoE. We changed our short-term bias on EUR/GBP from positive to neutral. The EUR/GBP 0.88/0.84 range should guide EUR/GBP trading medium term. Since late last week, the sterling rally/shortsqueeze shows tentative signs of running into resistance, but we see no trigger for a real change in sentiment yet. Longer term, Brexit-complications remain a potential negative for sterling. We are not convinced that the BoE will raise rates anytime soon, even not after recent higher inflation data.

EUR/GBP rebounds as sterling short-squeeze is easing

Download entire Sunrise Market Commentary

Today, the Fed will release the minutes of the March FOMC meeting, where the Committee raised interest rates by 25bps, as was very widely expected. However, the signals we received were not particularly hawkish. Even though the Fed upgraded its forecasts for the US economy, the “dot plot” was left largely unchanged, and Chair Yellen was rather cautious in her press conference.

What we understood at the time was that this hike did not reflect heightened optimism on the economic outlook, and did not imply that future rate hikes will be faster than previously anticipated. It would be interesting to see whether the tone of the minutes is equally cautious, as something like that could push somewhat back market expectations regarding the timing of the next rate hike and thereby hurt USD a little. However, we believe that Friday's employment data will probably be a much bigger determinant of when investors will anticipate the Fed's next move and thus, of the near-term direction of the dollar.

USD/JPY traded somewhat higher yesterday, after hitting support near the 110.35 (S1) level. Nevertheless, the recovery remained limited below the 111.00 (R1) resistance. In our view, the fact that the rate fell back below the key obstacle of 111.60 (R2) on Friday shifts the short-term outlook back to cautiously negative. Therefore, we expect a cautious tone in the minutes today to encourage the bears to pull the trigger for another test near the 110.35 (S1). A dip below that line could aim for the psychological zone of 110.00 (S2), where we expect the rate to settle for a while and wait for the NFP.

Second French presidential debate has little impact on the euro

Overnight, the second French presidential debate was rather uneventful, at least in terms of market response. According to a snap poll conducted after the debate, Melenchon was the most convincing performer, followed by Macron, Fillon, and Le Pen in that order. The reaction in the euro was muted after the debate, possibly due to Le Pen's poor performance, which was in line with what happened at the first debate as well.

Moving forward, we expect EUR traders to pay an increasing amount of attention to this race as we approach Election Day. We expect new opinion polls to have a greater impact on the euro compared to previous ones, considering that polls conducted just a few days before the election may carry greater importance for investors.

Given that Le Pen has lost the first round lead in the polling battle recently, we think that fresh polls showing her behind would simply confirm that that she is unlikely to win and may thereby have little positive impact on the euro. On the other hand, polls that show Le Pen gaining back ground could cause a much larger negative reaction, as they would come as a surprise given the current consensus.

As for the rest of today's highlights:

During the European day, we get the UK services PMI for March. The forecast is for the index to have risen somewhat. Nonetheless, following the disappointing manufacturing and construction indices, we see the risks surrounding the services forecast as tilted to the downside, perhaps for an unchanged print, or even a decline. In such a case, GBP could extend its recent losses. EUR/GBP is currently trading slightly below the key resistance zone of 0.8600 (R1) following a rebound from near the long-term uptrend line taken from the lows of November 2015. A disappointing services PMI today could prove the cause for a break above that resistance zone and encourage the bulls to remain in the driver's seat. Such a break could initially open the way for the next resistance of 0.8630 (R2).

From the US, we get the US ADP employment report for March. The private sector is expected to have added 187k jobs, less than the 298k in February, though still a strong number that is likely to raise speculation for the NFP figure to meet its forecast of 185k. We also get the ISM non-manufacturing PMI for March. We don't expect a major reaction from USD on these releases though, as market participants are likely pay more attention to the Fed minutes later in the day.

USD/JPY

Support: 110.35 (S1), 110.00 (S2), 108.80 (S3)

Resistance: 111.00 (R1), 111.60 (R2), 112.20 (R3)

EUR/GBP

Support: 0.8545 (S1), 0.8500 (S2), 0.8480 (S3)

Resistance: 0.8600 (R1), 0.8630 (R2), 0.8660 (R3)

EUR/JPY - 118.13

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term down

Original strategy:

Sell at 118.60, Target: 116.60, Stop: 119.20

Position: -
Target: -
Stop: -

New strategy :

Sell at 118.85, Target: 116.60, Stop: 119.45

Position: -
Target:  -
Stop:-

As the single currency has recovered after falling to 117.43, suggesting consolidation above this level would be seen and corrective bounce to 118.50 is likely, however, reckon upside would be limited to 118.90-00 and bring another decline later. A break of said support at 117.43 would add credence to our bearish view that the decline from 124.10 top (2016 high) is still in progress and further weakness to 117.00-10 would be seen but oversold condition should prevent sharp fall below 116.50-60 and reckon 116.15-20 would hold from here, bring rebound later.

In view of this, would not chase this fall here and would be prudent to sell euro on subsequent rebound as 118.90-00 should limit upside. Above 119.06 resistance would defer and suggest a temporary low is possibly formed, risk rebound to 119.40-50 but price should falter below resistance at 119.85, bring another selloff. 

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7577

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Sell at 0.7595, Target: 0.7400, Stop: 0.7655

Position: -
Target:  -
Stop: -

New strategy :

Sell at 0.7605, Target: 0.7410, Stop: 0.7665

Position: -
Target:  -
Stop:-

As aussie has recovered after falling to 0.7545, suggesting consolidation above this level would be seen and corrective bounce to 0.7600-05 cannot be ruled out, however, reckon upside would be limited to resistance at 0.7625 and bring another decline later, below said support would extend the fall from 0.7750 to 0.7520-25 (38.2% Fibonacci retracement of 0.7158-0.7750) but a break below indicated support at 0.7491 is needed to retain bearishness and bring further subsequent decline to 0.7450-55 (50% Fibonacci retracement), however, near term oversold condition should limit downside to 0.7380-85 (61.8% Fibonacci retracement), risk from there is seen for a rebound later.

In view of this, would not chase this fall here and would be prudent to sell aussie on recovery as 0.7600-05 should limit upside and bring another decline later.  Above 0.7625-30 would defer and risk a stronger rebound to 0.7650 but still reckon resistance at 0.7680-85 would limit upside and bring another decline later.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

Market movers today

Later today, we are due to get the minutes from the 14-15 March FOMC meeting. We will in particular look for discussions on t he Fed's desire t o begin shrinking it s balance sheet, as Fed Chair Janet Yellen said at the press conference that the FOMC members discussed it at the meeting.

As a warm-up for Fri day's labour market report in the US, ADP employment for March is due out today. Although not a perfect predictor, ADP tends to give a relat ively good idea of what to expect from the official jobs report.

The UK PMI service index released later today will attract attention after it declined in both January and February, suggest ing GDP growth slowed in Q1 17 to around 0.3 -0.4% q/q – down from 0.7% q/q. The service confidence indicator suggests the PMI service index could have moved up marginally to 53.7 in March, which, however, would not change the impression we have that growth slowed at the beginning of 2017.

Selected market news

Yesterday was the second day where the ECB QE purchases of bonds were reduced from EUR80bn a month in Q1 to EUR60bn a month. As it was the case on Monday, it did not change the recent st rong fixed income sent iment and the 10-year German government benchmark bond yield dropped to around 25bp. In addit ion, the market cont inued to price out ECB rate hikes in 2018. The ECB QE data for March was released yesterday and it confirmed a cont inued st rong presence in the short end of the German curve, with an average maturity of German PSPP purchases of 4.7 years.

Yesterday in the UK, PMI const ruct ion fell marginally to 52.2 in March from 52.5 in February. The figures have been quite stable at this level since September 2016.

T wo snap polls aft er yest erday's four-hour French President ial Elect ion debate rated only the Nat ional Front candidate, Marine Le Pen, the fourth most convincing candidate, with roughly half the endorsement of front -runner Emmanuel Marcon, see Bloomberg. Emmanuel Macron and Le Pen are st ill head to head in the polls for the first round (Bloomberg Composite of pools around 25% for both) and Emmanuel Macron's Oddschecker-implied probability indicator of winning the run-off remains above 60%. Current ly, the 10-year French government benchmark bond yield spread to Germany is around 66bp.

It has been a calm session in global financial markets this morning. Asian stock markets have been moving sideways mainly and in fixed income markets, changes in the US 10-year government benchmark bond yield have been subdued since yesterday. Brent oil has climbed to around USD54.4/bbl at the t ime of writ ing. Overnight , Markit PMI service figures for March in Japan came out at 52.9, which is the sixth consecut ive month of expansion and the highest reading since August 2015.