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EUR/USD has edged lower in the Tuesday session. Currently, the pair is trading at 1.0660. On the release front, the eurozone will release retail sales, which is forecast to post a gain of 0.5%, after three straight declines. ECB President Mario Draghi will speak in Frankfurt, as the ECB launches its new EUR 50 banknote. In the US, today’s highlight is trade balance, which the trade deficit expected to narrow to $46.0 billion. On Wednesday, all eyes will be on the Federal Reserve, which will publish the minutes of its March policy meeting. As well, the US will release ADP Employment Change and ISM Non-Manufacturing PMI.

The euro remains under pressure, as the currency hovers close to 3-week lows. EUR/USD dropped 1.9 percent last week, marking its worst weekly decline since November 2016. Soft inflation numbers late in the week disappointed the markets and soured sentiment on the continental currency. German Preliminary CPI posted a weak gain of 0.2%, short of the forecast of 0.4%. This was followed by Eurozone Flash CPI Estimate, which slipped to 1.5%, missing the forecast of 1.8%. At the same time, Germany, the largest economy in Europe, continues to post solid numbers. Employment and retail sales data in February beat expectations, as the German economy continues to expand at a healthy clip in 2017.

The US economy hasn’t missed a beat in 2017, and the markets are expecting strong data for the first quarter. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending, a key component of economic growth. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. With the economy headed in the right direction, the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger two or three more times in 2017. The markets will be paying close attention to the minutes of the March meeting, when the Fed raised rates by a quarter-point, to a range of 0.75-1.00%. Any hints about the timing of the next hike, as well as the tone of the minutes are factors which could move the currency markets on Wednesday. The markets considered the rate statement overly cautious, and this sentiment sent the US dollar broadly lower. If the reaction to the minutes is one of disappointment, the dollar could again head downwards.

Holidays in China, Hong Kong, Taiwan and India saw muted trading in much of Asia with the USD holding firm, except against the JPY.

With so much of the region on holiday today, the focus rested mostly on the USD/JPY and AUD/USD. This follows the tumble in US yields yesterday and the RBA rate decision this afternoon. The dovish tone of the RBA staying unchanged overrode any positive sentiment from this morning’s near record trade surplus. In Japan, the Yen continued to strengthen against the USD and Euro as the yield spread narrowed and risk aversion from Japanese investors continued.

Today in Europe we have ECB President Mario Draghi talking this evening, as well as Euro-zone Retail Sales. The U.S. announces the Trade Balance, Durable Goods and Factory Orders. Tonight will also be notable as the White House announces its mark 2 version of the Obamacare Repeal.

Equities

The Nikkei fell over 1% today as a strengthening Yen weighed on sentiment and pushed automaker stocks in particular, lower. Mainland China and Hong Kong markets were closed. The Nikkei will likely continue to remain heavy as USD/JPY approaches the 110.00 level and JGB’s continue to rally on safe-haven flows. The next important level is 18,850 just below.

FX

AUD struggled today as a dovish RBA (particularly on jobs) and falling imports data tipped it through key support at 7590. Aud has continued to fall into the afternoon session with nearby support at 7550 with a break possibly setting up a test of key long-term support in the 7490/7500 area.

AUD/JPY is also suffering as a high beta pair to the risk -on, risk-off complex.The cross is finishing on its lows at 83.45, having broken support at 83.75. A daily close would be quite bearish technically, setting up further possible losses to the 82.50 area.

USD/JPY has had another bad day as U.S. yields tanking added to the already bearish technical picture. We finish in Asia at the lows of 110.40 having fallen from 111.00 this morning. The bounces in USD/JPY from a technical perspective, have been tepid, to say the least. 110 is the key support level now with stop-loss selling anticipated on a break. Until then, we remain becalmed within the recent 110/112 trading range.

EUR/JPY has broken support at 118.25 and is testing its 200-day moving average at 117.65 as I write. Although a daily close below would be bearish, we do note that the daily RSI is in oversold territory. This may make the technical picture less clear and leave the cross vulnerable to a possible squeeze higher in the short term before the bigger technical picture re-establishes itself.

EUR/USD. The highlight will undoubtedly be Mario Draghi speaking at 2130 Singapore time. The street seems to have taken the ECB’s guidance to heart and scaled back on their tapering ambitions. With Greece coming back into the headlines for all the wrong reasons, peripheral spreads of Bunds, in particular, have widened. This has seen the Euro fall from grace quite quickly from the taper-tantrum heights of last week. The single currency, however, does have technical support down here at 1.0640, yesterday’s low, and more importantly at the 100-day moving average at 1.0630.

In the bigger picture, the key level for Euro is 1.0500. Momentum appears to be waning down here for now from a chart perspective, meaning Euro could be vulnerable to a squeeze higher.

Precious Metals

Gold is benefitting from the risk aversion in other markets, finishing up five dollars in Asia at 1258.50. Dips have been shallow of late, with 1240 now very strong support on the daily charts. This seems to be setting up gold for a test of its 200-day moving average just above at 1259.50. The 200-day has capped all successive rallies this year. A close above 1260.50 now would be a strong technical signal that we are going to higher levels.

Silver has already broken through its 200-day moving average at 18.0900, and this has held all pullbacks in the last week, making it strong support on the technicals. Silver has moved directly higher today from its New York close. Up some 10 cents from 10.2500 t0 10.3500 and putting it in sight of key resistance at 18.5000. The price action suggests a test of the latter is almost inevitable, with a daily close above, possibly setting up a technical move to the 19.0000 area.

Spot Gold extended recovery rally from $1139 trough on strong risk-off buying and cracked initial target at $1259 (200SMA), pressuring next targets at $1261/63(peaks of 27 Mar and 27 Feb).

The price is looking for daily close above $1255 (Fibo 61.8% of $1337/$1122 descend, which so far resisted several attacks), to generate bullish signal.

Firm break above 200SMA and $1261/63 peaks is needed to signal resumption of larger uptrend from $1122 (15 Dec low) towards Fibonacci projections at $1269/74 and $1286 (Fibo 76.4% of $1337/$1122 descend) in extension.

Meantime, the price may spend some time in consolidation before final break above key barriers, with daily Tenkan-sen (currently at $1250) required to contain extended dips.

Res: 1261, 1263, 1269, 1274
Sup: 1253, 1250, 1244, 1239

EUR/USD

Current level - 10663

The bias is bearish, for a test of 1.0600 static support. A break through the latter will challenge 1.0490 area. Crucial on the upside is 1.0700.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 110.52

The recent slide from 112.20 is still intact, with an initial resistance at 110.70 and target projection at 110.10 low.

GBP/USD

Current level - 1.2439

The break through the dynamic support at 1.2465 signals a bearish outlook, for a slide towards 1.2375, en route to 1.2230 area. 

'The recent good signals coming from the euro-area economy shouldn't hide the fact that it remains an incomplete -- and therefore dysfunctional -- monetary union.' – Maxime Sbaihi (Based on Bloomberg)

Pair's Outlook

The daily chart displays that the pair has showed almost no movement whatsoever, shifting from a green to a red doji candle. It appears that EUR/USD has now initiated a downward motion as the redness of the small candle has become more consistent, meaning that 1.0639, representing the 23.6% Fibo retracement of the May-January downfall, might be the ultimate target for today. The scenario is in line with the strong resistance cluster above at 1.0673/85 which the rate has not been able to overstep, leading with the 55-day SMA.

Traders' Sentiment

SWFX traders remain bearish on the pair, as 55% of open positions are short on Tuesday. Similarly 51% of trader set up orders are to sell the Euro.

'The dollar got some support last week from month-end buying and came off its lows, but overall its heaviness remains unchanged.' – Daiwa Securities (based on Reuters)

Pair's Outlook

The British currency's performance yesterday fell in line with expectations, being that the Pound reconfirmed the down-trend and closed trade between 1.2490 and 1.2480. Another bearish development today is expected, this time with the tough demand cluster around 1.2420 limiting the losses. However, daily technical indicators keep suggesting the Cable is to edge higher, but another retest of the bearish trend-line is anticipated not earlier than on Wednesday, when the upcoming ADP data could weaken the US Dollar in order for the Sterling to climb back above 1.25. Tuesday's trade is expected to remain in the red zone.

Traders' Sentiment

There are 56% of traders holding long positions today (previously 53%), whereas 54% of all pending orders are to purchase the Sterling.

'Before resuming its uptrend in the medium term, we think USD/JPY will likely be capped in the near term.' – Deutsche Bank (based on FXStreet)

Pair's Outlook

Monday ended with the US Dollar edging lower against the Japanese Yen, paving its way towards the descending channel's lower border, rather than the upper. Technical studies keep giving bearish signals, implying the Buck is to keep weakening. The weekly S1 is the nearest support, but in case bears continue pushing the pair lower, a drop beyond this area is likely. Nevertheless, a tough support cluster rests circa 109.30, which is also reinforced by the channel's support line, thus, that is where the Greenback should definitely rebound, given that no other factor sparks more USD-selling.

Traders' Sentiment

Market sentiment remains bullish, as 70% of traders hold long positions today, compared to 69% yesterday. At the same time, the share of buy orders added two percentage points, having risen up to 56%.

'Earlier in the day, the statistics bureau reported an expansion in the country's February trade surplus to more than double the previous month's as exports of gold and minerals rebounded, while imports dropped.' – Nichola Saminather (Based on Bloomberg)

Pair's Outlook

Despite the early reading, Gold managed to show a solid 392 green pips on the daily chart, suggesting that bullish momentum prevails, but the resistance cluster at 1,256.77/1,257.69 is most likely to limit upside potential due to the multiple tests that have failed at the area before. We will look for the pair to remain squeezed in between the aforementioned resistance and the 1,249.67/1,248.96 zone. In general it looks like XAU/USD is in the process of establishing a trading range with decent support at 1,242.20.

Traders' Sentiment

SWFX traders are neutral on the metal, as 50% of open positions are long. However, 63% of trader set up orders are to buy the yellow metal.

The Aussie accelerated lower on Tuesday after RBA and took out support at 0.7588 (Fibo 61.8% of 0.7489/0.7747 rally / lows of 28 Mar/03 Apr), completing Failure Swing pattern on daily chart.

Fresh bears are now pressuring strong supports at 0.7548/43 (200SMA / weekly cloud top), break of which would open way towards key short-term support at 0.7489 (09 Mar low).

Daily studies are turning into full bearish setup and support further weakness, after the pair returned into thick daily cloud that underpinned the uptrend since early March.

Oversold near-term studies suggest that bears may show hesitation at 200SMA support.

Bear-cross formed by daily Tenkan-sen / Kijun-sen lines at 0.7616, is expected to cap extended upticks.

Res: 0.7588, 0.7616, 0.7638, 0.7656
Sup: 0.7548, 0.7506, 0.7489, 0.7467

EUR/JPY - 117.82

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 120.40, Target: 118.40, Stop: 121.00

Position: -
Target: -
Stop: -

New strategy :

Sell at 118.60, Target: 116.60, Stop: 119.20

Position: -
Target:  -
Stop:-

As euro’s recent selloff has gathered momentum, adding 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, however, near term 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 118.60-70 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).