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The euro came under selling pressure yesterday, following a Reuters report that investors over-interpreted the signals from the ECB's March policy meeting. The report revealed that ECB officials only wanted to communicate reduced risks and not a step towards a reduction in stimulus. In addition, it was noted that policymakers are now cautious of making any new changes to the April statement, and that they are worried of a potential surge in the bloc's government bond yields.

During the European morning Wednesday, EUR/USD was trading near the key zone of 1.0800 and the uptrend line drawn from the low of the 9th of March. Nevertheless, the signals this report sent to market participants pushed the rate below that key support crossroad, which in our view shifts the short-term outlook of the pair to neutral for now. The rate could continue lower for a while given this change in sentiment towards the ECB plans and is possible to aim for the 1.0725 (S1) support soon. A clear break below that level could target the next one of 1.0700 (S2). However, we think it's too early to assume that the outlook has turned back bearish.

Yesterday's report suggests that the ECB is unlikely to change its language in April, especially considering that the meeting will take place ahead of the French election, a political event that could add a risk premium to European bond yields. Something like that could enhance the concerns of ECB policymakers with regards to a surge in yields and therefore, we expect the ECB to maintain a balanced tone, at least until the outcome of the election is sealed. For the next couple of months, EUR-traders may shift their attention to headlines regarding the French vote.

UK vs EU: Let the negotiations begin

Yesterday, the EU officially received the UK's Article 50 letter, which marks the beginning of two years of negotiations, the guidelines of which will be published by the EU within the next couple of days. These guidelines are expected to focus on the 'divorce bill' first. The EU wants the UK to cover the budget commitments they agreed to, which amount to EUR 63 billion. This bill seems to face high criticism from the UK government. The UK Trade Secretary previously described the notion of being charged for leaving the EU as 'absurd'.

As for the pound, it didn't react much on the triggering given that the event and the timing were known and expected. Nevertheless, we expect the 'divorce bill' to attract market attention. In our opinion, signals that the UK will not pay this bill could weigh on sterling, as something like that could lead to delays in the rest of the negotiating process. Considering that the UK has two years to negotiate its exit deal, we think that potential delays may be viewed as more negative for Britain than the EU. Overall though, we believe that the financial world may focus primarily on the subject of trade. So, in our view, the pound's broader path could depend on that to a large extend.

GBP/JPY was one of the sterling crosses to trade higher in the aftermath of the triggering. The pair rebounded from 137.50 (S2) to find resistance slightly below 138.80 (R1). The price structure on the 4-hour chart still suggests a short-term downtrend and as such, we would expect the bears to make a comeback soon. A dip back below 138.30 (S1) could confirm that and perhaps pave the way for another test near 137.50 (S2).

As for today's highlights:

Germany's preliminary CPI for March is due out, just one day ahead of Eurozone's print. The forecast is for the nation's CPI to have slowed to +1.9% yoy from +2.2% yoy previously, which could increase speculation for the bloc's rate to move in a similar fashion. Although something like that may cause the euro to trade a bit lower, we doubt that it will be particularly worrisome for ECB policymakers, given that they made it clear they pay more attention to core CPI prints.

In the US, the final estimate of Q4 2016 is due out, but considering that the 1st quarter of 2017 is almost over, we will treat these data as outdated. Initial jobless claims for the week ended March 24th are also out.

As for the speakers, we have three on the agenda: New York Fed President William Dudley, Dallas Fed President Robert Kaplan and ECB Executive Board member Yves Mersch.

EUR/USD

Support: 1.0725 (S1), 1.0700 (S2), 1.0665 (S3)

Resistance: 1.0770 (R1), 1.0800 (R2), 1.0825 (R3)

GBP/JPY

Support: 138.30 (S1), 137.50 (S2), 137.00 (S3)

Resistance: 138.80 (R1), 139.40 (R2), 140.40 (R3)

Daily Pivots: (S1) 0.8608; (P) 0.8671; (R1) 0.8720; More...

Intraday bias in EUR/GBP remains neutral for the moment. Overall, price actions from 0.8303 are forming a corrective pattern, as the second leg of the correction from 0.9304. Below 0.8604 will turn bias to the downside for 0.8402. Break will target 0.8116 cluster support, where the correction from 0.9304 should end. On the upside, above 0.8786 will target 61.8% retracement of 0.9304 to 0.8303 at 0.8922 instead.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

Daily Pivots: (S1) 1.3974; (P) 1.4070; (R1) 1.4132; More...

Intraday bias in EUR/AUD remains neutral for the moment. At this point, we're still mildly favoring the case of trend reversal. And, another rise is expected as long as 1.3872 support holds. Above 1.4309 should send the cross through channel resistance (now at 1.4378) to 1.4721 key resistance. However, break of 1.3872 will dampen our bullish view and bring retest of 1.3642 low instead.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction could be completed after testing 1.3671 support. Break of 1.4721 cluster resistance (38.2% retracement of 1.6587 to 1.3624 at 1.4756) should confirm this case and target 61.8% retracement at 1.5455 and above. Overall, we'd expect the up trend from 1.1602 to resume later. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

Daily Pivots: (S1) 119.79; (P) 120.08; (R1) 120.48; More...

Intraday bias in EUR/JPY remains mildly on the downside as the fall from 122.88 should target 118.23 support. At this point, we're holding on to the view that price actions from 124.08 are forming a consolidation pattern. There, strong support is expected around 118.45 key cluster support level (38.2% retracement of 109.20 to 124.08 at 118.39) to contain downside and bring rebound. On the upside, above 120.43 minor resistance will turn bias back to the upside for 122.88 resistance.

In the bigger picture, we're holding on to the view that medium term rise from 109.20 is still in progress. Focus is on 126.09 key resistance level. Sustained break will confirm completion of the whole decline from 149.76. And rise from 109.20 is of the same degree as the fall from 149.76. In such case, further rally would be seen to 104.04 resistance and possibly above before topping. Meanwhile, rejection from 126.09, or firm break of 118.45 cluster support, will likely extend the fall from 149.76 through 109.20 low.

Daily Pivots: (S1) 137.55; (P) 138.03; (R1) 138.54; More...

Intraday bias in GBP/JPY remains mildly on the downside for the moment. Choppy decline from 144.77 would target 136.44 support and below. But we'd expect support from 50% retracement of 122.36 to 148.42 at 135.39 to contain downside and bring rebound. On the upside, break of 139.39 minor resistance will turn bias to the upside and send GBP/JPY through 142.79 resistance. Overall, price actions from 148.42 are forming a consolidation pattern.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern. Or, sustained break of 50% retracement of 122.36 to 148.42 at 135.39 will turn outlook bearish for a test on 122.36 low. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement of 195.86 to 122.36 at 167.78.

Daily Pivots: (S1) 1.0706; (P) 1.0720; (R1) 1.0740; More...

EUR/CHF remains bounded in range of 1.0683/0761 and intraday bias remains neutral for the moment. We'd slightly favoring the case of trend reversal on bullish convergence condition in daily MACD. And, further rise is mildly in favor as long as 1.0683 minor support holds. Above 1.0761 minor resistance will turn bias to the upside for 1.0823 resistance first. Break will re-affirm the case of trend reversal and target 1.0897 resistance next. However, firm break of 1.0683 minor support will turn bias to the downside for 1.0620 key support level again.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Decisive break of 1.0897 resistance should confirm that it's completed. And in that case, larger up trend is resuming for another high above 1.1198. Meanwhile, sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485.

Daily Pivots: (S1) 1.3299; (P) 1.3349; (R1) 1.3378; More....

Intraday bias in USD/CAD is turned neutral as recovery lost moment after hitting 1.3413. On the downside, below 1.330 minor support will extend the corrective fall from 1.3534 through 1.3263. But in that case, we'd expect strong support from 1.3211 cluster level (61.8% retracement of 1.3008 to 1.3534 at 1.3209) to contain downside and bring rebound. On the upside, above 1.3413 will target a test on 1.3534 resistance first. Overall, rise from 1.2968 is expected to resume later to extend through the whole medium term rise from 1.2460 through 1.3598.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. Break of 1.2968 wold at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Daily Pivots: (S1) 0.7640; (P) 0.7657; (R1) 0.7685; More...

Intraday bias in AUD/USD remains neutral at this point. On the upside, break of 0.7748 will extend the rally from 0.7158. In that case, we'd expect strong resistance from long term retracement level at 0.7849 to limit upside. On the downside, below 0.7586 will turn bias back to the downside for 0.7490 support. Firm break there will confirm completion of rise from 0.7158. In such case, near term outlook will be turned bearish for 0.7158 support next.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8169) and above.

The dollar index has rebounded noticeably from a 4-and-a-half-month low of 98.85, helped by outperforming US consumer confidence for March, and recent Fed comments. This morning, the dollar index rallies and touches a 1-week high of 100.02, . Today, at 13:30 BST, sees the release of US Q4 GDP final reading and Q4 PCE inflation figures for March; with better-than-expected readings it is likely to provide further support to USD. However, per the first and second Q4 GDP annualized readings: a 1.9% growth, showing a slowdown comparing to a 3.5% growth in Q3.

OPEC is considering whether to extend the oil output cut for another 6 months to lift weak oil prices. The decision will likely be made in their scheduled meeting on May 25 in Vienna. In addition, the EIA crude oil inventories (the week ending March 24) dropped to 0.867 million barrels; less than expectations of 1.183 m and the previous figure of 4.954. These two factors cushioned oil prices creating a noticeable bounce off on Wednesday.

Britain's ambassador to the EU, Tim Barrow, handed over the Brexit triggering notification letter, signed by the UK Prime Minister Theresa May, to the EU Council President, Donald Tusk, in Brussels. Tusk is expected to present draft Brexit guidelines to the European Union's remaining 27 member states by this Friday. A withdraw agreement must be accepted by 72% out of the 27 states, representing 65% of the population.

Member states are expected to hold a Brexit summit on April 29. The Guardian reports (per a leaked copy of the European Parliament draft resolution) that the EU appears to be taking a strong position aka. “a hard Brexit”. It will likely result in no free trade agreements between the UK and the EU over the next two years, with a transition period of no longer than 3 years. The draft resolution is likely to be discussed next week.

Theresa May now faces a severe challenge: dealing with a prospective hard Brexit negotiation with the EU, at the same time, maintaining the UK territory from falling apart with the threat of Scotland's independence attempt.

The Eurozone economic sentiment, business climate and consumer confidence (Mar) will be released at 10:00 BST today, followed by German CPI (Mar) at 13:00 BST, accompanied by the US Q4 GDP final readings and US Q4 PCE.

Daily Pivots: (S1) 1.0727; (P) 1.0777 (R1) 1.0814; More.....

Intraday bias in EUR/USD remains on the downside for the moment. As noted before, rise from 1.0494 should have completed at 1.0905 on bearish divergence condition in 4 hour MACD. The whole corrective rise from 1.0339 is possibly finished too. Deeper fall should be seen back to 55 day EMA (now at 1.0682) first. Sustained break there will affirm this view and target 1.0494 resistance for confirmation. On the upside, above 1.0826 minor resistance will indicate that the corrective rise from 1.0339 is still in progress. Intraday bias would then be flipped back to the upside for 1.0905 and above.

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.