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The Aussie remains under pressure and penetrated into thick daily cloud that offered temporary support in previous sessions.

Yesterday's close below cloud top (0.7631) and daily Kijun-sen (0.7618) generated bearish signal, with the pair holding firmly in the cloud today and met next target at 0.7588 (Fibo 61.8% of 0.7489/0.7747 upleg).

This also marks pivotal support and close below it would trigger further downside extension towards next significant support at 0.7544 (200SMA).

Daily bulls are fading and support further easing, however, oversold slow stochastic suggests that near-term bears may be paused.

The pair is currently moving between 0.7588 Fibo support and daily cloud top (currently at 0.7631), which is expected to cap and keep near-term bears in play for fresh attempts lower.

Res: 0.7618, 0.7631, 0.7649, 0.7666
Sup: 0.7588, 0.7544, 0.7531, 0.7489

EUR/USD is almost unchanged on Tuesday, as the pair trades at 1.0860. On the release front, there are no eurozone events. In the US, today's highlight is CB Consumer Confidence, which is expected to dip to 113.9 points.

The improving euro punched above the 1.09 level on Monday, its highest level since November 2016. The currency was boosted by an excellent reading from German Ifo Business Climate, which rose to 112. 3 points. This marked its highest level since July 2011. The release underscores high optimism in the business sector, despite rumblings of protectionism from the US and the uncertainty in Europe over the imminent Brexit negotiations. Germany, the largest economy in Europe, continues to post strong numbers, which has been good news for the eurozone economy. Last week's PMIs pointed to expansion in the manufacturing and service sectors. German and eurozone Manufacturing PMIs both beat their estimates and hit their highest levels since 2011. Later this week, Germany releases key indicators, including CPI, retail sales and unemployment claims. One soft spot in the economy, however, is consumer confidence. GfK German Consumer Climate lost ground for a second straight month, as the indicator dropped to 9.8 in March, its lowest level since November 2016. Eurozone Consumer Confidence remains weak, as the indicator posted a decline of -5 in March, almost unchanged from a month earlier. These soft numbers are largely a result of higher inflation, as consumers are concerned about their reduced purchasing power. If inflation levels head higher, consumers could respond by curtailing spending, which could hamper economic growth.

Donald Trump suffered his first major setback as president last week, as his bill to replace the Affordable Care Act was pulled before it even went to a vote. Trump is used to giving the orders in the private sector and on reality TV, but he didn't get his way on healthcare, despite the Republicans enjoying a majority in Congress. This bruising defeat has sent the US dollar sharply lower, and sent market jitters higher. Trump's administration has stumbled out of the starting gate, and after more than two months in office, he has yet to provide any details over even an outline of economic policy. The inquiry into the Trump administration's links with Russia is gathering steam, and is another cause for concern for nervous investors. Trump has said he will now focus on tax reform, but he has his work cut out, trying to convince a skeptical Congress and general public that he can deliver the goods and pass new, effective legislation.

News and Events:

ZAR slides as political uncertainty rises

The South African rand was one of the few currencies that did not make the most of the broad USD sell-off. Since Monday, USD/ZAR surged 4.3% and hit the 13.00 threshold for the first time since March 15th amid rising political uncertainty. On Monday, Finance Minister Pravin Gordhan was recalled by President Zuma from an investor roadshow to face a court showdown today. Rumours are now circulating that President Jacob Zuma will soon request Minister Gordhan to step down. Finding a potential successor will be a tall order and the uncertainty has caused investors to pull back from sovereign bonds sending 10-year yields up 47bps to 8.80%.

However, the market is used to sudden spikes in volatility caused by Zuma's government; therefore we expect that pressure should soon return to normal levels as investors resume their hunt for yields. USD/ZAR should quickly return towards the 12.50 level in the short-term.

Stick with core driver over short term Trump hype

Our core drive for macro asset pricing for the last five years has been that global central banks accommodating policy will support risk taking. Brexit, Trump, terrorism for all their thunder can move investors off cheap capital. If the prospect of breaking up the world's largest economic union in 2 days (UK triggering Article 50) elicit panic stampede of risk aversion why would prospect of US political grid lock? We cautioned investors from getting stuck on transitional headlines and nonstructural forced pullback (risk valuations are high) as opportunity to reposition long. Asia stock indices reversed the US decline indicating that traders have already shifted from the Trump story. Additional weakness in US yields curve has help support risk taking (US 10 year stabilized at 2.37%). USD has been weaker against most EM currencies especially RUB and MXN, as Chicago Fed President Evans provided a dovish tone (not surprising). He indicated that failure of the repeal Obamacare bill increased uncertainty and should naturally lower prospects of a Fed hike. This new cycle highlights risk of chasing volatility verse sticking to the core driver. On the docket today two know hawks in Kaplan and George will keep the hopes of a June hike alive. We remain bullish on risk despite evidence of overstretch USD selling viewing the opportunity to harvest carry as a rationale to participate in higher yielders (limited macro risk). The lone exception would be our short trade EURCHF which is expected to grind lower, placing the SNB in a very difficult situation.

Mexico regains some strength despite Trump

Markets are pricing in further difficulties for Trump to deliver his program. The never-ending story of Trump's wall for the Mexican border is far from over, yet it seems very difficult to imagine how it will be financed, though we recall that his initial thoughts were that Mexico should pay for it themselves.

Economically, Mexico is closely scrutinising any and all developments from the Fed. This Thursday, Banxico will likely increase its overnight rate to 6.5% from 6.25%. The Mexican central bank has changed its meeting dates to closely follow FOMC meetings in order to make sure that Mexican monetary policy is not surprised by any Fed moves. One of Banxico's main objectives is to keep a rate spread between itself and the US to avoid any capital outflow.

Currency-wise, the MXN, which has suffered from Trump's election, has strengthened since mid-January. Other data, shows that Mexico has regained some colour in its cheeks, including trade deficit which narrowed in February from $736 million in January to $398 million and factory exports, which have also enjoyed a boost.

Furthermore, we firmly believe that Trump will face major challenges in attempting to rewrite the NAFTA (North American free-trade agreement), which has tied Canada, the US and Mexico for more than two decades. For this reason, we believe that there is further room for MXN and we target 16.00 before year-end.

Today's Key Issues (time in GMT):

• Jan Industrial Orders MoM, exp -2,60%, last 2,80%, rev 3,00% EUR / 08:00
• Jan Industrial Orders NSA YoY, last -0,90% EUR / 08:00
• Jan Industrial Sales MoM, last 2,60%, rev 2,50% EUR / 08:00
• Jan Industrial Sales WDA YoY, last 9,40% EUR / 08:00
• mars.23 FIPE CPI - Weekly, exp 0,06%, last 0,02% BRL / 08:00
• 4Q Non-Farm Payrolls QoQ, last 1,00% ZAR / 09:30
• 4Q Non-Farm Payrolls YoY, last 0,90% ZAR / 09:30
• ECB's Makuch Speaks in Bratislava EUR / 11:00
• Mar FGV Construction Costs MoM, exp 0,50%, last 0,53% BRL / 11:00
• Jan House Price Index YoY, last 12,22% TRY / 11:30
• Jan House Price Index MoM, last 0,81% TRY / 11:30
• ECB's Benoit Coeure in Panel Discussion in Brussels EUR / 11:45
• Feb PPI Manufacturing MoM, last 0,28% BRL / 12:00
• Feb PPI Manufacturing YoY, last -0,03% BRL / 12:00
• Feb Advance Goods Trade Balance, exp -$66.4b, last -$69.2b, rev -$68.8b USD / 12:30
• Feb P Wholesale Inventories MoM, exp 0,20%, last -0,20% USD / 12:30
• Feb Retail Inventories MoM, last 0,80% USD / 12:30
• Jan S&P CoreLogic CS 20-City MoM SA, exp 0,70%, last 0,93% USD / 13:00
• Jan S&P CoreLogic CS 20-City YoY NSA, exp 5,60%, last 5,58% USD / 13:00
• Jan S&P CoreLogic CS 20-City NSA Index, last 192,61 USD / 13:00
• Jan S&P CoreLogic CS US HPI YoY NSA, last 5,85% USD / 13:00
• Jan S&P CoreLogic CS US HPI NSA Index, last 185,54 USD / 13:00
• Mar Conf. Board Consumer Confidence, exp 114, last 114,8 USD / 14:00
• Mar Conf. Board Present Situation, last 133,4 USD / 14:00
• Mar Conf. Board Expectations, last 102,4 USD / 14:00
• Mar Richmond Fed Manufact. Index, exp 15, last 17 USD / 14:00
• Bank of Canada Governor Stephen Poloz Speech in Oshawa CAD / 14:10
• Bank of Canada Governor Stephen Poloz Press Conference CAD / 15:10
• Bank of Italy Governor Visco Speaks at Book Presentation EUR / 15:30
• SNB's Maechler Speaks in Geneva CHF / 16:30
• Fed's George Speaks in Midwest City, OK USD / 16:45
• Fed Chair Janet Yellen Speaks USD / 16:50
• Fed's Kaplan Speaks in Dallas USD / 17:00
• Fed Governor Jerome Powell Speaks USD / 20:30
• Apr Business Survey Manufacturing, last 81 KRW / 21:00
• Apr Business Survey Non-Manufacturing, last 77 KRW / 21:00

The Risk Today:

EUR/USD keeps on pushing higher towards key resistance given at 1.0874 (08/12/2017 high) has been broken. Strong support can be found at 1.0493 (22/02/2017 low). Expected to show continued increase. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD now lies in a short-term uptrend channel. There are rooms for further strength. Hourly resistance located at 1.2570 (24/02/2017 high) has been broken. Hourly support is given at 1.2324 (03/17/2017 low). Expected to show continued strength towards resistance at 1.2771 (05/10/2016 high). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY continues its declined since the pair has failed to break key resistance given at 115.62 (19/01/2016 high). The pair is heading lower. Hourly resistance can be located at 113.57 (16/03/2017 high). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF is declining. Hourly support is given at 0.9862 (31/01/2017 low) has been broken. Key resistance can be found at a distance at 1.0344 (15/12/2016 high). Expected to show continued weakness. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Weekly
    •    Last Candlesticks pattern: Shooting star
    •    Time of formation: 5 Sep 2016
    •    Trend bias: Down

Daily
    •    Last Candlesticks pattern: Long black candlestick
    •    Time of formation: 24 Jun 2016
    •    Trend bias: Down

GBP/USD – 1.2583

The British pound has risen again after brief pullback and upside bias remains for the rise from 1.2109 to extend further gain to 1.2640-50, however, as broad outlook remains consolidative, reckon upside would be limited and price should falter well below indicated previous resistance at 1.2706, bring retreat later. In the event cable is able to penetrate resistance at 1.2706, this would retain bullishness and extend the erratic rise from 1.1986 low towards another previous resistance at 1.2775 first. 

On the downside, whilst initial pullback to 1.2490-00 cannot be ruled out, reckon the Tenkan-Sen (now at 1.2429) would limit downside and bring another rise later to aforesaid upside target. Below the Kijun-Sen (now at 1.2363) would suggest top is possibly formed, bring test of support at 1.2335 but a daily close below said support at 1.2335 is needed to confirm and suggest the rebound from 1.2109 has ended instead, risk weakness to 1.2240-45 and possibly towards 1.2200, however, price should stay well above said support at 1.2109 (this month’s low), bring rebound later.

Recommendation: Buy at 1.2470 for 1.2670 with stop below 1.2370. 

On the weekly chart, cable has continued moving higher after staging a strong rebound from 1.2109, adding credence to our bullish view that another leg of corrective rise from 1.1986 low is underway and may extend gain to 1.2706 resistance but break there is needed to provide confirmation, bring retracement of early downtrend for test of previous resistance at 1.2775 and later 1.2850-60 but price should falter well below psychological resistance at 1.3000.

On the downside, expect pullback to be limited to 1.2465-70 and renewed buying interest should emerge around there, bring another rise later to aforesaid upside targets. Only below support at 1.2335 would abort and prolong choppy trading within recent established broad range, bring further fall to 1.2240-50 but a weekly close below the Kijun-Sen (now at 1.2212) is needed to signal the rebound from 1.2109 has ended, bring further fall to 1.2140-50. 

'The political uncertainties don't affect the German economy.' - Klaus Wohlrabe, Ifo

In March, the German Business Climate Index rose more than many experts estimated. It surged to 112.3, appearing to be the highest since June 2011. Such notable change suggests that German businesses have finally adapted to the new US Administration and are not disturbed by the US President Donald Trump's plan to levy a 35% border tax on German car manufacturers or his $375 billion bill for NATO handed to the German Chancellor Angela Merkel. The positive rise of business confidence also shows that companies calmly perceive the upcoming elections in France and Germany and the already conducted elections in Netherlands. Altogether, this allows to assume that the German economy is relatively indifferent to the current political turbulences across the world. Nevertheless, the reason for such unexpected surge was also based on economic grounds. In particular, improvements in the manufacturing, construction and retailing sectors that were fuelled by higher demand for cars and machinery. Moreover, with respect to the construction industry, sentiment in the following sector reached the highest level in 26 years amid positive demographics, spiking wages and lower borrowing costs, which altogether created a housing boom.

This is not the weather forecast, but it was chilly up north when Theresa May met Nicola Sturgeon and made it clear that another Scottish independence vote before Brexit will not be fandabidozi. This meeting had no impact on the Pound, which strengthened against most other currencies yesterday. The impending triggering of Article 50 appears to be viewed with more enthusiasm by the markets than we might have expected. The lack of UK data today should leave the Pound meandering in its current tight ranges, but there are a number of central bankers speaking throughout the day, so who knows what might come out.

Germany's IFO survey delivered a pleasant surprise. At 112.3, the Business Climate Index was higher than forecast and paints a picture of a country in recovery mode. The supervisory board of the European Central Bank (ECB) says Eurozone banks have improved their stability, but there is more to do. That's the banking equivalent of a teacher writing 'must try harder' on a report card. Meanwhile, German members of the ECB are pressing the central bank to start raising interest rates and lower their bond holdings. So everyone is telling everyone else what to do whilst the Eurozone economy is still struggling to grow. The posturing ahead of UK-EU negotiations continues. German Finance Minister, Wolfgang Schauble, said "We have no interest in punishing the UK, but we also have no interest in putting European integration in danger over the UK." That is being touted as an anti-UK comment, but I disagree. Surely that is just eminently sensible, given Shauble's position.

Today's data diary is as empty as an election promise. Minor data releases from the US later in the day will not be market movers, but traders may well start positioning themselves ahead of tomorrow's expected Article 50 announcement from the UK Prime Minister.

And a chap in Nova Scotia has been told he cannot have a personalised licence plate on his car even though it only bears his name. Lorne Grabher had a plate with just his surname on it but authorities have said it makes a socially irresponsible statement. Deed & Poll are the words that spring to mind.

One liners

• It doesn't matter whether you win or lose...until you lose.
• One good turn gets most of the duvet.
• People who say "I slept like a baby" usually never had one.
• Remember the journey of a thousand miles begins with your Dad saying... "I know a shortcut"
• A torch is just a tube for keeping dead batteries in
• Duct tape is like the force, it has a light side and a dark side and it holds the universe together.

'The euro will be the final step because I want to wait for the result of the German election.' – Marine Le Pen (based on Bloomberg)

Pair's Outlook

On Tuesday morning the common European currency was in a retreat against the Greenback, as the currency exchange rate fluctuated near the 1.0850 mark. Previously, during Monday's trading the rate surged and touched the 1.0905 level, and with it a long term ascending channel's upper trend line was confirmed, as the pair bounce off of it. It is most likely that the currency pair will get squeezed in during today's trading session, as the 200-day SMA is moving in from the upside while the weekly R1 and the 38.20% Fibonacci retracement level are providing support, respectively, at 1.0841 and 1.0826 levels.

Traders' Sentiment

SWFX traders remain bearish, as 63% of open positions are short. Meanwhile, trader set up orders are neutral.

'According to our long-term fair value model G10 VALFex, the USD already looks quite overvalued vs SEK, EUR, JPY and GBP and that should limit any future gains.' – Credit Agricole (based on PoundSterlingLive)

Pair's Outlook

The Cable mostly behaved in accordance with expectations on Monday, with the only exception being that the pair was able to reach beyond the 1.26 major level. Nevertheless, trade closed with British currency appreciating 64 pips against the Buck, thus, reaching its four-week high. The bullish trend remains intact, with the Pound expected to outperform the US Dollar once more. Technical indicators are also giving bullish signals, confirming the possibility of the positive outcome today. However, due to lack of strong market movers, the upside development is likely to be very limited, with the immediate resistance cluster around 1.2630 preventing the Sterling from edging higher.

Traders' Sentiment

Today 63% of traders are bulls (previously 60%), while 53% of all pending orders are to sell the British currency (down from 55%).

'The Trump reflation trade could still reverse course in a more meaningful way, resulting in dollar weakness.' – MUFG (based on Business Recorder)

Pair's Outlook

Fortunately for the US Dollar, it managed to avoid substantial losses against the Japanese Yen yesterday. Nonetheless, a new four-month low was reached, but with the USD/JPY pair once again remaining above the 110.60 level, which appears to be providing strong psychological support. As a result, the Greenback has the opportunity to post gains today, as another leg down would cause a breach of this support. Moreover, the weekly S1 and the Bollinger band are somewhat bolstering the psychological demand area, even though technical studies are unable to confirm the possibility of a recovery.

Traders' Sentiment

Market sentiment remains bullish, as 71% of all open positions are long, compared to 72% yesterday. At the same time, the portion of orders to acquire the Buck inched up from 65 to 66%.

'We're likely to see gold prices relatively steady for now until there is a little bit more clarity on Trump's other policies, particularly over the tax bill.' – Daniel Hynes, ANZ (based on Reuters)

Pair's Outlook

During the early hours of Tuesday's trading session the yellow metal's price declined, as it traded just above the 1,250 mark. Previously, during Monday's trading session the bullion managed to surge and even reach above the 1,260 mark. During that move, the price passed the 200-day SMA, and it was expected that the metal will continue the surge. However, it seems that as the US political fundamental events calmed down, the buck regained its strength. Although, the hypothesis of a surge remains in force, as the medium term ascending channel remains unbroken.

Traders' Sentiment

Traders are neutral bearish, as 51% of open positions are short on Tuesday. However, 67% of set up orders are to buy the metal.