USD/JPY - 112.33

Original strategy  :

Buy at 111.55, Target: 112.55, Stop: 111.20

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 111.55, Target: 112.55, Stop: 111.20

Position :  -

Target :  -

Stop : -

As the greenback has continued trading with a firm undertone after recent rally above previous resistance at 111.74, adding credence to our view that recent upmove is still in progress and bullishness remains for further subsequent gain to 112.50-60 but near term overbought condition should limit upside to 112.80 and price should falter below 113.00-10, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as 111.50-55 should limit downside. Below indicated support at 111.21 would abort and suggest a temporary top is formed instead, bring correction towards 110.87 support.

Daily Pivots: (S1) 1.0902; (P) 1.0917 (R1) 1.0946; More....

Intraday bias in EUR/USD stays neutral as the consolidation form 1.0949 temporary top continues. At this point, further rise is still expected as long as 1.0851 minor support holds. However, choppy rebound from 1.0339 is seen as a correction. Hence we'd look for topping again on next rise. Meanwhile, on the downside, break of 1.0777 will turn turn bias to the downside for 1.0851 support 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.

Dollar is steady against European majors as FOMC rate decision looms. Job data from US is basically in line with expectation and triggers little reactions. Instead, news regarding ultra-long bonds sends the Japanese Yen lower again. Released from US, ADP report showed 177k growth in private sector jobs in April, comparing to expectation of 178k. The US Treasury Department said today that it's conducting an "internal review" regarding ultra-long bonds. The department was meeting with "a broad variety of market participants" regarding the pros and cons of 50-year and 100-year securities. Earlier this week, Treasury Secretary Steven Mnuchin said that ultra-long bonds absolutely makes sense to the Treasury. 30 year yield jumped on Monday after Mnuchin's comments.

FOMC rate decision will be a major focus today and it's widely expected to keep monetary policies unchanged. At this point, the base case for Fed remains unchanged. That is, Fed will continue with it's plan of a total of three rate hikes this year. That would be followed by a "brief pause" as Fed starts shrinking its balance sheet later in the year. Markets are pricing in over 60% chance of a rate hike by Fed in June. It's generally believed Fed will look past the weaker than expected Q1 GDP data. There is no post meeting press conference scheduled.

Eurozone GDP grew 0.5% qoq, focus on French debate

Eurozone GDP grew 0.5% qoq in Q1, up from prior quarter's 0.4% and met expectation. However, PPI dropped -0.3% mom, rose 3.9% yoy in March, below expectation of 0.1% mom, 4.3% yoy. German unemployment dropped -15k in April, larger than expected drop of -10k. Unemployment rate was unchanged at 5.8%. The set of data does little to change ECB's monetary policy stance. The central bank should continue with it's asset purchase of EUR 60b a month till the end of the year. And it will keep interests rate unchanged before ending the purchases. Nonetheless, markets would be eager to hear if ECB policymakers would start reassessing the monetary policy stance in June meeting.

For now, focus will stay in French election. Pro-EU centrist Emmanuel Macron and EU-sceptic far right Marine Le Pen will have a head-to-head TV debate tonight. At this point, polls are still suggesting Macron as a clear winner out of the run-off of the French Presidential election this Sunday. With just four days to go, Macron is having a strong lead of 20 points over Le Pen. Macron said that he will use "hand-to-hand fighting to demonstrate that her ideas represent false solutions" in the debate. On the other hand, Le Pen said that "his program seems to be very vague, but in reality it is a simple continuation of (Socialist President) Francois Hollande's government."

EU and UK at odds over EUR 100b Brexit bill

Regarding Brexit, it's reported that EU has raised the up-front settlement bill to EUR 100 on request of France and Germany. EU's chief Brexit negotiator Michel Barrier said that "some have created the illusion that Brexit would have no material impact on our lives or that negotiations can be concluded quickly and painlessly." And, "this is not the case". Meanwhile he emphasized that "mutual commitments" must be honored and "the final settlement is all about settling the accounts".

On the other hand, UK's Brexit Secretary David Davis said that "this is a negotiation. They lay down what they want and we lay down what we want." And when asked when at figure of EUR 100b was acceptable, Davis said that "we will not be paying €100bn." He emphasized that "we will meet our international obligations, but there will be our international obligations including assets and liabilities and there will be the ones that are correct in law, not just the ones the Commission want."

Released from UK, construction PMI rose to 53.1 in April. BRC shop price index dropped -0.5% yoy in April.

Surge in NZD/USD was brief

New Zealand Dollar surged sharply against Australian Dollar today after solid employment data. NZD/USD also spiked higher to 0.6967 but quickly lost steam. New Zealand unemployment rate dropped to 4.9% in Q1, down from 5.2% and below expectation of 5.1%. Employment grew 1.2% qoq, up from prior quarter's 0.7% qoq and beat expectation of 0.8% qoq. However wage growth was muted as the ordinary time private sector labor cost index just rose 0.4% qoq, 1.5% yoy. That was at the lowest level since 2010. The lack of wage pressure should keep RBNZ on hold.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0902; (P) 1.0917 (R1) 1.0946; More....

Intraday bias in EUR/USD stays neutral as the consolidation form 1.0949 temporary top continues. At this point, further rise is still expected as long as 1.0851 minor support holds. However, choppy rebound from 1.0339 is seen as a correction. Hence we'd look for topping again on next rise. Meanwhile, on the downside, break of 1.0777 will turn turn bias to the downside for 1.0851 support 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.

Economic Indicators Update

GBP has been the strongest currency over past three weeks.

GBP/USD has seen a 4.6% rise since April 10, largely because of UK Prime Minister Theresa May's sudden announcement of a snap general election on April 18.

On the daily chart, the price is still holding above the downside 10-day SMA support.

Nevertheless, the bullish momentum has turned weaker over the past week as Cable nears the significant psychological resistance level at 1.3000; where there is heavy selling pressure.

UK construction PMI for April, released this morning was 53.1, which surpassed expectations of 52.0, and hitting the highest level this year.

GBP/USD didn't respond much to this improved figure mainly because of the reduced bullish momentum and lack of subsequent market drivers fundamentally.

The daily Stochastic Oscillator is around 70, suggesting a correction.

The resistance level is at 1.2950, followed by 1.2970 and 1.3000.

The support line is at 1.2900, followed by 1.2880 and 1.2860.

Keep an eye on the FOMC monetary policy statement to be released this evening at 19:00 BST, the UK Markit Services PMI (Apr) at 09:30 BST on Thursday, and the crucial US non-farm payroll (Apr) at 13:30 BST on Friday. The figures will likely cause volatility for GBP and GBP crosses.

It's been a quiet week for European stock markets, and the CAC is flat in Wednesday session. Currently, the index is trading at 5,290.35. On the release front, Eurozone Preliminary Flash GDP remained unchanged in the first quarter at 0.5%, matching the forecast. In the US, the Federal Reserve is expected to maintain interest rates at 0.75%. On Thursday, France and the Eurozone release Services PMIs, followed by Eurozone Retail Sales.

All eyes will be on the Federal Reserve, which releases its policy statement later on Wednesday. A rate hike is extremely unlikely, with the CME Group pricing in a hike at just 5%. This means that the markets will be focusing on the rate statement and the views of policymakers concerning economic conditions. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, so the markets will be looking for another reference to the balance sheet in the rates statement or the minutes of the meeting. The markets are fairly confident that the Fed will press the rate trigger in June, as the odds for a hike have improved to 63%. If the rate statement is more hawkish than expected, we could see these odds increase.

The eurozone has been hampered by years of high unemployment, but the labor situation has improved considerably. The eurozone economy continues to expand, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. The March release remained unchanged at 9.5%, within expectations. Germany has led the way for Europe, with improving employment data. US employment numbers will also be in the spotlight this week, with wage growth and the official nonfarm payrolls report being released on Friday. If these indicators are not close to the estimates, we're likely to see some movement from the CAC.

French voters will head back to the ballot box on Sunday, with Emmanuel Macron and Marine Le Pen vying for the next president of France. European stock markets have been very steady in the second round of the campaign, as opinion polls continue to show a comfortable majority for Macron:

The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.

Source - BBC

French Election Timeline

May 3 - TV debate between the two remaining candidates

May 5 - [from midnight] Poll blackout

May 7 - Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 - Official proclamation of the new President.

May 14 - [from midnight] End of Francois Hollande's mandate

June 11 - First round of legislative elections

June 18 - Second round of legislative elections.

The DAX has edged lower in the Wednesday session, as the index trades at 12,485.50. On the release front, German Unemployment Claims came in at -15 thousand, beating the estimate of -10 thousand. Eurozone Preliminary Flash GDP remained unchanged in the first quarter at 0.5%, matching the forecast. In the US, the Federal Reserve is expected to maintain interest rates at 0.75%. On Thursday, we'll get a look at Services PMI in Germany and the Eurozone, as well as Eurozone Retail Sales.

The eurozone has been hampered by years of high unemployment, but the labor situation has improved considerably. The eurozone economy continues to expand, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. The March release remained unchanged at 9.5%, within expectations. Germany has led the way, with the unemployment rate dropping to 5.9% in February. Unemployment rolls continue to shrink in Germany, and the decline of 15,000 unemployed persons was better than the estimate of 10,000. US employment numbers will also be in the spotlight this week, with ADP Nonfarm Payrolls kicking things off on Wednesday. The indicator is expected to drop sharply to 178 thousand in March compared to 263 thousand a month earlier. On Friday, we'll get a look at wage growth and the official nonfarm payrolls report. If these indicators are not close to the estimates, we're likely to see some movement from the DAX.

The DAX has not shown significant movement in the second quarter of 2017, but traders should keep in mind that the index has been trading at record highs this week. Will the trend continue? Current economic conditions point to the DAX continuing to climb higher. The index has outperformed most eurozone equity indexes in 2017, benefiting from a strong German economy, marked by steady growth and low unemployment. Stronger global demand has boosted Germany's export sector and the Federal Reserve's plans to continue to hike rates in 2017 has pushed German stocks to higher levels.

French voters will head back to the ballot box on Sunday, with Emmanuel Macron and Marine Le Pen vying for the next president of France. European stock markets have been very steady in the second round of the campaign, as opinion polls continue to show a comfortable majority for Macron:

The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.

Source - BBC

French Election Timeline

May 3 - TV debate between the two remaining candidates

May 5 - [from midnight] Poll blackout

May 7 - Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 - Official proclamation of the new President.

May 14 - [from midnight] End of Francois Hollande's mandate

June 11 - First round of legislative elections

June 18 - Second round of legislative elections.

USDJPY: The pair continues to hold on to its upside pressure leaving more strength expected. On the downside, support comes in at the 112.00 level where a break if seen will aim at the 111.50 level. A cut through here will turn focus to the 111.00 level and possibly lower towards the 110.50 level. On the upside, resistance resides at the 112.50 level. Further out, we envisage a possible move towards the 113.00 level. Further out, resistance resides at the 113.50 level with a turn above here aiming at the 114.00 level. On the whole, USDJPY looks to recover further higher.

Sterling was unsettled during Wednesday's trading session with prices violently swinging between losses and gains after reports of Brussels bolstering the Brexit bill to up to $100 billion, which reinforced speculations of the EU playing hardball. Official negotiations of the UK leaving the European Union have yet to begin, but financial heavyweights have already started their battle of words on the Brexit topic. With Theresa May vowing on Tuesday that she will be a "bloody difficult woman" in Brexit talks adding to anxiety, a rocky road filled with obstacles may lie ahead. Sterling could find itself exposed to downside shocks amid the uncertainty, with recent reports of the European Union warning that May could be barred from the negotiations terms, fueling hard Brexit fears.

Focusing on the macro fundamentals, UK construction PMI accelerated in April to 53.1, but this did little to inspire Sterling bulls with prices eventually descending back towards 1.2900. The growing uncertainty around Brexit negotiations, coupled with political instability ahead of the UK general election could create a scenario where markets slightly overlook fundamentals with much of the focus directed towards ongoing Brexit developments.

From a technical standpoint, the GBPUSD could come under renewed selling pressure if bears are able to break below 1.2875. A breakdown below 1.2875 may encourage a further decline towards 1.2775. In an alternative scenario, an intraday breakout above 1.2940 could pave the way to 1.3000.

Fed meeting and ADP in focus

The main event on Wednesday that could rattle financial markets is the Federal Reserve meeting which is widely expected to conclude with interest rates left unchanged. With economic data from the US mostly mixed since the previous Fed meeting and first quarter growth in 2017 cooling at 0.7%, investors may heavily scrutinize the statement to see if there is a change in rhetoric. The Dollar could be at risk of depreciating further if "doves" exploit the softening economic outlook to make a guest appearance today.

On the other hand, if the Federal Reserve maintains its hawkish bias and offers clarity on US rate hike timing, Dollar bulls could be given enough confidence to challenge 99.50.

Some attention may also be directed towards the pending ADP Nonfarm data, which could be treated with some skepticism after it reported a mammoth gain in March jobs, while NFP tumbled well below expectations under 100,000.

Euro searches for direction

The Euro has been on cruise control this week with investors observing the currency from a distance ahead of the second round of the French Presidential election voting on 7 May. With the current polls showing that Emmanuel Macron is holding a solid 20 point lead over Marine Le Pen, markets may have already priced in a Macron victory. Although the Macron outcome on Sunday has the ability to elevate the Euro higher, an unexpected Marine Le Pen victory could still rattle the financial markets with parity on the EURUSD becoming a possibility. From a technical standpoint, a failure for bulls to secure control above 1.0900 may open a path towards 1.0800.

WTI Crude dips below $48

WTI Crude was exposed to heavy losses this week as anxiety over the rising output in Libya and Canada, coupled with concerns of a dip in compliance with OPEC's production cuts enticed sellers to attack. It is becoming increasingly clear that oil prices remain gripped by the oversupply fears with confidence rapidly diminishing over OPEC's ability to stabilize the saturated oil markets. Although some still remain cautiously optimistic that an extension of the production cut deal may limit the global glut, the incessant pumping of US Shale has left most investors skeptical, questioning whether prices will ever balance out. Much attention may be directed towards the pending crude oil inventory report which may pressure oil markets further if there is a build in US crude inventories. From a technical standpoint, WTI Crude is heavily bearish on the daily charts and a breakdown below $47.50 could open a path towards $44.00.

• Sterling steady as election gets underway
• NZD strengthens as unemployment drops below 5%

As from today, we have no MPs in the UK, just candidates. Oddly, you will probably hear more from your local MP over the next 5 weeks than you will for the following 5 years but that's politics.

Sterling seems to be taking all this electioneering in its stride and is trading in narrow ranges at the top end of its recent ranges. The lack of UK data today will probably leave Sterling in that cryogenic state for now. However, a statement from the EU's chief Brexit negotiator has definite 'cat amongst the pigeons' potential.

As the UK election campaign starts to gather momentum, the French presidential elections draw nearer to a conclusion and it looks like Monsieur Macron is likely to take the win. That likelihood has calmed the nerves of Euro traders and the Euro has settled down a little. We get the preliminary calculation of Eurozone economic growth for the first three months of the year today. Quarterly growth is expected to match the previous 0.4% growth but some are forecasting a small uptick in that number. That would boost the Euro; especially if the Producer Price data; also due this morning, is above 4.4% for March.

US data today is slim but the service sector Institute for Supply Management (ISM) report is very influential on sentiment in the Federal Reserve and that is expected to be rather upbeat. If that proves to be the case, then the USD may recover some of its lost ground.

The New Zealand Dollar has gained some ground overnight after positive unemployment data. The rate of unemployment dropped to 4.9% in the 3 months to March and the labour market participation rate hit an all-time high. The only downer on the data was the fact that hourly earnings increased only marginally and missed the forecasts.

And I know it is puerile and childish to mock Diane Abbott after her scattergorical interview yesterday, but it does highlight the way that some politicians are either uninformed or ill-informed. If that had been a performance in front of the Dragon's Den, they would all be out.

Quote

"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies."

Groucho Marx

The NZD/JPY made a strong break to the upside following the surge in equities and Yen weakness. At this point an Inner trend line (black) is making a nice resistance just above 1-3 Wolfe Wave. What does it mean? If we see a price spike towards 1-3 trend line we could see another rejection towards 1-4 target. 78.00-78.15 is the zone where the pair could reject if we see a retracement. If we don't see any retracement, the pair could proceed below 1-4 (77.50) towards 77.25. Further weakness is expected below 77.20.