Sample Category Title

• Sterling jumps on election announcement
• USD weaker on Organization of the Petroleum Exporting Countries (OPEC) news and Sterling's advance
• Aussie consumer confidence slips

Well, that was a turn up for the books, wasn't it? Prime Minister, Theresa May, caught everyone napping after her walk in the countryside persuaded her to call a snap election. I love hearing other politicians accusing a Prime Minister of playing politics, as though they wouldn't think of such a thing. And I love the fact that, whilst they all accuse her of U-turning, they will definitely vote for the election to take place.

The markets liked the idea, but shares in the major exporting businesses slipped as Sterling rallied. Their earnings are likely to be damaged by the strength in the Pound. Sterling's rally appears to be related to the kind of Brexit deal that could be done by a UK Prime Minister with a sizeable majority in Parliament. EU commentators suggested a Prime Minister with the clout to deliver on any agreement was a better counterparty for the EU negotiators to deal with. If that is so, a softer Brexit with more concessions on both sides is more likely and that is seen as a positive for the UK economy.

Sterling's day was a bright one; after the initial dip, traders got to grips with the logic of the decision and the Pound began to rally. That rally certainly wasn't hindered by the International Monetary Fund (IMF) raising its forecasts for UK growth.

There was other news, though. OPEC has committed to bringing down oil inventories and returning some stability to the petrochem market. That means higher prices, with the consequences of higher inflation around the world and a weakened US Dollar. Whether the USD will actually weaken or just not strengthen as much is a moot point at this stage.

With that in mind, this afternoon brings the release of the US Federal Reserve's Beige Book; a regional perspective on the US economy. That is expected to be rather upbeat, although we can expect the overuse of the words 'moderate' and 'somewhat', as is their wont. The US Dollar, which has weakened on the oil news and against a stronger Pound, is marginally weaker against the Euro as well.

Before then, we will see EU inflation data, which is forecast to be a tad stronger than last month. The Euro has fallen back to flirt with €1.20 against the Pound, but is fairly robust against the weakened USD at $1.07.

Overnight, we heard that the weekly consumer confidence measure in Australia fell back last week to return the index to its average level. In fact, expectations for the economy over the next five years dropped by 4.1%, the index's lowest level since September 2015. The Reserve Bank of Australia is battling a familiar problem; overheating housing markets in major cities, but less so elsewhere. Hence, no room to raise interest rates to cool the city housing markets for fear of killing more rural economies. The Aussie Dollar remains at the weaker end of recent ranges.

That's about all there is for today. You'll have plenty of electioneering rhetoric to deal with, so I'll leave you to put your headphones on and lie down in a darkened room ready for the onslaught. Oh and there is one other story. Apparently, World War Three will start on 13th May 2017. That isn't my prediction, it is the word of self-proclaimed 'messenger of God' Horacio Villegas. He predicted the Donald Trump election win (a number of other people did that, by the way) and he believes nuclear war will break out on the 100th anniversary of the visitation of Our Lady of Fatima. That was 13th May 1917. I just thought I would mention it…just in case you were wondering. Tin hat, anyone?

War report

The US Secretary for Defence, Ash Carter, is briefing Donald Trump in the Oval Office.

"Oh and finally, sir, three Brazilian soldiers were killed in Syria today."

Trump goes pale, his jaw hanging open in stunned disbelief.

He buries his face in his hands, muttering "My God...My God".

"Mr. President," says Carter, "Soldiers in battle die. It's terrible, I know, but I've never seen you so upset. What's the matter?"

Trump looks up and says..."How many zeros are there in a Brazilian?"

EUR/JPY - 116.75

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 118.00, Target: 116.00, Stop: 118.60

O.C.O.

Buy at 115.25, Target: 117.25, Stop: 114.65

Position: -
Target: -
Stop: -

New strategy :

Sell at 118.00, Target: 116.00, Stop: 118.60

O.C.O.

Buy at 115.80, Target: 117.80, Stop: 115.20

Position: -
Target:  -
Stop:-

As the single currency has risen again after brief pullback, adding credence to our view that a temporary low has been formed at 114.85, hence consolidation with mild upside bias is seen for further gain to 117.20, then 117.40-50, however, reckon upside would be limited to 118.00-10 and bring retreat later, below 116.25-30 would bring weakness to 115.75-80 but reckon 115.40-50 would hold, bring another rebound later.

In view of this, whilst we are looking to turn long on dips, we would also sell euro on subsequent rebound towards 118.00. Only below said support at 114.85 would signal recent entire fall from 124.10 top is still in progress and downside risk remains for further weakness to 114.40-50, then towards 114.00-10, however, near term oversold condition should prevent sharp fall below latter level and risk from there is seen for a much-needed rebound to take place later.

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 – 0.7520

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 down

Original strategy :

Exit long entered at 0.7525

Position: - Long at 0.7525
Target:  -
Stop: -

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although aussie has retreated after meeting resistance at 0.7611 earlier this week and consolidation with mild downside bias is seen for weakness to 0.7495-00, break of indicated previous support at 0.7473 is needed to retain bearishness and extend the fall from 0.7750 top to 0.7450-55 (50% Fibonacci retracement of 0.7158-0.7750) but 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 stand aside for now. Above 0.7560-65 would prolong consolidation and bring another bounce to 0.7600 but break of said resistance at 0.7611 is needed to revive bullishness, bring a stronger rebound towards resistance at 0.7680 which is likely to hold from here. 

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.

Currency pair GBP/USD

The UK Prime Minister Theresa May has announced her goal to organise new elections ahead of the Brexit negotiation process between Great Britain and the European Union. The snap general election call would take place on June 8, 2017 but needs approval by a majority of Member of Parliament in the House of Commons. The vote will be held today on Wednesday 19 April 2017.

The election news caused the GBP/USD to break several tough and long resistance zones. The bullish move broke the contracting triangle chart pattern formation from the daily chart. The wave 4 (green) pattern could still be valid because the wave 1 (from the daily chart) has not yet been reached but a movement towards or above the 78.6% Fib makes a wave 4 (green) invalid

The GBP/USD breakout could be a wave 3 (purple) momentum and the current pullback is a potential wave 4 (purple) pullback. Such a retracement often bounces at the 38.2% Fibonacci level for a wave 5 continuation within wave C (orange).

Currency pair EUR/USD

The EUR/USD broke above the resistance trend line (dotted red) and expanded the wave 2 (brown) correction as indicated in yesterday's wave analysis. Price has now reached the 50% Fibonacci retracement level which could cause a bearish bounce – see the 1 hour chart.

The EUR/USD indeed developed an ABC (purple) zigzag but price could be expanding the wave C (purple) part with 5 internal waves (pink). The current potential wave 4 (pink) remains valid as long as price stays above the 50% Fibonacci retracement level. A potential 5th wave after completing wave 4 (pink) could see price challenge the 61.8% Fib of wave 2 (brown).

Currency pair USD/JPY

The USD/JPY is building a potential wave 4 correction (orange), which would become invalid if price retraced above the bottom of wave 1 (red line). A break below the support level (blue) could indicate a bearish breakout and completion of wave 4 (orange).

The USD/JPY could be building an ABC (purple) zigzag correction towards the Fibonacci levels of wave 4 (orange). A break below the Fibonacci levels of wave B (purple) would invalidate the wave count. A break above the resistance level (red) could spark a wave C (purple).

The GBP/USD spiked heavily after UK PM Theresa May called for snap UK elections on June 8. UK PM May stated that these elections might further instill the stability in UK and would provide stability for longer period. Traders favored UK PM's reasoning and the GBP flew off above weekly resistance levels.

The pair has formed a bullish pennant that might provide a further breakout to the upside above 1.2855 targeting 1.2907 and 1.2946. In case of retracement, technically the POC comes within 1.2735-60 (ATR low, W H5, D H3) and rejection should target 1.2835 and 1.2855 with the possible breakout as mentioned above.

D L3 - Daily Camarilla Pivot (Daily Interim Support)

D H3 - Daily Camarilla Pivot (Daily Interim Resistance)

D H4 - Daily Camarilla Pivot (Strong Daily Resistance)

D L4 - Daily Camarilla Pivot (Very Strong Daily Support)

D L5 - Daily Camarilla Pivot (Strongest Daily Support)

W H5 - Weekly H4 Camarilla (Strongest Weekly Resistance)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

Notes/Observations

British lawmakers set to approve PM May's June 8th election plan

Overnight:

Asia:

China said to have eased its yuan outflow controls last week citing smaller risk of capital exodus and greater market confidence in the value of the yuan. (**Insight: 1st relaxation of outbound capital control in nearly two years ). Banks can now freely process outbound yuan payment (matched payment reporting no longer required)

Europe:

German govt believes an interest rate increase by the ECB would help to reduce current account surplus due to an expected strengthening of the euro. Fin Min Schaeuble planned to present eight-page paper at the spring meeting of the IMF later this week (**Note: does not call for the ECB to raise interest rates)

German Bundesbank's Dombret (ECB SSM member): Bundesbank sees 800 banks that are vulnerable to interest rate risk

UK Yougov Poll: PM May on course for 114 seat majority; could win 382 seats compared to 330 currently (17 seat majority)

Americas:

Runoff election set for Jun in Georgia special congressional election between Ossoff (D) and Handel (R)

Energy:

(US) Weekly API Oil Inventories: Crude: -0.8M v -1.3M prior; 3rd straight draw

Economic Data

(EU) Mar EU27 New Car Registrations: 11.2% v 2.2% prior

(AT) Austria Mar CPI M/M: 0.6% v 0.3% prior; Y/Y: 2.0% v 2.2% prior

(ZA) South Africa Mar CPI M/M: 0.6% v 0.9%e; Y/Y: 6.1% v 6.3%e (6-month low)

(IT) Italy Feb Total Trade Balance: +€1.9B v -€0.6B prior; Trade Balance EU: €0.2B v €0.3B prior

(EU) Euro Zone Mar CPI M/M: 0.8% v 0.8%e; Y/Y (Final reading): 1.5% v 1.5%e; CPI Core Y/Y(Final reading): 0.7% v 0.7%e

(EU) Euro Zone Feb Trade Balance (Seasonally Adj): €19.2B v €18.0Be; Trade Balance NSA(unadj): €17.8B v €16.2Be

Fixed Income Issuance:

(IN) India sold total INR140B vs. INR140B in 3-month and 6-month Bills

(DK) Denmark sold total DKK740M in 2027 and 2039 Bonds

(EU) ECB allotted $80M in 7-day USD Liquidity Tender at fixed 1.41% vs $35M prior

(SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2023 and 2028 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 flat at 3,420, FTSE -0.1% at 7,142, DAX +0.2% at 12,023, CAC-40 +0.2% at 5,000, IBEX-35 % +0.7at 10,334, FTSE MIB +1.2% at 19,677, SMI -0.3% at 8,503, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European equity indices are trading mixed as political uncertainty in France and the UK continue to weigh on the markets; Banking stocks providing some support across the board as shares of Intesa Sanpaolo, ING Groep, and SocGen lead the sector gains in the Eurostoxx; commodity and mining stocks trading notably higher in the FTSE 100 as copper prices trade higher intraday; energy stocks trading lower in the index as oil prices stabilize after yesterday’s sell off; shares of Burberry the notable laggard in the index after releasing H2 SSS results lower than expected.

Upcoming scheduled US earnings (pre-market) include Abbott Laboratories, TD Ameritrade, BlackRock, Genuine Parts, Huntington Bancshares, Lithia Motors, Morgan Stanley, Signature Bank, Textron Inc, US Bancorp.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Associated British Foods ABF.UK +3.6% (H1 results), Bunzl BNZL.UK -1.2% (Q1 sales), Bonmarche BON.UK +4.7% (Q4 sales), Burberry BRBY.UK -5.9% (H2 sales), Exova Group EXO.UK -0.6% (To be acquired by Element Materials Tech for 242.35p/shr valued at £620.3M), Heineken HEIA.NL +1.1% (Q1 results), Remy Cointreau RCO.FR -0.4% (FY16/17 sales), Rentokil Initial RTO.UK -1.5% (Q1 sales), Tomtom TOM2.NL +4.8% (Q1 results), Zalando ZALG.DE -4.5% (prelim Q1 results)]

Energy: [Vopak VPK.NL +3.9% (Q1 results)]

Financials: [Great Portland GPOR.UK +0.3% (special dividend), Segro SGRO.UK +0.5% (trading update)]

Materials: [Akzo Nobel AKZA.NL +0.7% (Q1 results, strategic plan, special dividend)]

Technology: [ASML Holdings ASML.NL +0.4% (Q1 results), Frontier Developments FDEV.UK +10.7% (trading update), GB Group GBG.UK +3.9% (trading update)]

Utilities: [Abertis ABE.ES -1.8% (Atlantia said to offer about €16/shr for Abertis)]

Speakers

ECB's Hansson (Estonia): Not too early to have a discussion on ECB policy but was too early for any concrete actions

Treasury Sec Mnuchin: President Trump is "absolutely not" trying to talk down USD

UKPM May: Possible to complete Brexit negotiation within the two year timeframe and reiterated stance that there will be NO 2nd referendum

Fitch: decision to call an early general election does not alter our UK sovereign rating assessment

Austrian member of the Council of Europe observer mission: Up to 2.5M votes could have been manipulated in Sunday's Turkish referendum

South Africa Fin Min Gigaba: To meet with Moody's during upcoming bond roadshow

Turkey Election Board: To assess election objections on Wed, Apr 19th (today)

China govt said to urge fiscal and monetary measures if unemployment situation worsens

OPEC Sec Gen Barkindo reiterated optimism that policy measures have taken us on the path of recovery. OPEC to decide on extending production cuts on May 25th

Kuwait Oil Min AlmarzooqOpec to study decision to extend oil production cuts before May 25th meeting. Saw Iran maintaining current production level if cuts are extended

Currencies

US Dollar index tested 3-week lows below 99.47 on Tuesday and remained in a consolidated mode in a quiet EU session.

EUR/USD was starting the day testing its best levels for the month and on course for its 4th straight day of gains but some weakness did slip in just ahead of the NY morning. ECB's Hansson noted that it was too early for any concrete action seems to take some wind out of the sails for the Euro. Political headwinds from the upcoming 1st round of the French election also a factor in limiting Euro gains

GBP/USD was retracing after hitting 6-month highs above 1.2860 on Tuesday after PM May called an early general election ahead of Brexit negotiations. Pair below 1.2820 level as the NY morning approached

USD/JPY was higher and inching back towards the 109 area

Fixed Income

Bund futures trade at 163.55 down 13 ticks having gaped lower from yesterday's close of 163.86 as Equities recoup some of yesterday's losses. Futures look to 163.99 initially followed by 164.20. A continued move lower targets yesterday low of 163.34 then 163.01.

Gilt futures trade at 128.70 down 4 ticks falling from yesterday's close of 129.00 following the yesterday's snap election announcement, which saw Cable push higher by over 3 big figures. Support moves to 128.42 low followed by 128.24 then 127.94. A move back high targets 129.00 followed by 129.24. Short Sterling curve is flattening slightly with Jun17/Jun18 spread widening marginally to 10/10.5bp.

Wednesday's liquidity report showed Tuesday's excess liquidity fell to €1.570T a fall of €17B from €1.587T prior. Use of the marginal lending facility fell to €254M from €721M prior.

Corporate issuance saw $10.98B come to market led by financial names headlined by Citigroup 3 part $4.5B offering and JP Morgan's $5.25B 3 part offering. This puts issuance for the week at $11.8B and Monthly issuance at $44.2B.

Looking Ahead

(CO) Colombia Mar Consumer Confidence Index: -19.5e v -24.3 prior

(IT) Italy Debt Agency (Tesoro) announces upcoming CTZ and BTPei auctions for Apr 24th

05:30 (UK) Weekly John Lewis Partnership LFL sales

05:30 (DE) Germany to sell €1.0B 2.5% July 2044 Bunds

05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 3-month and 12-month Bills

06:00 (RU) Russia to sell combined RUB39.5B in 2019 and 2033 OFZ bonds

06:00 (PT) Portugal Mar PPI M/M: No est v -0.8% prior; Y/Y: No est v 4.0% prior

06:00 (IE) Ireland Feb Property Prices M/M: No est v 0.6% prior; Y/y: No est v 7.9% prior

06:45 (US) Daily Libor Fixing

07:00 (US) MBA Mortgage Applications w/e Apr 14th: No est v 1.5% prior

07:00 (BR) Brazil Apr IGP-M Inflation (2nd Preview): -0.7%e v +0.1% prior

07:00 (UK) Weekly PM May question time in House of Commons

08:00 (PL) Poland Mar Employment M/M: 0.2%e v 0.3% prior; Y/Y: 4.6%e v 4.6% prior

08:00 (PL) Poland Average Gross Wages M/M: 5.4%e v 0.6% prior; Y/Y: 4.3%e v 4.0% prior

08:15 (UK) Baltic Dry Bulk Index

09:00 (EU) Weekly ECB Forex Reserves

10:30 (US) Weekly DOE Crude Oil Inventories

12:00 (US) Fed's Rosengren speaks at Bard College Conference

12:00 (CA) Canada to sell 2-Year Bonds

14:00 (US) Fed Beige book

'The 240-minute EUR/USD chart is rallying from a head and shoulders bottom. If the bulls get a breakout, the targets are a measured move up and a 50% correction.' – Al Brooks, Brooks Price Action (based on investing.com)

Pair's Outlook

The common European currency has reached the resistance put up by the weekly R2 at 1.0729 against the US Dollar. On Wednesday morning the currency exchange rate was in a slight retreat, as a consolidation of positions was occurring after the almost 100 base point surge of Tuesday. There are two possible short term outcomes for the pair. It can soon resume the surge and set its eyes on the weekly R3, which is located at the 1.0780 level. On the other hand the pair might bounce off the weekly R2 and retreat back to the combined support of the 20-day SMA at 1.0690 and the monthly PP at 1.0686.

Traders' Sentiment

SWFX traders have shifted their positions, as 51% of open positions are short on Wednesday, compared to 51% long on Tuesday. Meanwhile, 53% of set up orders are to sell.

'The USD side also looks supportive for further gains in cable, which reflects softer US data surprises, a longer timeline for fiscal reform and a shift in Fed pricing.' – TD Securities (based on FXStreet)

Pair's Outlook

UK Prime Minister May's surprise announcement on Wednesday lifted the Sterling, allowing it to gain more than 270 pips against the US Dollar. The six-month down-trend can now be called completely breached, since the resistance cluster around 1.2610 was also easily pierced. However, the Pound encountered some resistance around the 1.29 handle, which is now the new Cable's new target. From this point on the British currency is likely to begin sliding down, undergoing a correction, but the monthly R1 at 1.2743 is expected to provide sufficient support to keep the pair elevated.

Traders' Sentiment

Market sentiment remains equally divided between the bulls and the bears, while the share of purchase orders inched higher, namely from 49 to 51%.

'We still think the dollar is going to strengthen over time based on the outlook for US monetary policy... but for now, with markets not heavily focused on monetary policy, it could explain this consolidation (for the greenback).' – Wells Fargo (based on Business Recorder)

Pair's Outlook

The Greenback was unable to outperform the Japanese currency yesterday, which resulted in a failure to preserve the descending channel pattern. Nevertheless, the Buck is not ready to give up and is likely to take another shot at pushing higher in order to settle above the channel's support line. The 200-day SMA is unlikely to provide resistance at this point, but the monthly S1 at 108.17 is the level to focus on, as it prevented the US Dollar from edging higher four times now. Meanwhile, technical indicators are unable to confirm the possibility of the positive outcome, but signals are no longer bearish.

Traders' Sentiment

Market sentiment remains strongly bullish, as 72% of all open positions are long (previously 73%). The number of orders to acquire the Buck edged down from 62 to 58%.

'The whole situation for gold is more than optimistic because of the geopolitical tensions aroused by North Korea and with the interest rate hike expectations coming down.' – Mark To, Wing Fung Financial Group (based on Reuters)

Pair's Outlook

On Wednesday morning the yellow metal's price was in a retreat just below the 1,290 mark, where the commodity price has been since the higher opening of Monday's trading session. During the second half of Tuesday's trading the bullion's surge was suddenly stopped by a market participant selling around 20 000 futures contracts. That forced the metal to retreat and find support in the 61.80% Fibonacci retracement level, which is located at the 1,278.73 level. It is most likely that this level will continue to provide support to the metal, as it is still expected that the bullion will reach the 1,300 mark.

Traders' Sentiment

Traders are bearish on the metal, as 55% of open positions are short. However, 64% of trader set up orders are to buy the bullion.