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Canada’s merchandise trade balance swung to a $2.3 billion deficit in March, while February's surplus was revised lower to $476 million.

Exports, which fell by 5.3% in March, gave back most of last month's hefty gain. The contribution to the decline was broad-based, with 9 of 11 sectors falling. Gold and other metal exports continue to swing the headline number, falling by 32.5% month-on-month (m/m). Exports of energy products (-4.9% m/m) and exports of motor vehicles and parts (-6.3% m/m) also contributed to the slide.

Meanwhile, total imports also fell (-1.2% m/m) in March with 7 of 11 product sectors seeing declines. Imports of electronic and electrical equipment fell by 8.1% m/m in March after a sizeable gain last month. Further contributing to the decline was a decrease in metal ores and non-metallic mineral imports (-27.9% m/m), which was partially offset by a 10.8% m/m gain in metal and non-metallic mineral imports.

In volume terms, imports rose by 0.6% in the first quarter while exports were effectively flat.

Canada's trade surplus with the United States narrowed from $8.5 billion in February to $6.5 billion in March.

Key Implications

Before the release of the March trade data, export activity was shaping up to be a decent tailwind to Q1 growth. However, volatility stemming from trade in gold and other metal sectors combined with revisions to last month's data suggest trade may turn out to be a net drag in the first quarter. This is meaningful as it puts downside risk to the most updated forecasts for first quarter GDP growth–including the Bank of Canada's newly revised projections of 2.8%.

March's data pours cold water on the prospects of a sustained upturn in external demand, as export volumes pulled back sharply. Imports, a barometer for domestic demand, suggests the Canadian consumer is holding up moderately well despite the slight decline in March import volumes. However, over the near term we would expect imports to moderate further as spending patterns weaken over the coming months.

Daily Pivots: (S1) 1.0664; (P) 1.0699; (R1) 1.0748; More...

Intraday bias in EUR/USD remains neutral as range trading continues. On the upside, break of 1.0752 will resume the rebound from 1.0601. Sustained trading above 55 D EMA (now at 1.0770) will argue that fall from 1.0980 has completed. On the downside, though, break of 1.0648 will retain near term bearishness and bring retest of 1.0601 low first.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern to rise from 0.9534 (2022 low). Current fall from 1.1138 is seen as the third leg. While deeper decline is would be seen to 1.0447 and possibly below, strong support should emerge from 61.8% retracement of 0.9534 to 1.1274 at 1.0199 to complete the correction.

Daily Pivots: (S1) 1.2481; (P) 1.2516; (R1) 1.2564; More...

Intraday bias in GBP/USD remains neutral as range trading continues. On the upside, above 1.2568 will resume the rebound from 1.2298 to 55 D EMA (now at 1.2578). Sustained break there will argue that fall from 1.2892 has completed already, and bring further rise to this resistance. Nevertheless, on the downside, break of 1.2448 minor support will indicate that rebound from 1.2298 has completed, and turn bias back to the downside for this low.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to up trend from 1.0351 (2022 low). Fall from 1.2892 is seen as the third leg. Deeper decline would be seen to 1.2036 support and possibly below. But strong support should emerge from 61.8% retracement of 1.0351 to 1.2452 at 1.1417 to complete the correction.

Daily Pivots: (S1) 152.27; (P) 155.13; (R1) 157.26; More...

No change in USD/JPY's outlook as correction from 160.20 is in progress. Risk will stay on the downside as long as 157.98 resistance holds. Deeper pullback would be seen to 55 D EMA (now at 152.25), and possibly further to 61.8% retracement of 146.47 to 160.20 at 151.71. But strong support should be seen from 150.87 to bring rebound.

In the bigger picture, current rise from 140.25 is seen as the third leg of the up trend from 127.20 (2023 low). Next target is 100% projection of 127.20 to 151.89 from 140.25 at 164.94. Outlook will remain bullish as long as 150.87 resistance turned support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.9128; (P) 0.9176; (R1) 0.9207; More....

Intraday bias in USD/CHF remains neutral for the moment. Further rally is still in favor as long as 0.9087 support holds. On the upside, above 0.9223 will resume larger rally to 0.9243 resistance. Decisive break there will carry larger bullish implication. However, firm break of 0.9087 will indicate rejection by 0.9243 and turn bias back to the downside 0.9009 support instead.

In the bigger picture, price actions from 0.8332 medium term bottom as tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Further rise would be seen as long as 0.8884 resistance turned support holds. But upside should be limited by 0.9243 resistance, at least on first attempt. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146.

Swiss Franc saw a significant rebound in European session, driven by stronger-than-expected inflation figures for April. Despite this upside surprise, inflation remained within SNB's target range of 0-2% for the eleventh consecutive month. Currently, economists are still largely anticipating a further 25 basis point rate cut by SNB in June, which would adjust the policy rate to a more neutral level of 1.25%. However, these expectations could be subject to change should inflation figures for May indicate acceleration again.

Meanwhile, Japanese Yen continues to dominate as the strongest currency for the week, bolstered by significant spikes on Monday and Wednesday. Despite Japan's top currency diplomat Masato Kanda refraining from confirming any market interventions, reports suggest that as much as JPY 3.5T may have been deployed in market operations on Wednesday. This speculation has solidified 160 mark as a firm ceiling for USD/JPY for now. We're are now keenly waiting to see if upcoming US non-farm payroll data tomorrow might trigger further pullback in USD/JPY.

In other parts of the currency markets, Swiss Franc trails only behind the Yen in strength for the week, with Sterling ranking third. On the flip side, Canadian Dollar is lagging as the weakest performer, followed by New Zealand Dollar and Australian Dollar. Dollar and the Euro are positioned in the middle.

Technically, near term outlook in DOW remains bearish as it's firmly capped by 55 D EMA. The first question for the rest of the week would be on whether correction from 39899.05 would resume through 37611.56. The second question is, if #1 realizes, how would DOW reaction to 38.2% retracement of 32327.20 to 39889.05 at 37000.42. That would set the tone on risk sentiment for the rest of the quarter.

In Europe, at the time of writing, FTSE is up 0.45%. DAX is up 0.18%. CAC is down -0.63%. UK 10-year yield is down -0.0398 at 4.334. Germany 10-year yield is down -0.009 at 2.577. Earlier in Asia,Nikkei fell -0.10%. Hong Kong HSI rose 2.50%. China was on holiday, Singapore Strait Times rose 0.13%. Japan 10-year JGB yield rose 0.0101 to 0.906.

US initial jobless claims unchanged at 208k, vs exp 212k

US initial jobless claims was unchanged at 208k in the week ending April 27, lower than expectation of 212k. Four-week moving average of initial claims fell -3.5k to 210k. Continuing claims was unchanged at 1774k in the week ending April 20. Four-week moving average of continuing claims fell -4k to 1779k.

Also released IS trade deficit widened slightly from USD -68.9B to USD -69.4B, versus expectation of US -69.3B. Nonfarm productivity rose 0.3% in Q1, versus expectation of 0.8%. Unit labor costs rose 4.7% in Q1 versus expectation of 3.2%.

Canada trade balance recorded CAD -2.3B deficit, versus expectation of USD 1.0B surplus.

Eurozone PMI manufacturing finalized at 45.7, deepens recession despite bright spots in Spain and Netherlands

Eurozone's manufacturing sector remains entrenched in recession as April's PMI figures highlight ongoing challenges and disparities within the region. The overall Manufacturing PMI for the Eurozone was finalized at 45.7, a slight decrease from March's 46.1.

Among the member states, Greece led with a PMI of 55.2, though it marked a three-month low for the country. Spain and the Netherlands exhibited positive trends, with Spain reaching a 22-month high at 52.2 and the Netherlands achieving a 20-month high at 51.3. Conversely, major economies like Germany, France, and Italy continued to struggle. Germany's PMI slightly improved to a two-month high of 42.5, and France's was a three-month low at 45.3, despite a slight uptick from the flash estimate.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted the manufacturing sector is prolonging its drawn-out recession into April." He highlighted the significant downturn in new orders, which he described as "a rapid decline unmatched in speed over the past four months and devoid of international support." De la Rubia also pointed out the concerning trends in the capital goods sector, which is usually a bellwether for broader industrial health but has been "hit particularly hard" in the current cycle.

Spain stands out as an anomaly within the Eurozone, continuing to demonstrate economic resilience with sustained growth in its manufacturing sector. This divergence is notable, especially against the backdrop of more subdued economic performances in other major Eurozone economies like Germany, France, and Italy, which have failed to gain similar momentum.

Swiss CPI rises to 1.4% yoy in Apr, above expectations

Swiss CPI rose 0.3% mom in April, above expectation of 0.2% mom. CPI core (excluding fresh and seasonal products, energy and fuel) rose 0.4% mom. Domestic products prices rose 0.1% mom. Import products prices rose 1.1% mom.

Over the 12 month period, CPI accelerated from 1.0% yoy to 1.4% yoy, above expectation of 1.1% yoy. CPI core increased from 1.0% yoy to 1.2% yoy. Domestic products price growth rises from 1.7% yoy to 2.0% yoy. Imported products prices contraction lessened from -1.3% yoy to -0.4% yoy.

Also from Switzerland, retail sales fell -0.1% yoy in March, versus expectation of 0.2% yoy rise. PMI manufacturing fell sharply from 41.4, well below expectation of 45.8.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9128; (P) 0.9176; (R1) 0.9207; More....

Intraday bias in USD/CHF remains neutral for the moment. Further rally is still in favor as long as 0.9087 support holds. On the upside, above 0.9223 will resume larger rally to 0.9243 resistance. Decisive break there will carry larger bullish implication. However, firm break of 0.9087 will indicate rejection by 0.9243 and turn bias back to the downside 0.9009 support instead.

In the bigger picture, price actions from 0.8332 medium term bottom as tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Further rise would be seen as long as 0.8884 resistance turned support holds. But upside should be limited by 0.9243 resistance, at least on first attempt. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146.

Economic Indicators Update

US initial jobless claims was unchanged at 208k in the week ending April 27, lower than expectation of 212k. Four-week moving average of initial claims fell -3.5k to 210k.

Continuing claims was unchanged at 1774k in the week ending April 20. Four-week moving average of continuing claims fell -4k to 1779k.

Full US jobless claims release here.

It has been a remarkable week for the yen, which has exhibited sharp swings throughout the week.

The Japanese yen fell as much as 1% earlier and on Thursday but has pared most of those losses. USD/JPY has risen 0.38% to 155.19 at the time of writing.

In the Asian session, the yen fell as low as 157.55 but then recovered to precisely 153. The reason for the swing is unclear but there are strong suspicions that Japan’s Ministry of Finance (MoF) ordered another round of intervention. Japan’s top currency official, Masota Kanda, refused to comment on whether Japan had intervened. Kanda was also mum about whether there was intervention on Monday, when the yen spiked and fell below the 160 level before recovering.

Money market movements indicate that the MoF did intervene on Monday, selling as much as $35 billion to prop up the yen. The yen’s swings Monday and today could signal that the MoF has targeted 160 as its “line in the sand” for intervention.

Fed holds rates, US dollar slips

There was no surprise from the Federal Reserve which maintained the benchmark rate in the target range of 5.25% to 5.50% on Wednesday. This marked a six straight pause, as Fed Chair Powell was clear that high inflation has delayed rate cuts. The rate statement said that inflation had fallen in the past year but there was a lack of progress towards the 2% inflation target in recent months. At a press conference, Powell said that the Fed was not yet confident that inflation was falling closer to the target.

Consumer inflation has been moving higher and the US economy remains surprisingly strong, which has complicated the Fed’s plan to provide relief to households by lowering rates. Still, the Powell said the next rate move was unlikely to be a hike, which sent the US dollar broadly lower against the majors on Wednesday. The yen soared as much as 3.2% against on the dollar after the rate announcement and closed on Wednesday with gains of 2%.

USD/JPY Technical

• USD/JPY is testing resistance at 155.13. Above, there is resistance at 157.26
• There is support at 152.27 and 150.14

Brent crude oil prices have dropped to $83.95 per barrel on Thursday, marking the lowest level in seven weeks. This decline follows recent US statistics indicating a significant increase in crude oil inventories and production. According to the Department of Energy, inventories rose by 7.30 million barrels last week, contrary to the forecasted decrease of 2.3 million barrels. Additionally, February's oil production escalated to 13.15 million barrels per day from January's 12.58 million, the most substantial monthly increase in three and a half years.

These developments have provided bearish signals for the market, mirroring similar trends on the commodity platform.

Amidst falling oil prices, there is ongoing discussion about potential US actions to replenish their strategic hydrocarbon reserves, particularly if prices drop to $79.00 per barrel or below.

The oil market is also influenced by some stabilisation in the Middle East, with emerging hopes for a ceasefire between Israel and Hamas, facilitated by Egypt. This development has reduced the risk of a broader conflict in the region, contributing to the decrease in oil prices.

Brent technical analysis

On the H4 chart, Brent oil has formed a consolidation range around the $87.50 level, with the current correction wave extending downwards. The price has already reached $83.50, and a further stretch to $82.82 is possible. Upon completing this correction, a new wave of growth towards $88.60 is anticipated, potentially continuing to $95.00. This bullish scenario is supported technically by the MACD indicator, whose signal line is below zero, suggesting a forthcoming update of the lows.

On the H1 chart, a fifth correction structure is developing towards $82.72. Once this target is achieved, a growth phase to $88.58 is expected, marking the first target of the new growth wave. This outlook is corroborated by the Stochastic oscillator, with its signal line currently above 80 and poised to descend to 20.

Two-day recovery seems to be running out of steam, following repeated failure to break above thin daily cloud, with long upper shadows on daily candles, warning of persisting pressure.

Technical picture on daily chart is bearishly aligned as MA’s remain in full bearish setup and 14-day momentum turned south and nearing the centreline.

Another failure to clear cloud top, reinforced by 55DMA would add to signals of recovery stall and increase risk of fresh weakness and retest of 0.8530 (Apr 30 low) and 0.8520 (Apr 14 low).

Only acceleration and close above 0.8560 /75 zone, where a cluster of daily MA’s (10/20/100) and Fibo 38.2% of 0.8644/0.8530 bear-leg) would provide relief and shift near-term focus to the upside.

Res: 0.8560; 0.8575; 0.8587; 0.8605.
Sup: 0.8545; 0.8530; 0.8520; 0.8503.