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Dollar is capitalizing on its strong position and extends its rally om Asian session today, as risk aversion grips global markets. US stocks, which initially showed gains overnight, ultimately closed significantly lower as Treasury yields climbed in response to robust economic data. The sentiment continued in Asia, with major markets opening lower, and followed by extended decline. lower open.

Amid these developments, China's economic data presented a mixed picture, providing little to uplift overall market sentiment. Strong Q1 GDP from China was overshadowed by a batch of weak March data. Further dampening sentiment, S&P Global downgraded the credit rating of Chinese developer Longfor from BBB- to BBB+ yesterday, assigning a negative outlook. These developments in China have cast a shadow over global market sentiment.

In the currency markets, Dollar stands out as the strongest performer of the day, with Japanese Yen and Canadian Dollar also showing resilience. Conversely, Australian Dollar is facing the most significant pressure, followed by New Zealand Dollar and Swiss Franc. Euro and Sterling are holding middle ground as market participants shift their focus to upcoming economic releases, including UK employment data and wage growth, German ZEW economic sentiment, and Canadian CPI.

Technically, AUD/CAD's extended decline affirms that case that corrective recovery from 0.8725 has completed with three waves up to 0.9005. Deeper decline would be seen to 0.8799 support next. Firm break there will argue that whole fall from 0.9063 is ready to resume through 0.8725 support. Let's see if Canadian CPI today would prompt the downside breakout.

In Asia, at the time of writing, Nikkei is down -2.22%. Hong Kong HSI is down -1.93%. China Shanghai SSE is down -1.42%. Singapore Strait Times is down -1.29%. Japan 10-year JGB yield is up 0.0089 at 0.875. Overnight, DOW fell -0.65%. S&P 500 fell -1.20%. NASDAQ fell -1.79%. 10-year yield rose 0.129 to 4.628.

Fed's Daly stresses patience on rate cuts, no urgency required

San Francisco Fed President Mary Daly emphasized a cautious approach to interest rate reductions. Given the current economic and labor market strength, coupled with persistently high inflation rates, she highlighted the lack of urgency to lower interest rate policy.

"The worst thing to do is act urgently when urgency is not required," Daly remarked at an event.

Daly also expressed her reservations about the consequences of misjudging the necessary intensity of policy adjustments. She requires more evidence of inflation consistently moving towards 2% target before considering easing monetary policy.

China's GDP grows 5.3% yoy in Q1, but March data weak

China's GDP grew 5.3% yoy in Q1, above expectation of 5.0% yoy. Comparing to Q4, GDP grew 1.6% yoy. By sector, primary industry was up 3.3% yoy, secondary industry rose 6.0% yoy, tertiary industry rose 5.0% yoy.

In March, retail sales rose 3.1% yoy, below expectation of 5.1% yoy. Industrial production rose 4.5% yoy, below expectation of 6.0% yoy. Fixed asset investment rose 4.5% ytd yoy, above expectation of 4.3%.

USD/CNH is steady after the release with focus on 7.2815 resistance. firm break there will resume whole rebound from 7.0870 and target 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. For now, outlook will stay bullish as long as 7.2354 support holds, in case of retreat.

Looking ahead

UK employment and German ZEW economic sentiment are the main focus in European session. Later in the day, Canada CPI will take center stage. US will release housing starts and building permits, and industrial production.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6422; (P) 0.6458; (R1) 0.6477; More...

AUD/USD's break of 0.6442 support confirms resumption of whole fall from 0.6870. Intraday bias remains on the downside for 61.8% projection of 0.6870 to 0.6442 from 0.6643 at 0.6378. Decisive break there will pave the way to 0.6269 low, and possibly further to 100% projection at 0.6215. On the upside, above 0.6429 minor resistance will turn intraday bias and bring consolidations, before staging another fall.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which is still in progress. Overall, sideway trading could continue in range of 0.6169/7156 for some more time. But as long as 0.7156 holds, an eventual downside breakout would be mildly in favor.

Economic Indicators Update

Key Highlights

• Bitcoin price started a fresh decline below $68,000 and $65,000.
• BTC is facing hurdles near $68,000 and a bearish trend line on the 4-hour chart.
• Crude oil price corrected gains below $86.20.
• Gold price also dipped below the $2,380 and $2,365 support levels.

Bitcoin Price Technical Analysis

Bitcoin price failed to stay above $68,000 and started a fresh decline amid a rise in Israel-Iran tensions. BTC traded below the $66,000 and $65,000 support levels to move into a short-term bearish zone.

Looking at the 4-hour chart, the price traded below a key bullish trend line with support at $68,550. It even settled below the $67,000 level, the 100 simple moving average (red, 4 hours), and the 200 simple moving average (green, 4 hours).

Finally, it tested the $60,000 zone and recently started a decent recovery wave. There was a move above the $64,000 and $65,000 levels.

However, it struggled near the 50% Fib retracement level of the downward move from the $72,874 swing high to the $59,744 low. Immediate resistance is near the $67,000 level. The first key resistance is near the 100 simple moving average (red, 4 hours), $68,000, and a connecting bearish trend line.

The next resistance is near $68,500. A successful close above $68,500 might start another steady increase. In the stated case, the price may perhaps rise toward the $72,500 level.

Immediate support is near the $64,750 level. The next major support sits at $62,850. Any more losses might send the price toward the $60,000 support zone.

Economic Releases

• US Industrial Production for March 2024 (MoM) – Forecast +0.4%, versus +0.1% previous.
• Fed's Williams speech.

China's GDP grew 5.3% yoy in Q1, above expectation of 5.0% yoy. Comparing to Q4, GDP grew 1.6% yoy. By sector, primary industry was up 3.3% yoy, secondary industry rose 6.0% yoy, tertiary industry rose 5.0% yoy.

In March, retail sales rose 3.1% yoy, below expectation of 5.1% yoy. Industrial production rose 4.5% yoy, below expectation of 6.0% yoy. Fixed asset investment rose 4.5% ytd yoy, above expectation of 4.3%.

USD/CNH is steady after the release with focus on 7.2815 resistance. firm break there will resume whole rebound from 7.0870 and target 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. For now, outlook will stay bullish as long as 7.2354 support holds, in case of retreat.

San Francisco Fed President Mary Daly emphasized a cautious approach to interest rate reductions. Given the current economic and labor market strength, coupled with persistently high inflation rates, she highlighted the lack of urgency to lower interest rate policy.

"The worst thing to do is act urgently when urgency is not required," Daly remarked at an event.

Daly also expressed her reservations about the consequences of misjudging the necessary intensity of policy adjustments. She requires more evidence of inflation consistently moving towards 2% target before considering easing monetary policy.

• China’s Q1 GDP expected to fall below 5.0% on Tuesday at 02:00 GMT
• Expansion to remain solid but unlikely to quell stimulus calls
• AUDUSD tests lower boundary of the 2024 range

China to report weaker GDP after disappointing trade data

China remains a major trade partner for advanced economies such as the US and Europe, especially in the manufacturing sector, where its global dominance in terms of production and value added surpasses its peers by a large margin. Therefore, although the West has toughened its stance against Beijing’s trade practices in industrial areas, demand from China will remain vital for global markets.

China’s GDP data scheduled for release on Tuesday will give an insight into how the economy performed in the first three months of the year. Forecasts point to a slowdown to 4.6% y/y in Q1 from 5.2% y/y previously - the lowest in a year - but the sharp decline might be an outcome of the annual comparison effects as China’s delayed reopening at the end of 2022 unleashed a surge in consumption and production in the same period last year.

The unexpected steep 7.5% drop in the value of exports and the almost 2.0% decline in imports in March has already warned traders over an economic deceleration in Q1, but if the quarter-on-quarter GDP reading shows a stronger rebound of 1.4% in Q1 compared to 1.0% in Q4, investors may not sell aggressively the yuan and the aussie. Note that the manufacturing sector returned to expansion in March for the first time in a year, according to the PMI data.

Economic outlook remains blurry

Nevertheless, the economy might have a tough time in boosting investors’ sentiment. The problematic real estate sector, which remains vulnerable to delayed projects, excessive borrowing, and bankruptcy jitters, will keep weighing on the economic outlook. Recent headlines suggest that credit support from banks is well below the amount needed to secure the completion of pre-sold houses, while the previous stimulus measures are already losing power in the new homes market. Funds raising in the Mainland's capital markets is not optimistic either, hitting multi-year lows recently in a sign of broken confidence.

As regards to consumption, the latest inflation figures underlined persisting challenges on the demand front. Consumer prices rose by a marginal rate of 0.1% y/y in March after a 0.7% surge on the back of the Lunar new year celebrations in February, remaining worlds apart as inflation in other major economies is showing some stickiness above central banks’ targets. Producer prices faced stronger headwinds, dipping for the 16th consecutive month by 2.5% y/y.

Hence, given the problematic old growth drivers, such as infrastructure, and the geopolitical and policy risks, which threaten China’s competitiveness in clean energy products, the government might be under pressure to release more stimulus if Tuesday’s GDP data miss expectations.

AUDUSD levels to watch

Looking at AUDUSD, the pair is currently trading at the lower boundary of the 2024 range of 0.6440-0.6630, and in the absence of any positive technical signals, there is little optimism for a rebound. Although the negative surprise in China’s trade data did not cause any serious reaction in the market last week, investors will look for a break below the 0.6440 floor and towards 0.6400 if China’s GDP misses forecasts by a large margin. Slightly lower, the 0.6315-0.6370 support trendline area could be another important pivot area.

Alternatively, for the price to reach the upper band of the range around 0.6630, the bulls will have to overcome the 0.6535-0.65680 zone, where the exponential moving averages (EMAs) are placed. If the pair breaks its horizontal move on the upside, resistance could next emerge near the 0.6730 territory.

• S&P 500 falling inside sharp c-wave
• Likely to fall to support level 5000.00

S&P 500 index continues to fall inside the sharp c-wave of the minor ABC correction ii from the end of last month.

The price earlier broke the support levels 5100.00 and 5140.00, which strengthened the bearish pressure on these index .

Given the worsening sentiment seen across the USA equity, S&P 500 index can be expected to fall further to the next round support level 5000.00.

• EURUSD broke support level 1.0730
• Likely to fall to support level 1.0570

EURUSD currency pair fall after the earlier breakout of the key support level 1.0730 (which has been reversing the price from December) intersecting with the 61.8% Fibonacci correction of the ABC correction (2) from October.

The breakout of the support level 1.0730 accelerated the iii-wave of the active impulse waves 3 and (3) .

Given the continuing bullish USD sentiment, EURUSD can be expected to fall further to the next support level 1.0570.

• BoE’s determination could be tested if this week’s CPI prints surprise on the upside
• Pound could benefit from a strong set of data this week
• Employment data will be released on Tuesday; the inflation report on Wednesday

Inflation in the spotlight

At the last Bank of England meeting, which is still relatively fresh in the market’s mind, the Committee maintained its balanced approach. The UK economy is navigating through rough waters with the upcoming general elections expected to add further fuel to the fire. Interestingly, the UK appears to exhibit signs both from the US and euro area economies.

It is experiencing the strong inflation seen in the former and the weak growth present in the latter. BoE’s inherited dovishness has not been openly expressed yet, but this week’s data could tip the balance in favour of the doves. In the meantime, at least six members are scheduled to be on the wires including Governor Bailey and known hawk Haskel.

Labour market data on Tuesday

On Tuesday, labour market statistics and average earnings data for February will be published. The latter has been a real headache for the BoE doves as, despite the deceleration seen from the 2023 highs, the yearly growth in average earnings remains incompatible with a central bank willing to cut rates. The market forecasts point to a small easing to 5.8% for the excluding bonuses indicator, which would be another positive sign for the doves.

The main reason for the elevated earnings prints is the tightness of the labour market. The official unemployment is expected to climb to 4%, just a tad above its recent all-time low level, with the market paying more attention to the more up-to-date claimant count change. A large jump in March could tentatively show an easing in labour demand. However, this progress is very gradual and might not pick up considerable speed due to the post-Brexit restrictions imposed by the UK government.

Could inflation surprise on the upside?

At 06:00 GMT on Wednesday the March inflation report will be released. Progress has been made on this front as headline CPI dropped in February to its lowest rate since October 2021 with the core indicator proving much stickier. The market is looking for another easing to 3.1% and 4.2% respectively but there might be some sizeable upside risks following last Wednesday’s strong US inflation report.

Confirmation of the market forecasts would appease the BoE doves and bring forward the chances of the first rate cut from September to August. This move could pick up speed if Wednesday’s producer price index results surprise on the downside and thus point to further easing in inflationary pressure during the rest of 2024.

Pound could benefit from a stronger inflation report

The pound has been anxiously trying to take advantage of developments elsewhere, but it has failed to make any concrete gains lately. The ongoing dollar strength has pushed the pound/dollar pair to the lowest level since mid-December 2023 while euro/pound is still hovering close to its recent 2024 lows.

With the ECB seen ready to announce a rate cut in June, a strong set of data this week could push the euro/pound pair towards the 0.8492-0.8504 area and potentially open the door to a new 20-month low level.

On the flip side, weakening inflationary pressure and as loosening labour market could convince the market that a BoE rate cut is closer than currently anticipated and hence allow pound bears to push the euro/pound pair towards the November 23, 2023 downward sloping trendline at 0.8566.

• USDJPY surpasses 154.00
• Round numbers to be watched
• Stochastics indicate overstretched market

USDJPY is surging to another multi-year high above the 154.00 round number, adding 0.8% so far today. The technical oscillators are holding in overbought regions. The RSI is suggesting that more gains may be on cards; however, the stochastic oscillator is indicating an overstretched market as it is creating a bearish crossover within its %K and %D lines above the 80 level, hinting that a potential negative retracement is near.

Should the pair manage to strengthen its positive momentum, the next resistance could come near the next handles such as 155.00 and 156.00 before the market rallies towards the 161.8% Fibonacci extension level of the down leg from 151.95 to 140.20 at 159.15.

However, if prices begin a bearish correction, immediate support could come from the 151.95 obstacle, which overlaps with the 20-day simple moving average (SMA) ahead of the 150.87 barrier. The next key support to watch lower down is the 150.87 region ahead of the 50-day SMA at 150.45 before testing the medium-term ascending trend line at 150.00.

To sum up, USDJPY remains positive since prices are continuing the steep upward rally and only a decrease beneath the 200-day SMA may change the outlook to neutral.