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Daily Pivots: (S1) 1.0936; (P) 1.0960; (R1) 1.0997; More...

Range trading continues in EUR/USD and intraday bias stays neutral. Outlook remains bullish with 1.0830 support intact. On the upside, break of 1.1075 will will resume larger up trend to 1.1273 fibonacci level. Break there will target 61.8% projection of 0.9534 to 1.1032 from 1.0515 at 1.1441. However, firm break of 1.0830 will confirm short term topping and bring deeper decline to 1.0711 support instead.

In the bigger picture, rise from 0.9534 (2022 low) is in progress for 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. Sustained break there will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high). This will now remain the favored case as long as 1.0515 support holds, even in case of deeper pull back.

Daily Pivots: (S1) 1.2379; (P) 1.2414; (R1) 1.2461; More...

GBP/USD is still staying in sideway trading and intraday bias remains neutral at this point. Another rise is in favor with 1.2343 support intact. On the upside, above 1.2545 will target 1.2759 fibonacci level first. Firm break there will target 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095. However, considering bearish divergence condition in 4H MACD, firm break of 1.2343 will confirm short term topping, and turn bias back to the downside for deeper pullback.

In the bigger picture, the rise from 1.0351 medium term term bottom (2022 low) is in progress for 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. Sustained break there will add to the case of long term bullish trend reversal. Further break of 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095 could prompt upside acceleration to 100% projection at 1.3895. For now, this will remain the favored case as long as 1.1801 support holds, even in case of deep pull back.

Daily Pivots: (S1) 0.8947; (P) 0.8970; (R1) 0.8985; More...

Outlook in USD/CHF is unchanged and intraday bias remains neutral. Another decline cannot be ruled out with 0.9070 support turned resistance intact. On the downside, below 0.8858 will resume the down trend to 61.8% projection of 1.0146 to 0.9058 from 0.9439 at 0.8767, which is close to 0.8756 long term support. Strong support is expected there to bring rebound, at least on first attempt. On the upside, break of 0.9070 support turned resistance will confirm short term bottoming and turn bias back to the upside.

In the bigger picture, fall from 1.1046 (2022 high) is in progress for 0.8756 support (2021 low). But overall, this fall is still seen as a leg in the long term range pattern from 1.0342 (2016 high). So, downside should be contained by 0.8756 to bring reversal. Sustained break of 0.9058 support turned resistance will be the first sign of medium term bottoming. However, decisive break of 0.8756 will carry larger bearish implications.

Daily Pivots: (S1) 133.74; (P) 134.23; (R1) 134.58; More...

Intraday bias in USD/JPY stays on the upside as rally from 129.62 is in progress. Further rise should be seen towards 137.90 resistance. On the downside, below 133.85 minor support will turn intraday bias neutral again. But further rally will remain in favor as long as 132.03 support holds.

In the bigger picture, corrective pattern from 127.20 might be extending. But after all, down trend from 151.93 is expected to resume at a later stage. Break of 127.20 will resume this down trend and target 61.8% projection of 151.93 to 127.20 from 137.90 at 122.61. This will now be the favored case as long as 137.90 resistance holds.

Daily Pivots: (S1) 166.20; (P) 166.60; (R1) 167.04; More...

GBP/JPY's rally continues today and hit as high as 167.95 so far. Intraday bias remains on the upside for the moment. Current rally is part of the whole rise from 155.33. Next target is 169.26 resistance first. However, considering bearish divergence condition 4 H MACD. Break of 165.38 minor support will argue that a short term top was already formed. Intraday bias will be turned back to the downside for 162.75 support instead.

In the bigger picture, as long as 38.2% retracement of 123.94 (2020 low) to 172.11 (2022 high) at 153.70 holds, medium term bullishness is retained. That is, larger up trend from 123.94 (2020 low) is still in progress. Break of 172.11 high to resume such up trend is expected at a later stage.

Sterling climbed broadly today following the release of data showing that March's inflation slowed less than expected, with CPI remaining in double digits. This development supports expectations of a further 25bps rate hike by BOE in May, with some speculating that an additional increase could bring the terminal rate to 4.75% in June. Despite this, Dollar is slightly strong due thanks to rising treasury yields. Canadian Dollar is currently the weakest performer for the day, followed by Japanese Yen and Euro, while Australian and New Zealand Dollars are mixed.

From technical perspective, 10-year treasury yield saw a notable rise in early US session. A close above 3.610 resistance level should confirm short-term bottoming at 3.351, increasing the likelihood that the whole corrective decline from 4.333 has completed with three waves down to 3.51. A stronger rally is expected to return to 4.091 resistance level. If realized, this development could provide additional lift to USD/JPY.

In Europe, at the time of writing, FTSE is down-0.21%. DAX is down -0.17%. CAC is up 0.01%. Germany 10-year yield is up 0.026 at 2.505. Earlier in Asia, Nikkei dropped -0.18%. Hong Kong HSI dropped -1.37%. China Shanghai SSE dropped -0.68%. Singapore Strait Times rose 0.44%. Japan 10-year JGB yield rose 0.0023 to 0.478.

ECB Lane: Markets expect rates to remain at elevated levels for an extended period

ECB Chief Economist Philip Lane noted in a speech that "since the cut-off date for the March 2023 projections, the incoming data have been mixed."

Lane pointed out the ongoing divergence in sectoral performance, as services business activity experiences accelerated expansion due to strong reopening effects and increased incomes. In contrast, manufacturing output remained stagnant in the first quarter. He also indicated that the consistent improvement in business and consumer sentiment, despite remaining at low levels, appears to have reached a plateau.

Lane mentioned that market pricing and the ECB's Survey of Monetary Analysts (SMA) foresee that the "policy rate will rise further in the near term and will remain at elevated levels for an extended period."

He explained that once inflation stabilizes at the 2% target in the medium term, it is projected that the policy rate will settle around 2% instead of returning to ultra-low levels. This expectation is primarily driven by the re-anchoring of long-term inflation expectations at the ECB's 2% target, indicating that market participants and monetary analysts anticipate the longer-term equilibrium real rate to hover around zero per cent.

Eurozone CPI finalized at 6.9% yoy in Mar, core CPI at 5.7% yoy

Eurozone CPI was finalized at 6.9% yoy in March, down from February's 8.5% yoy. Core CPI (all items excluding energy, food, alcohol & tobacco) was finalized at 5.7%, up from prior month's 5.6% yoy. The highest contribution to the annual Eurozone inflation rate came from food, alcohol & tobacco (+3.12%), followed by services (+2.10%), non-energy industrial goods (+1.71%) and energy (-0.05%).

EU CPI was finalized at 8.3% yoy, down from prior month's 9.9% yoy. The lowest annual rates were registered in Luxembourg (2.9%), Spain (3.1%) and the Netherlands (4.5%). The highest annual rates were recorded in Hungary (25.6%), Latvia (17.2%) and Czechia (16.5%). Compared with February, annual inflation fell in twenty-five Member States and rose in two.

UK CPI slowed to 10.1% yoy, core CPI unchanged at 6.2% yoy

UK CPI slowed from 10.4% yoy to 10.1% yoy in march, above expectation of 9.8% yoy. CPI all goods index slowed from 13.4% yoy to 12.8% yoy. But CPI all services was unchanged at 6.6% yoy. On a monthly basis, CPI rose 0.8% mom, above expectation of 0.5% mom. Core CPI (CPI excluding energy, food, alcohol and tobacco) was unchanged at 6.2% yoy, above expectation of 6.0% yoy.

Also released, RPI was up 0.7% mom, 13.5% yoy, above expectation of 0.6% mom, 13.3% yoy. PPI input was at 0.2% mom, 7.6% yoy, versus expectation of -0.4% mom, 9.8% yoy. CPI output was at 0.1% mom, 8.7% yoy, versus expectation of -0.1% mom, 8.7% yoy. PPI core output was at 0.3% mom, 8/.5% yoy, versus expectation of 0.2% mom, 9.8% yoy.

Australia's Westpac Leading Index signals below-trend growth, RBA expected to hike rates in May

Australia Westpac-Melbourne Institute Leading Index rose slightly from -0.79% to -0.75% in March, marking the eighth consecutive negative reading. This indicates below-trend growth throughout 2023. Westpac forecasts a modest 1% growth for Australia in 2023, while IMF recently revised its growth forecast for the country from 1.9% to 1.6%. RBA also predicts just 1.6% growth in 2023.

Westpac anticipates a further 25bps increase in the cash rate to 3.85% at RBA's May 2 meeting. The April RBA minutes revealed additional concerns about the inflation outlook, including rising demand due to increased immigration, pressures in the housing market, and risks associated with growing wage growth, particularly in the public sector. The March quarter inflation report, scheduled for release on April 26, will be a crucial data point for the central bank's decision-making process.

GBP/JPY Mid-Day Outlook

Daily Pivots: (S1) 166.20; (P) 166.60; (R1) 167.04; More...

GBP/JPY's rally continues today and hit as high as 167.95 so far. Intraday bias remains on the upside for the moment. Current rally is part of the whole rise from 155.33. Next target is 169.26 resistance first. However, considering bearish divergence condition 4 H MACD. Break of 165.38 minor support will argue that a short term top was already formed. Intraday bias will be turned back to the downside for 162.75 support instead.

In the bigger picture, as long as 38.2% retracement of 123.94 (2020 low) to 172.11 (2022 high) at 153.70 holds, medium term bullishness is retained. That is, larger up trend from 123.94 (2020 low) is still in progress. Break of 172.11 high to resume such up trend is expected at a later stage.

Economic Indicators Update

• Gold reversed from major resistance level 2050.00
• Likely to fall to support level 1953.00

Gold continues to fall after the price reversed down from the major resistance level 2050.00 (which is the upper boundary of the powerful resistance zone, which has been reversing the price from the middle of 2020) coinciding with the upper weekly Bollinger Band.

The downward reversal from the resistance level 2050.00 created the weekly Japanese candlesticks reversal pattern Shooting Star.

Given the bearish divergence on the weekly Stochastic, Gold can be expected to fall further toward the next support level 1953.00 (lower boundary of this resistance zone).

• USDCAD reversed from powerful support level 1.3300
• Likely to rise to resistance level 1.3500

USDCAD recently reversed up from the powerful support level 1.3300 (which has been reversing the price from the middle of November) coinciding with the lower daily Bollinger Band and the 50% Fibonacci retracement of the previous upward impulse from August.

The upward reversal from the support level 1.3300 stopped the previous minor correction ABC 2.

USDCAD can then be expected to rise further toward the next resistance level 1.3500 (top of the earlier correction (b) from the start of April).

ECB Chief Economist Philip Lane noted in a speech that "since the cut-off date for the March 2023 projections, the incoming data have been mixed."

Lane pointed out the ongoing divergence in sectoral performance, as services business activity experiences accelerated expansion due to strong reopening effects and increased incomes. In contrast, manufacturing output remained stagnant in the first quarter. He also indicated that the consistent improvement in business and consumer sentiment, despite remaining at low levels, appears to have reached a plateau.

Lane mentioned that market pricing and the ECB's Survey of Monetary Analysts (SMA) foresee that the "policy rate will rise further in the near term and will remain at elevated levels for an extended period."

He explained that once inflation stabilizes at the 2% target in the medium term, it is projected that the policy rate will settle around 2% instead of returning to ultra-low levels. This expectation is primarily driven by the re-anchoring of long-term inflation expectations at the ECB's 2% target, indicating that market participants and monetary analysts anticipate the longer-term equilibrium real rate to hover around zero per cent.

Full speech of ECB Lane here.

• Eurozone inflation fell to 6.9%, while the core rate rose to 5.7%
• Goldman Sachs expects ECB rate hike in May
• EUR/USD has fallen 0.50% and is trading at 1.0920

Eurozone inflation drops to 6.9%

Eurozone inflation numbers were unchanged in the final estimate. Headline inflation dropped to 6.9% in March, down sharply from 8.5% a month earlier. The not-so-good news is that core CPI, which is a more reliable gauge of inflation trends, inched higher to 5.7% in March, up from 5.6% in February.  The main reason for the drop in the headline figure was a sharp decrease in energy costs, which are not included in the core rate.

Core CPI not only moved the wrong way (upwards), but the 5.7% gain was a record high. This will be a major concern for the ECB, which will likely respond to the sticky core rate with another rate hike at the May 4^th meeting. The ECB was late to the rate-hiking party and lags behind most major central banks, with a benchmark cash rate of 3.0%.

Goldman Sachs has now changed its projection for a terminal rate of 3.75%. up from 3.50%. Goldman Sachs noted that inflation remained “very strong” and also cited an easing of tensions over the banking crisis as the reasons for its more hawkish rate projection. As for the upcoming meeting, Goldman Sachs said it was a close call between a 25-bp and a 50-bp increase, although its working assumption is that the ECB will deliver increases in 25-bp increments at the May, June and July meetings.

The Fed is very likely to raise rates at the May meeting, with an 84% probability according to the CME Group. On Tuesday, Fed member Bostic said that he expects one more rate hike in May and then a hold policy all the way into 2024. The markets are more dovish and anticipate rate cuts before the end of this year, as inflation falls and the economy cools.

EUR/USD Technical

• EUR/USD is testing support at 1.0889. Below, there is support at 1.0804
• There is resistance at 1.0989 and 1.1074