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The Euro accelerated lower on Monday after upside attempts in early European session were capped by 1.10, now reverted to resistance.

Pullback from new 2023 high (1.1075) extends into second consecutive day and gains pace, as dollar advances on rising bets on Fed rate hike next month, while upbeat US data on Monday added to positive signals for the US currency.

Bears broke through initial supports at 1.0943/39 (Fibo 23.6% of 1.0516/1.1075 / 10DMA) and pressure round-figure support at 1.0900, ahead of next pivots at 1.0886/62 (20DMA / Fibo 38.2%) loss of which would further weaken near-term structure.

Today’s close below broken supports at 1.0943/39 to add to growing reversal signals, which still require confirmation on sustained break below pivots at 1.0862/31 (Fibo 38.2% / Apr 10 higher low).

Res: 1.0943; 1.1000; 1.1032; 1.1075
Sup: 1.0886; 1.0862; 1.0831; 1.0796

Cable remains at the back foot on Monday, but with limited extension of Friday’s nearly 0.9% drop so far, though dollar keeps positive tone on growing expectations of another Fed rate hike in May.

Much better than expected release of US Empire State Manufacturing Index (Apr 10.8 vs -18.00 f/c) added support to the greenback.

Rising 20DMA (1.2375) and Fibo 23.6% of 1.0802/1.2545 (1.2370) offered temporary support, but near-term risk remains shifted to the downside and threatening break of pivotal supports at 1.2375/70 and 1.2343 (Apr 10 trough).

Sustained break here to generate fresh bearish signal on completion of a double-top pattern (1.2525/45) and risk deeper fall.

Weakening daily studies contribute to the outlook as falling 14-d momentum is approaching the borderline of negative territory and stochastic is heading south, while MA’s are in mixed setup.

Loss of 1.2343 pivot would risk acceleration towards 1.2262 (Fibo 38.2% of 1.0802/1.2545) and 1.2180 zone (50% retracement/converged 55/100DMA’s) in extension.

Near-term action is expected to remain biased lower while holding below 10DMA (1.2443), but extended range-trading can be expected if bears fail to clear supports at 1.2375/70.

Res: 1.2443; 1.2476; 1.2500; 1.2545.
Sup: 1.2343; 1.2262; 1.2190; 1.2174.

Cryptocurrencies are experiencing a slowdown as traders refocus their attention on earnings and economic fundamentals. Last week, Ethereum's Shapella Upgrade was successfully implemented, causing a surge past the 2000 level. While some feared the upgrade would lead to a selloff, investors chose to emphasize the long-term advantages of the update. As a result, Ethereum remains well-supported above the 2000 threshold despite the pullback.

In the short term, Ethereum's prospects appear bullish, provided the 1824.70 support level remains intact. An ongoing rally could propel Ethereum towards a long-term fibonacci retracement level of 38.2% retracement of 4863.75 to 878.50 at 2400.86. However, Rejection by this level will keep price actions from 878.50 as a corrective move only, and keep medium term outlook neutral at best.

Meanwhile, Bitcoin has slipped back under the 30k mark after a brief spike to 31011 last week. The near-term outlook for Bitcoin will stay bullish as long as the 27808 support level holds. The climb from 15452 has the potential to reach a 38.2% retracement of 68986 to 15452 at 35901. Similar to Ethereum, if Bitcoin is rejected by 35901, price action from 15452 would be viewed as corrective, leaving the medium-term outlook neutral at best.

Daily Pivots: (S1) 1.0952; (P) 1.1014; (R1) 1.1055; More...

EUR/USD's pull back from 1.1075 extends lower today but stays above 1.0830 support. Intraday bias remains neutral and outlook stays bullish. Above 1.1075 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 bottoming 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) 1.2361; (P) 1.2454; (R1) 1.2508; More...

GBP/USD is still staying above 1.2343 support and intraday bias remains neutral. Another rise is in favor and 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) 0.8885; (P) 0.8922; (R1) 0.8977; More...

USD/CHF's recovery from 0.8858 extends higher today but stays below 0.9070 support turned resistance. Intraday bias remains neutral first. 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.

Markets

Europe took a slow start to the new week. Core bonds struggled to find direction in a session where news and data was scarce. As trading evolved, core bonds eventually extended Friday’s losses with US Treasuries underperforming German Bunds already before the release of a better-than-expected Empire Manufacturing. The April headline index rebounded sharply from -24.6 to 10.8 (vs -18 consensus), the highest since July and the first positive reading in five months. New orders surged by a record 46.8 points to 25.1. Actual shipments also shot up by a whopping 37.4 points. Headcount is still expected to shrink though less than in March. Prices paid eased from 41.9 to 33 signaling easing producer prices though prices received edged up to 23.9. Business conditions for the six month ahead period improved as well but remain low in a historical perspective. US yields add between 4 and 6.1 bps with the front end of the curve taking the lead higher. German yields advance 2 bps (2-y) to 4.1 bps (30-y). Core bond yields further bottoming out suggests markets are (getting) past the mid-March financial turmoil and instead embrace the idea of more central bank tightening to come. Current market pricing implies an >80% chance of a 25 bps Fed rate hike in May. Euro area money markets expect an additional 75 bps more tightening to come. There’s a 25% odd for a 50 bps move in May but it’s building after last week’s (orchestrated?) verbal intervention by the likes of ECB Wunsch. Equities in Europe have come a bit under pressure after an impressive rally over the past month. The EuroStoxx50 touched the 4K barrier mid-March and tested the 4400 level end of last week and again today. Failure in pushing through resulted in a muted technical countermove with the index losing 0.5% currently. WS opens mixed. Equities losing some steam and USTs underperforming are giving the dollar an edge. DXY rises from 101.57 to 101.83 and EUR/USD slips from 1.10 at the open to 1.0955 now. USD/JPY extends gains to 134.18 within a developing shallow upward sloping trend channel. EUR/JPY briefly hit the highest level since end-October before paring gains to just south of 147. Sterling strengthens despite the fragile risk mood and gilt outperformance (yields gain less than 2 bps). EUR/GBP loses half a big figure intraday, dropping from a 0.8872 high to 0.8825 currently.

News & Views

The Swedish government published its 2023 spring fiscal policy bill and the spring amending budget for 2023. The government assesses the Swedish economy to be in recession throughout 2023. It downwardly revised its 2023 growth forecast from -0.7% to -1.0%. At the same time, headline inflation/CPIF is expected at 8.8% and 5.9% respectively, marginally lower from the December forecasts with inflation driven primarily by higher prices of food and services, whereas the impact of energy prices is decreasing. Underlying inflation (ex. interest costs and energy) is expected at 6.6% this year. Public finances are to be impacted negatively by declining demand in the economy in the coming years but the fiscal situation stays robust with government debt at a historically low level (31.0% of GDP expected in 2023 & 2024). In this context, the government says it is exercising responsibility through continued restrain in its fiscal policy while ensuring support goes primarily to vulnerable households. The krone is strengthening modestly today. Still, at EUR/SEK 11.34, the Swedish currency is holding within reach of the post-pandemic lows (EUR/SEK 11.44/48) as the Riksbank takes a rather balanced anti-inflation approach.

According to data released by the National Bank of Poland today, core inflation in the country rose 1.3% M/M and 12.3% Y/Y (was 1.3% M/M and 12.0% Y/Y in February). CPI prices excluding food and energy prices and excluding administered prices still rose 1.3% M/M. Most volatile prices rose 1.5%. Earlier this month, the statistical office reported headline March inflation at 1.1% M/M and 16.1% Y/Y. The NBP has a 2.5% inflation target with a tolerance band of +/- 1.0%. In a written response to questions from Reuters, Polish MPC member Cezary Kochalski before today’s data release indicated that high inflation is leaving no scope for the NBP to discuss interest rate cuts. For that to happen it needs certainty ‘that inflation is moving quickly to the target over the monetary policy impact horizon’. The zloty YTD underperformed the forint and the Czech koruna. However, EUR/PLN (4.63) is now also closing in on 4.6270 support (December low).

Daily Pivots: (S1) 132.68; (P) 133.26; (R1) 134.35; More...

Intraday bias in USD/JPY remains mildly on the upside as rebound from 129.62 is in progress. Further rally could be seen back towards 137.90 resistance. For now, further rise will remain in favor as long as 132.03 support holds, in case of retreat.

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.

Multiple themes are unfolding in the markets today without any one taking center stage. Dollar is gaining strength, particularly against Yen, supported by an extended rebound in Treasury yields. Euro, on the other hand, is losing ground to the Pound after failing to break through a key near-term resistance level, which also weighs on the common currency against the greenback. Meanwhile, Aussie continues to rally against Kiwi, but no significant movement is observed elsewhere.

From a technical standpoint, it is premature to confirm a reversal of Dollar's near-term downtrend despite today's recovery. Crucial levels to monitor include 1.0830 support in EUR/USD, 1.2343 support in GBP/USD, and 0.9070 resistance in USD/CHF. As long as these levels hold, Dollar's weakness could resume at any moment.

In Europe, at the time of writing, FTSE is up 0.13%. DAX is down -0.19%. CAC is down -0.17%. Germany 10-year yield is up 0.0329 at 2.473. Earlier in Asia, Nikkei rose 0.07%. Hong Kong HSI rose 1.68%. China Shanghai SSE rose 1.42%. Singapore Strait Times rose 0.50%. Japan 10-year JGB yield rose 0.0206 to 0.482.

AUD/NZD rebound gains traction ahead of RBA minutes

AUD/NZD continues to extend its rebound from 1.0585 short-term bottom, prompting traders to further close their short positions as the previous selloff failed to push the cross through 1.0469 low. Market participants are awaiting the release of RBA minutes in the upcoming Asian session, along with Australian PMIs and New Zealand CPI data this week.

Expectations on New Zealand's CPI remain divided, with some anticipating a slowdown from 7.2% yoy level. If realized, this would fall below RBNZ's forecast of 7.3%, potentially sparking speculation of a less aggressive rate hike path. Conversely, improvements in Australia's PMI could bolster RBA's confidence in resuming tightening with another rate hike in May.

Technically, break of 1.0789 resistance now argues that fall from 1.1085 has completed at 1.0585. Rise from there could be seen as the third leg of the pattern from 1.0469. Further rally could be seen back to 1.1085 resistance next. However, on the downside, break of 1.0732 support will bring retest of 1.0585 low instead.

ECB Kazaks hints at potential smaller rate hike in May

ECB Governing Council member Martins Kazaks has suggested that a smaller rate hike of 25 basis points in May is possible, although a 50 basis point increase should not be dismissed entirely.

In an interview with Latvian news service Leta, Kazaks stated, "At some points, it's only natural that the step size is reduced. For example, the increase could be not 50 basis points, but 25 basis points."

Regarding the upcoming ECB Council meeting in May, Kazaks commented, "Should we move to a lower step already at the ECB Council meeting in May? I think there is every possibility for that, but a 50 basis point increase is not an option that can be ignored."

Kazaks remains optimistic about the Eurozone's economic outlook, pointing out that "the economy is still resilient, there will probably not be a recession in the Eurozone this year, the labor market remains strong, the pressure on wages is still very high and in some cases even increasing. Therefore, in my opinion, a rate increase is necessary."

NZ BNZ Services dropped to 54.4, but keeps its head above water

New Zealand's service sector growth slowed down in March, with the BusinessNZ Performance of Services Index (PSI) declining to 54.4 from 55.8 in February. However, the index stayed above the long-term average of 53.6.

BusinessNZ Chief Executive Kirk Hope highlighted the uptick in negative sentiment, with the proportion of negative comments surging from 51.9% in February to 58.6% in March. The main concerns expressed were a cooling economy, the impact of price increases, and overall uncertainty.

Despite these challenges, BNZ Senior Economist Craig Ebert remains cautiously optimistic. He noted that while the PSI held relatively steady in March, the Performance of Manufacturing Index (PMI) slipped into slightly negative territory. Nonetheless, Ebert believes that there is enough positive momentum to suggest an underlying tendency for growth in activity.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 132.68; (P) 133.26; (R1) 134.35; More...

Intraday bias in USD/JPY remains mildly on the upside as rebound from 129.62 is in progress. Further rally could be seen back towards 137.90 resistance. For now, further rise will remain in favor as long as 132.03 support holds, in case of retreat.

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.

Economic Indicators Update

AUD/NZD continues to extend its rebound from 1.0585 short-term bottom, prompting traders to further close their short positions as the previous selloff failed to push the cross through 1.0469 low. Market participants are awaiting the release of RBA minutes in the upcoming Asian session, along with Australian PMIs and New Zealand CPI data this week.

Expectations on New Zealand's CPI remain divided, with some anticipating a slowdown from 7.2% yoy level. If realized, this would fall below RBNZ's forecast of 7.3%, potentially sparking speculation of a less aggressive rate hike path. Conversely, improvements in Australia's PMI could bolster RBA's confidence in resuming tightening with another rate hike in May.

Technically, break of 1.0789 resistance now argues that fall from 1.1085 has completed at 1.0585. Rise from there could be seen as the third leg of the pattern from 1.0469. Further rally could be seen back to 1.1085 resistance next. However, on the downside, break of 1.0732 support will bring retest of 1.0585 low instead.