Sample Category Title

Daily Pivots: (S1) 0.7406; (P) 0.7440; (R1) 0.7489; More...

AUD/USD recovered again after dipping to 0.7390 and intraday bias remains neutral. On the downside, below 0.7390 will resume the fall from 0.7660. On the upside, above 0.7518 minor resistance will turn bias back to the upside for 0.7660. Firm break there will resume larger rise from 0.6991 to retest 0.8006 high.

In the bigger picture, correction from 0.8006 could have completed at 0.6966, after drawing support from 0.6991. That is, up trend from 0.5506 (2020 low) might be ready to resume. Firm break of 0.8006 will target 61.8% projection of 0.5506 to 0.8006 from 0.6966 at 0.8511 next. This will remain the favored case as long as 0.7164 support holds.

Daily Pivots: (S1) 125.23; (P) 125.78; (R1) 126.20; More...

Intraday bias in USD/JPY is turned neutral again as it retreat after failing to sustain above 125.85 long term resistance. Focus stays on 125.85 and sustained break there will carry larger bullish implication and target 130.04 long term projection level next. On the downside, break of 124.75 minor support will turn bias to the downside for pull back to 4 hour 55 EMA (now at 124.28) and possibly below.

In the bigger picture, up trend from 98.97 (2016 low) is in progress for retesting 125.85 (2015 high). Sustained break there will confirm long term up trend resumption. Next target will be 61.8% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 130.04. This will now remain the favored case as long as 116.34 resistance turned support holds.

Daily Pivots: (S1) 0.9322; (P) 0.9340; (R1) 0.9365; More....

Intraday bias in USD/CHF remains neutral for the moment. On the upside, firm break of 0.9380 should confirm that fall from 0.9459 has completed with three wave down to 0.9193. Such development will revive near term bullishness and turn bias back to the upside for 0.9459 and then 0.9471 resistance. On the downside, below 0.9280 minor support will turn bias to the downside for 0.9193 support next.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that whole down trend form 1.0342 (2016 high), has completed with waves down to 0.8756. A medium term up trend should be set up to target 1.0237/0342 resistance zone.

Daily Pivots: (S1) 1.3021; (P) 1.3069; (R1) 1.3165; More...

Intraday bias in GBP/USD is turned neutral first with current rebound. Another fall will remain in favor as long as 1.3165 resistance holds. Break of 1.2971 will resume larger down trend from 1.4248. However, firm break of 1.3165 will confirm short term bottoming, and turn bias back to the upside for 1.3297 resistance and above.

In the bigger picture, rise from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In any case, break of 1.3748 resistance is needed confirm completion of the fall from 1.4248, or outlook will stay bearish.

Markets

In the run-up to key events, moves on financial markets usually hold little information. It was no different yesterday ahead of today’s ECB policy meeting. German yields eased 1 or 2 bps. US Treasuries outperformed, seeing yields decline up to -5.7 bps at the front end in a steepening move. Recent dollar strength reversed with the trade-weighted DXY returning below the psychological 100 barrier. It also helped EUR/USD rebound from the 1.082 area to a close of 1.0888. Technical factors may have done their part too. The pair found key support provided by the 2022 low of 1.0806 and the upward sloping trendline connecting the lows of 2017, 2020 and 2022. Whether the euro has more room to run, is completely up to Lagarde and the ECB. The April meeting is without new forecasts but it could be an important one nonetheless. Back in March, the central bank accelerated the APP taper process. Net bond buying was scheduled to end in Q3 but with the optionality of resuming should the outlook worsen. The March Minutes revealed how some governors wanted the summer as a firm end-date, adding that the ECB risks falling behind the curve. Recent inflation data (7.5% y/y) suggest so by making the March inflation forecast already outdated. A much clearer anti-inflation signal from the ECB is needed. Its credibility is at stake: market inflation expectations for the eurozone (10y inflation swap) have risen sharply to about 3% in recent weeks, a series high. Barring the extremely volatile and illiquid 2008 crisis period, the difference with the US has never been lower (near zero). Pressure is also building from peers. Just yesterday, both the Reserve Bank of New Zealand and the Bank of Canada went from raising by a regular 25 bps pace to double that size. The Fed already regrets not having done so in March while again above-consensus CPI in the UK does not allow the Bank of England to dial back the normalization process. Last but not least: the euro. The common currency is suffering from high inflation (expectations) and the lack of clear willingness to fight it. A weak euro spurs price rises even further and thus risks getting trapped in a vicious circle. We believe the hawks at the committee have more than enough arguments to leave their mark on today’s meeting. Chances are APP’s Q3 optionality will be put to bed, but probably verbally (by Lagarde in the press conference) rather than formally (statement). Doing so gives the central bank leeway for a quicker start of the rate hike cycle, potentially in July. Markets would surely adjust accordingly, especially the euro. The first meaningful resistance in EUR/USD is located at 1.1186 but a close above 1.10 is already a nice plus ahead of the long weekend.

News Headlines

The Bank of Canada stepped up its tightening pace yesterday by lifting its policy rate by 50 bps, from 0.5% to 1%. Starting April 25, the BoC will also stop its reinvestment policy of maturing Government of Canada bonds, allowing the size of the balance sheet to decline over time. By the end of fiscal 2024, BoC bond holdings will be slimmed down by C$155bn to C$267bn. Canadian inflation (5.7% Y/Y) exceeds the central bank’s forecast and is driven by rising energy and food prices and supply disruptions, in combination with strong global and domestic demand. Inflation is now expected to average almost 6% in the H1 2022 and remain well above the control range throughout this year. It is then expected to return to the 2% target in 2024. The BoC points to an increasing risk that higher inflation expectations become entrenched. Interest rates will need to rise further and governor Macklem signaled preparedness to move more forcefully than +50 bps on rates if needed. The BoC also raised its estimate of a nominal neutral rate to the 2%-3% range, 25 bps higher than in the April 2021 assessment. The loonie performed well after the hawkish BoC meeting with USD/CAD dropping more than 1 big figure, from 1.2670 towards 1.2550.

WTI crude oil futures have successfully climbed beyond the medium-term ascending trend line again and found strong resistance around the 20- and 40-day simple moving averages (SMAs). However, the RSI indicator is mirroring the latest decline of the commodity and is touching the neutral threshold of 50, while the MACD is holding slightly below its trigger and zero lines.

In the event of an upside reversal and a surge above the short-term SMAs, the 116.60 resistance level could act as a barrier before being able to re-challenge the 261.8% Fibonacci extension level of the down leg from 85.35 to 62.27 at 122.85. A break above this level would shift the medium-term outlook to a more positive one as it would take the price above the 14-month high of 130.50.

On the other hand, further losses should see the latest lows of 92.20 acting as a major support below the uptrend line. A drop lower would reinforce the bearish structure and open the way towards the 81.92-85.35 region, which is standing marginally above the 200-day SMA at 81.16.

All in all, WTI futures are gaining some ground after the jump above the uptrend line, though only a significant rally beyond the SMAs would endorse the positive bias in the short-term timeframe.

EUR/USD

The common European currency recovered some of its recent losses against the dollar, and during the early hours of today`s trading, the pair is about to test the resistance zone at 1.0896. A successful breach for the bulls could easily lead to a continuous recovery towards the target at 1.0940. If the bears re-enter the market, then a successful attack on the support zone at 1.0850, followed by a violation of the zone at 1.0811, could lead to more losses and could strengthen the negative expectations for the future path of the EUR/USD. Today, the most important news for investors is the announcement of the European Central Bank Interest Rate Decision (today; 11:45 GMT), as well as the expected Initial jobless claims for the U.S. (today; 12:30 GMT).

USD/JPY

The test of the resistance zone at 125.75 was not successful and the currency pair consolidated around the current level at 125.32. A new attack on the mentioned resistance is a highly probable scenario, but only a violation of the mentioned level could continue the rally and lead to new gains for the USD against the JPY. If the bears prevail, then a breach of the close support at 124.74 could deepen the sell-off for the dollar and easily lead the Ninja towards the important zone at 124.00.

GBP/USD

The positive sentiment remained and the pound continued to gain ground against the dollar. The pair breached the resistance at 1.3105, and during the time of writing this analysis, the Cable is headed for a test of the upper target at 1.3165. A violation of the mentioned zone would strengthen the positive expectations for the future path of the pair and could easily lead to a rally towards the level at around 1.3217. If the bullish momentum fades and this proves to be a corrective move, then the first level of support would be the zone at 1.3105, followed by the lower level at 1.3048.

EUGERMANY40

The support zone at 14051 successfully withheld the bearish attack, and during the early hours of today`s trading, the German index is hovering above the mentioned level. If the bulls prevail, then a violation of the resistance zone at 14304 could easily pave the way for a test of the target at 14562 and could lead to a change in the current sentiment of the market participants. On the other hand, if a new successful test of the support at 14051 becomes the case, then the sell-off will most likely continue towards the lower zone at 13884. Volatility can be expected around the ECB interest rate decision and the follow-up press conference.

US30

Yesterday, the bears did not gain enough momentum for a successful breach of the support zone at 34100 and the bulls prevailed. The U.S. blue-chip-index appreciated and the expectations are for a test of the close resistance at 34691. А breach here could continue the recovery and could easily lead to an attempt at violating the major level at 34961. If the bears re-enter the market, then their first target would still be the mentioned zone at 34294, followed by the lower support at 34099. An increase in volatility can be expected today around the announcement of the European Central Bank Decision (11:45 GMT) and the Initial jobless claims data (12:30 GMT).

WTI bounces as major trading houses plan to trim purchases of Russian crude. The price is slowly recovering from the daily demand zone around 94.00.

This could be a consolidation phase after the recent wild ride. The RSI’s double-dip in the oversold territory triggered a buy-the-dips behavior. A break above 105.00 could cause a broader recovery to 115.00.

The RSI’s swing into overextension may limit the impetus. The psychological level of 100.00 is fresh support and 94.00 is a critical floor to keep the price afloat.

The pound recoups losses as the UK’s March CPI beats market expectations. Overall sentiment ticked down after the pair dropped below the psychological level of 1.3000.

However, a swift bounce above 1.3080 is an encouraging sign for the bulls as it forced the bears to cover their positions. 1.3180 is the next resistance and a bullish breakout could bring the sterling back to 1.3300 and open the door to a reversal.

The RSI’s overbought condition may lead to a pullback. And 1.2990 is the immediate support should this happen.

The Canadian dollar surged after the BOC’s aggressive rate hike of 50bp. The pair’s recovery came under pressure at 1.2670.

A bearish RSI divergence shows a loss of momentum in the rally and the ensuing break below 1.2580 acts as confirmation of underlying weakness. A combination of stop losses and momentum selling could further depress the greenback.

An oversold RSI may attract some bargain hunters and 1.2480 is a major level to keep the rebound intact. In fact, its breach could cause extended losses beyond 1.2400.