Headlines:

• ECB’s de Guindos: Appropriate to loosen restrictive policy if inflation conditions are met
• BOJ’s Noguchi: Some big firms are benefiting from a weaker yen
• PBOC deputy governor says will keep yuan exchange rate basically stable
• PBOC cautions against ‚one-sided‘ pursuit of credit expansion
• Switzerland March trade balance CHF 3.54 billion vs CHF 3.66 billion prior
• Eurozone February current account balance €29.5 billion vs €39.4 billion prior
• German economy likely expanded in Q1 – Bundesbank
• Dollar’s dominant status as world’s reserve currency set to endure – Morgan Stanley

Markets:

• GBP leads, JPY lags on the day
• European equities a little higher; S&P 500 futures up 0.3%
• US 10-year yields down 0.6 bps to 4.579%
• Gold up 0.9% to $2,382.41
• WTI crude down 0.9% to $81.95
• Bitcoin up 3.3% to $62,857

Major currencies were relatively muted during the session, as the dollar kept steadier for the most part. The greenback fell in trading yesterday but it hasn’t really amounted to much in the grand scheme of things.

EUR/USD is flat on the day at 1.0671, holding within a 25 pips range, while USD/JPY is also little changed at around 154.45 currently. The pound is a little higher at 1.2473 but remains in a consolidation phase just under 1.2500.

Meanwhile, commodity currencies are also lightly changed with USD/CAD down just 0.1% to 1.3756 and AUD/USD up 0.1% to 0.6441 on the day.

In the equities space, we are seeing a light bounce in the risk mood. However, it is still early in the day and we’ll see if Wall Street will want to carry on with that appetite.

It’s a bit of a slower week in general as there isn’t any major economic data releases. And that seems to be how markets are taking to things in general as of late. On weeks when there is big data, we do get some notable moves across the board. But on weeks like this, it can be quite the slugfest at times.

This article was written by Justin Low at www.forexlive.com.

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US CPI beat expectations for the third
  consecutive month, while the US PPI came in line with forecasts.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US ISM Manufacturing PMI beat expectations by a big margin with
  the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to
  the lowest level in 4 years.
• The US Retail Sales beat expectations across the board by a
  big margin with positive revisions to the prior figures.
• The market now expects the first rate cut in
  September.

GBP

• The BoE left interest rates unchanged as expected but with Haskel and
  Mann this time voting for a hold instead of a hike.
• The employment report missed expectations with a big jump
  in the unemployment rate although the wage growth increased.
• The UK CPI beat expectations with Services inflation
  remaining sticky, which continues to support the BoE’s patient stance.
• The latest UK PMIs showed the Services PMI missing expectations
  slightly and the Manufacturing PMI beating.
• The market expects the first rate
  cut in August.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD is
pulling back into some key resistance levels
with even a possible break and retest pattern around the 1.25 handle. In fact,
we can see that the sellers will have two short opportunities:

• The first one around the 1.25 handle where they
  will also find the confluence of the
  38.2% Fibonacci retracement level
  and the blue 8 moving average.
• The second one around the 1.26 handle where they
  will find the confluence of the trendline, the
  61.8% Fibonacci retracement level and the red 21 moving average.

The buyers, on the other hand, will need to break
above the trendline to turn the trend around and start targeting a new cycle
high.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more clearly the
bearish setups around the 1.25 and the 1.26 handles. If the price were to break
above the 1.25 resistance zone, we can expect the buyers to increase the
bullish bets into the trendline targeting a break above it. There’s not much
else to glean from this chart, so we need to zoom in to see some more
details.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the ultimate target for the pullback should be the
base of the divergent formation around the 1.26 handle with a break above it
confirming a reversal. In case, we get a rejection from the 1.25 resistance,
the buyers might lean on the black counter-trendline to position for a rally
into the major trendline. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into new lows.

Upcoming Events

Today we get the latest US Jobless Claims figures,
while tomorrow we conclude the week with the UK Retail Sales.

This article was written by FL Contributors at www.forexlive.com.

Morgan Stanley says that the dollar’s dominant status as the world’s reserve currency is set to persist. That is in part due to its credible challengers, such as the Chinese yuan, being rather lacking at the moment.

While there have been some concerns about the dollar’s reign at the top recently, Morgan Stanley argues that the greenback can still hold its own. That despite worries about US debt levels and some signs of reserve managers diversifying away from the dollar.

„We expect USD’s dominant reserve currency status to endure despite ongoing challenges from an increasingly multipolar world. This supports our current preference for USD and should provide long-term support, though periods of weakness are to be expected on cyclical conditions and valuations.“

This article was written by Justin Low at www.forexlive.com.

• Unexpected boost from industry and construction likely led to expansion in Q1
• But there is still no evidence of sustained improvement for the German economy
• Demand for industrial products domestically and abroad remains weak, continues to decline
• Higher rates and economic uncertainty are holding back investment
• Households are also still hesitant to spend
• It is unclear that the increase in economic output will continue in Q2

Germany continues to be the sick man of Europe at the moment and that perception has not changed to start the second quarter this year. Weak demand conditions and poor consumption activity are the two main problems. And that in general is a contributive factor for the ECB to look towards loosening policy sooner rather than later.

This article was written by Justin Low at www.forexlive.com.

Yesterday, the Dow Jones extended the drop into new
lows despite a lack of bearish catalysts. In fact, we had pretty much a down
day for most markets with selloffs in the US Dollar, Treasury yields and some
commodities. On the geopolitical front, not much has changed as the Israeli
retaliation continues to be delayed and it’s not even sure if they will strike
at all now.

On the macro side, the market has priced out almost all the rate
cuts in 2024 as it expects just one cut later in the year. On the data front,
we don’t have much to work on in the next couple of weeks except the PCE, which
the Fed has already indicated to be slightly higher but mostly unchanged.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones has
been trading inside a rising channel and continued to diverge with the
MACD for a
long time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. Recently, we got a breakout which opened the door for a
bigger correction into the 37128 level. The sellers managed to break the second
key support level
and will now target a drop into the third and last one at 37128. The buyers, on
the other hand, will need to break the current downward trend to start
targeting new highs.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that
the price has been getting rejected by the downward trendline and
the blue 8 moving average as the
sellers kept leaning on them with a defined risk above the trendline to
position for new lows. If we get another pullback, we can expect the sellers to
step in around the trendline again to position for a drop into the third key
support. The buyers, on the other hand, will want to see the price breaking
higher to invalidate the bearish setup and position for a rally into a new
all-time high.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that all
the rallies have been faded as the sellers kept on piling in around the
trendline as they continue to target the 37128 support. We can notice that we
are starting to see a divergence with the MACD which is signalling a weakening
bearish momentum. The price action might also form a descending
triangle so a break on either side will likely trigger a
sustained move.

Upcoming Events

Today we get the latest US Jobless Claims figures.

This article was written by FL Contributors at www.forexlive.com.

Headlines:

• Sterling climbs on slightly stronger UK inflation data
• US futures pare losses as risk mood holds up for now
• Japan chief Cabinet secretary says closely watching FX moves, prepared for full measures
• UK March CPI +3.2% vs +3.1% y/y expected
• Eurozone March final CPI +2.4% vs +2.4% y/y prelim
• US MBA mortgage applications w.e. 12 April +3.3% vs +0.1% prior
• NZ statistics office owns up to inflation data release error
• Japan monthly visitors hit a record high in March, crosses 3 million for first time ever

Markets:

• NZD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields flat at 4.655%
• Gold up 0.3% to $2,388.80
• WTI crude down 0.7% to $84.77
• Bitcoin flat at $63,053

The dollar is taking a bit of a breather today as it slacks against the rest of the major currencies bloc. That said, it is still in a solid position as traders are still digesting the events so far in April.

The pound was a decent mover, helped by a slightly stronger UK inflation report. GBP/USD nudged up from 1.2420 to 1.2480 but failed to clear the 100-hour moving average. The key technical hurdle is where sellers are holding, with price now back down slightly to 1.2455 on the day.

Besides that, EUR/USD is up 0.2% to 1.0640 with USD/CHF down 0.2% to 0.9107 currently. The moves are relatively light, not really suggesting much of a turnaround in the recent dollar momentum.

AUD/USD is seen up 0.4% to 0.6425 with NZD/USD up 0.5% to 0.5908 after the NZ inflation data earlier in the day. A better risk mood is also helping as US futures pared early losses to sit a little higher now. European indices are also looking to bounce back from yesterday’s fall, with French stocks leading the way. The CAC 40 is up a little over 1% with the DAX up 0.5%.

Other than that, there’s not much else to really scrutinise in markets so far today. It’s a pause in the dollar momentum and that’s the main takeaway.

This article was written by Justin Low at www.forexlive.com.

Copper continues to be
supported by favourable fundamentals although the latest rally is starting to
look a bit exhausted. The supporting factors include the recent beat in the Chinese PMIs and the US ISM Manufacturing PMI, with the latter jumping into
expansion for the first time since 2022. Moreover, we have the PBoC expected to
deliver more policy support this year while the other central banks continue to
foresee rate cuts at some point although they are willing to keep rates higher
for longer if needed. The current environment should be good for growth, so the
things to watch will be signs of marked deceleration in growth indicators or
increased risks of rate hikes.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Copper has been
struggling to break the key 4.35 level. From a risk management perspective, the
buyers will have a much better risk to reward setup around the 4.18 level where
we can also find the confluence of the 50%
Fibonacci retracement level,
the red 21 moving average and the trendline. The
sellers, on the other hand, will likely step in around these levels to position
for a drop into the trendline and eventually target a break below it.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price has
been diverging with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the target for the pullback would come right around
the base of the divergent formation near the 4.18 support,
although the price will need first to break below the black minor trendline to
confirm it.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price rejected the 4.35 level and it’s now falling back to the minor trendline.
The buyers will have another opportunity to step in around the trendline to
position for a break above the 4.35 resistance. If the price were to break lower
though, the sellers will gain control and take the price into the 4.18 support.

Upcoming Events

Tomorrow we get the latest US Jobless Claims figures.

This article was written by FL Contributors at www.forexlive.com.

• Prior +0.1%
• Market index 202.1 vs 195.7 prior
• Purchase index 145.6 vs 138.7 prior
• Refinance index 500.7 vs 498.3 prior
• 30-year mortgage rate 7.13% vs 7.01% prior

Despite a jump in the rates, mortgage applications in the past week rebounded a fair bit. Both purchases and refinancing activities also climbed with the latter index at its highest since May last year.

This article was written by Justin Low at www.forexlive.com.

Iran-Israel tensions are casting a dark shadow over the market, providing what can be argued as a timely retracement in equities and risk trades. But whenever geopolitics tend to get involved, the first thing that always comes to mind for me is the saying buy value, sell hysteria.

It’s a tale as old as time and it works for almost anything as long as there is fear in the picture. If a meteor is said to be headed to earth and the market crashes, it’s the best time to buy the dip. If there’s a comet projected to hit earth and wipe out humanity, you should buy the dip anyway. At worst, we all die together. But by any chance the comet misses and we all survive, guess what? The world will carry on as it did before.

As much as tensions are staying heated when it comes to Iran and Israel currently, there’s every likelihood that at least one side does not want a war. I mean, we’ve gone through the whole Russia-Ukraine debacle two years ago and I preached the exact same thing here.

But putting that into today’s market, things might be a little different. We’ve seen stocks rally in rather one-sided fashion since the end of October. And this is perhaps as good an excuse as any to come off the boil a little. I mean, it is also coinciding with more stubborn inflation pressures.

Over time, the market is always quick to forget and move on. And in this day and age, it happens more quickly than ever given the information echo chamber. So, yes the tensions are high when it comes to Iran and Israel now. But this is an episode that the market will not care about in a few months‘ time, let alone a year.

And that’s what you should be looking at. That is to buy value, sell hysteria.

This article was written by Justin Low at www.forexlive.com.

The recent price action in
Crude Oil indicates that the market needs some rest as we haven’t seen a
sustained rally despite the big geopolitical risk in the Middle East between
Israel and Iran. Overall, the fundamentals remain supportive for the market as
we’ve been seeing a pickup in economic activity, although the expectations for
rate cuts continue to dwindle. The technicals will be important to monitor as a
drop below the key $83 support zone could start to signal a turnaround in the
bullish trend.

WTI Crude Oil Technical
Analysis – Daily Timeframe

On the daily chart, we can see that Crude Oil got
stuck in a consolidation lately with a slight bearish tilt as the price
continues to pull back into the key $83 support zone.
That’s where we can expect the buyers to step in as they will also find the confluence of the trendline, the red
21 moving average and the
38.2% Fibonacci retracement level.
The sellers, on the other hand, will want to see the price breaking lower to
invalidate the bullish setup and position for a drop back into the lows.

WTI Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price is
breaking below another minor trendline which should see some sellers piling in
to target a drop into the major trendline for a pullback. There’s not much else
we can glean from this chart, so we need to zoom in to see some more details.

WTI Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
clearly the consolidation that’s been going on since last Monday. We can also
see that we have a downward counter-trendline where the sellers piled in for a
better entry to target a drop into the major trendline.

Upcoming Events

Tomorrow we get the latest US Jobless Claims figures.

This article was written by FL Contributors at www.forexlive.com.