Yesterday,
the Dow Jones opened lower and finished the day negative following another hot US CPI report.
This has pushed rate cuts expectations further out with the market now pricing
in less rate cuts than the Fed’s dot plot. The Treasury yields skyrocketed
across the board putting some pressure on the stock market. Now the market
might even think that the economy is still doing great, and the Fed is not
going to hike anyway, but there are now good reasons to see a bigger correction
to the downside, so the bulls should be extra careful.

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 price bounced on the first support level at
38464 following the goldilocks NFP, but fell back to it following another hot
CPI report.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that
the price bounced on the first support level but got rejected by the downward trendline and
the blue 8 moving average before
breaking below the support following the CPI release. The sellers will now have
even more conviction to sell the rallies and we can expect a drop into the
second level at 38043 next. The buyers, on the other hand, will want to see the
price breaking above the trendline to invalidate the bearish setup and position
for a rally back into the highs.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the downward trendline where we can also find the confluence of the
red 21 moving average and the 38.2% Fibonacci
retracement level. This is where we can expect the
sellers to step in with a defined risk above the trendline to position for a continuation
of the downtrend with a better risk to reward ratio. The buyers, on the other
hand, will want to see the price breaking higher to start targeting new highs.

Upcoming Events

Today we get the US PPI report and the latest US
Jobless Claims figures. Tomorrow, we conclude the week with the University of
Michigan Consumer Sentiment survey.

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

Wells Fargo now sees the Fed cutting rates in September, previously they were looking for a cut in June.

This joins plenty of other participants shifting their views after yesterday’s CPI beat:

• BNP Paribas joins other banks to amend Fed cuts to two this year
  
• UBS expects the Fed to start cutting in September

This article was written by Arno V Venter at www.forexlive.com.

• Tesla Chief Elon Musk to visit India, meet PM Modi this month
• Tesla’s Musk to make announcement about India plant, investments during India trip
• Will meet Modi in the week of April 22 in New Delhi, and will separately make an announcement about his India plans
• Reuters has previously reported that Tesla officials are expected to visit India this month to look at sites for a manufacturing plant that would require an investment of about $2 billion

This article was written by Arno V Venter at www.forexlive.com.

• Russia considers dropping some environmental requirements for gasoline usage to avoid possible shortages
• The measure to reduce environmental standards may bring an additional 10% of gasoline to domestic markets
• adjustment could potentially increase the domestic gasoline supply by 10%, which translates to an additional 300,000 to 350,000 metric tons per month.
• Refinery output in Russia has grown significantly since 2000, with a total production of 275 million tons in the previous year.
• The proposed measures are expected to enhance gasoline production, especially benefiting older refining facilities.
• Loosening environmental standards is seen as a regression from Russia’s 2011 initiative to improve fuel quality and ecological standards through refinery modernization.

This article was written by Arno V Venter at www.forexlive.com.

Earthquake of magnitude 5.1 strikes Aksu in Xinjiang

This article was written by Arno V Venter at www.forexlive.com.

• US mortgage
  market index +0.1 pct to 195.7 in week ended April 5
• US mortgage
  purchase index falls 4.7 pct to 138.7 in April 5 week
• US mortgage
  refinance index rises 9.9 pct to 498.3 in April 5 week
• US average
  30-year mortgage rate rises 10 bps to 7.01 pct in April 5 week

This article was written by Arno V Venter at www.forexlive.com.

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 an uptick
  in the unemployment rate and an easing in wage growth.
• The UK CPI missed expectations across the board but 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 June.

JPY

• The BoJ finally exited the negative interest rates
  policy as expected
  at the last meeting raising interest rates by 10 bps bringing the rate to a
  target between 0.00-0.10%. Moreover, the central bank scrapped the yield curve
  control and the ETF purchases, while maintaining QE in place.
• The latest Unemployment Rate missed expectations although it
  continues to hover around cycle lows.
• The Japanese PMIs improved further for both the
  Manufacturing and Services measures although the former remains in
  contractionary territory.
• The latest Japanese wage data came in line with expectations.
• The Tokyo CPI, which is seen as a leading
  indicator for National CPI, came in line with expectations.
• The market expects another rate hike
  from the BoJ this year although the timing remains uncertain.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY bounced
on the 61.8% Fibonacci retracement level
near the lower bound of the rising channel where we had also the red 21 moving average for confluence. The
buyers extended the rally into the 193.00 handle and will certainly keep
targeting the upper bound of the channel around the 195.00 handle. The sellers,
on the other hand, will want to see the price reversing and breaking below the
lower bound to position for a drop into the 187.96 low.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that from a risk
management perspective, the buyers will have a much better risk to reward setup
around the trendline where
they will also find the 61.8% Fibonacci retracement level for confluence. The
sellers, on the other hand, will want to see the price breaking lower to
position for a drop into the lower bound of the channel eventually targeting a
break below it.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with the pair bouncing on the most recent swing
high level at 192.20. If we get a pullback from the current high, that’s where
the buyers should pile in with a defined risk below the 192.20 level to
position for a rally into new highs. The sellers, on the other hand, will want
to see the price breaking lower to position for a drop into the trendline
around the 191.50 level.

Upcoming Events

Today we get the US CPI report and the FOMC Minutes.
Tomorrow, we will have the US PPI and the latest US Jobless Claims figures. On
Friday, we conclude the week with the UK GDP and the University of Michigan
Consumer Sentiment Survey.

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

Some
thoughts from Monex on the USD:

• Solid
  US job growth: The strong March job numbers hint at robust economic health
  which will potentially delay Fed rate cuts.
• Bond
  yields: Strong growth and higher commodities have pushed yields higher, which
  increases appeal for the dollar.
• Market
  dynamics: Despite a brief delay, there is potential for significant technical
  breaches in key major pairs which suggest readiness for the dollar to
  strengthen, especially if CPI points higher this week.
• Central
  bank policies: Expected dovish shifts from the ECB and BoC contrast with that
  of the Fed and should enhance dollar attractiveness

One risk to
a higher dollar this week is if a strong CPI pushes USDJPY into 152 and
triggers possible intervention. That should only mean short-term pressure on
the dollar but a risk worth considering.

Also think watching global growth is important
for the dollar. There have been green shoots in the data in other parts of the
world which explains some of the recent dollar weakness as well.

This article was written by Arno V Venter at www.forexlive.com.

The
bank offers their views on why the numbers weren’t as bad as we thought:

1. Self-employment drove the weakness (29k drop), which offset a 27k rise in private sector (15k) and public sector (12k) jobs.
2. The soft headline was driven by youths’ (aged 15-24) falling 28k. As youths do not have the same impact in housing and consumer markets, the implication for the drop in youths’ employment isn’t as bad as it would have been if the losses were in the 25+ age group.
3. Quebec youths drove most of the softness by showing 18k fewer jobs.
4. Wages still grew by 4.5%, which is still running at over twice the BoC’s 2% inflation target.

With this
in mind the bank doesn’t think that Friday’s report changes anything for the
BoC.

I agree that one jobs print shouldn’t change
anything, especially looking at the details under the hood. But when we combine
Friday’s job report with the recent CPI deceleration and the lower expectations
of higher inflation by Canadian businesses seen in the Business Outlook survey,
it gives the bank the cover it needs to sound more dovish.

This article was written by Arno V Venter at www.forexlive.com.

Below
is a very handy ECB cheat sheet from ING:

The bank
thinks that EURUSD is expensive at current levels, but unless we get strong
guidance for deeper cuts after June the impact might be more short-lived. I share their sentiment in this regard.

They think
that the pair would need an equity-sell off as well as an official start to the
ECB’s rate cutting cycle for a move lower.

There is a
greater chance of a move towards 1.07 compared to a break higher to 1.09.

Personally, I think a lot of bad news is priced
for the EUR, but time will tell.

This article was written by Arno V Venter at www.forexlive.com.