Daily FX Wrap: A cagey session in FX; too tight to call a theme, but EUR resilience notable. NZD gives back CPI led gains through AUD cross rate. CAD still pressured – CPI tomorrow. Key UK retail sales could hurt GBP recovery.

Another cagey session in FX today where directional conviction was at a premium. Across the board we saw players struggling to push for extended levels, though later in the day we saw the USD index pushing higher again to give the lead JPY rate a modest lift into the mid 109.00’s. However, the market is struggling for traction here, with a mix of risk sentiment and softening USD data prompting sellers to fade (some of this) strength. The Philly Fed manufacturing index also came in weak to make for a consistent run of data misses out of the US in the past week or so, with the new orders index falling significantly along with business conditions. PMIs tomorrow from Markit, but ISM not out until next week. Existing home sales
also due.

More significant data releases to look out for elsewhere on Friday, and nowhere more so than the UK where the key retail sales for March are expected to fall back after Feb’s strong numbers. The BRC last week reported some notable weakness, to there is a risk that the data may undershoot expectations of a modest 0.2% drop on the month. GBP is already retreating from its highs in the wake of the post election (announcement) rally, which eventually saw Cable tipping 1.2900, but 1.2920 resistance held firm. On the downside, many agree that only a breach back below 1.2600 would negate the near-term uptrend have pushed up into a ‘higher’ range.

EUR/GBP however, is once again showing its resilient nature, and this is in light of the upcoming election risk in France. The lack of risk premium priced into the single currency would suggest local traders are confident that one of Macron or Fillon will eventually win, but we only need the presence of Le Pen (less so Melenchon) in the second round to spark a fresh sell off. For now however, the GBP cross rate has found support ahead of 0.8300, while EUR/USD looks reluctant to return to the lower 1.0700’s to keep EUR/JPY supported in the mid 117.00’s for now. EU wide PMIs will have a marginal impact in tomorrow’s trading as politics rules for now.

USD/JPY continues to find demand into the low 108.00’s, as traders continue to position off the 107.00-108.00 support zone. We see limited scope for a breakout here near term, but the risk remains to the downside due to the current risk overhang – largely from the latest murmurings from North Korea. That said, it looks unlikely that US yields can fall much further, irrespective of the disappointment surrounding the Trump administration’s plans for fiscal stimulus, so the near-term stalemate continues to play out. 110.00 should be heavy in the meantime.

Little of note ahead in the overnight session to affect the AUD or NZD, so technical dynamics are likely to drive trade. AUD/NZD hit a notable bank of support ahead of 1.0617, and the subsequent upturn through 1.0700 could be indicative of a base, but we need to clear 1.0850 higher up to confirm this. For the CAD, key inflation data for March is the immediate focus, but there has been little relief for the Loonie despite the stabilisation in Oil prices. The market continues to push for 1.3500,
with the prospect of stripping stops through here, but we continue to highlight strong resistance near/from 1.3600.

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Dollar Index Daily

Market is sideways. Price is bearish though the daily stoch is turning up which indicates that we may be in for some dollar strength in the days to come. The 200 EMA continued to provide support today. Resistance is eyed at the MPP.

Dollar Index H4

Market is bearish. Price is sideways though note that price has made a double bottom at the weekly bearish target. Resistance eyed at the 21 and WS1 - so not bullish yet. Looking for a higher high and then waiting for a pull back to buy the higher low. If you are trading Dollar pairs then you will be keeping an eye on lower lows with a plan to sell lower highs.

US10Y Daily

Market is sideways. Price is rolling over and becoming bearish. Note the overbought stoch indicating that we should see price on the 10Y move lower in the coming days. That's good news for Yen and Gold weakness, something we have been waiting very patiently for. The 200 EMA continued providing resistance pushing price lower. Support eyed at WR1 which is the role reversal of the previous range.

US10Y H4

Market is bullish and price is bearish. Note that price has broken through the 21 and support at MM4, currently at the 55 EMA. the 55 EMA predicts a double top though keep an eye on resistance at WM3 and MM4. Note that a conservative trader would wait for a lower low on the 10Y before considering a change in market direction. Keep an eye on your Yen pairs for reversal patterns followed by higher highs with a plan to buy the higher low.

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