• A sudden pickup in the USD demand helps regain positive traction.
• Cautious mood/weaker US bond yields might cap additional gains.
The USD/CHF pair finally broke out of its Asian session consolidation phase and spiked to fresh session tops, surpassing the overnight swing high.
With investors looking past Wednesday’s ultra-dovish FOMC statement, the US Dollar managed to stage a goodish bounce from the lowest level since early February on Thursday.
The USD uptick extended on the last trading day of the week, rather picked up the pace and was seen as one of the key factors behind the pair’s latest leg of a sudden upsurge in the last hour or so.
The intraday positive move seemed rather unaffected by the prevalent cautious mood, reinforced by weaker US Treasury bond yields and which tends to underpin the Swiss Franc’s safe-haven demand.
The recovery move, however, lacked any obvious catalyst and hence, remains to be seen if the recovery is backed by any genuine buying or is solely led by some near-term short-covering.
There isn’t any major market-moving economic data due for release from the US and hence, the broader market risk-sentiment/USD price dynamics might continue to influence the pair’s momentum.
• German manufacturing PMI falls to the weakest level in six years and prompts some aggressive selling.
• Composite Euro-zone manufacturing PMI drops to 71-month lows and added to the bearish pressure.
• British Pound remains supported by the overnight news of an unconditional Brexit delay until April 12.
The EUR/GBP cross finally broke down of its late-Asian session consolidation phase and tumbled to fresh session lows in the last hour, albeit managed to find some support ahead of the 0.8600 handle.
The cross extended overnight retracement from one-month tops, levels beyond the 0.8700 handle, and the corrective slide accelerated further in wake of some aggressive selling around the shared currency following today’s disappointing release of flash Euro-zone manufacturing PMI prints.
Data released on Friday showed that that German manufacturing activity slipped deeper into contraction territory and grew at the weakest pace in six years in March. Meanwhile, the composite Euro-zone manufacturing PMI plunged to a 71-month low level of 47.6 and added to the bearish pressure.
Adding to this, the British Pound remained supported by the fact that the EU leaders, at the European Council meeting on Thursday, agreed to offer an unconditional Brexit delay until April 12. However, the British Parliament has to agree to the PM Theresa May’s Brexit deal for an extension till May 22.
However, given that May might still struggle to gain the required support to get her withdrawal agreement through the UK Parliament kept a lid on any runaway rally for the British Pound and turned out to be only factors lending some support to the cross, at least for the time being.
Hence, it would be prudent to wait for a strong follow-through selling before confirming that the recent corrective bounce might have already run out of steam and the cross is set to resume with its prior/well-established near-term bearish trajectory.
Increased odds of no-deal Brexit, USD rebound knocks-off GBP/USD.
All eyes remain on Brexit headlines, US macro data and EU Summit.
The GBP/USD pair stalled its steady recovery mode near 1.3160 and ran into heavy offers after the greenback staged a solid rebound across the board, mainly driven by an 80-pips sell-off in the EUR/USD pair following awful Eurozone and German manufacturing March PMI reports.
Goldman Sachs raises chances of no-deal Brexit, says all options in play
The latest slide in the spot can be also attributed to the return of the GBP bears, as markets are now pricing in the chances of a no-deal Brexit again, as they believe the 2-weeks Brexit deadline extension granted by the European Union (EU) to the UK PM May is unlikely to resolve any problem for May’s government.
Meanwhile, no new surprises offered by the Bank of England (BOE) a day before also continues to weigh down on the investors’ minds, as attention gradually shifting towards a fresh batch of macro releases from the US docket due later today. Markets look forward to the manufacturing and services PMI reports from Markit and existing homes sales data for fresh trading incentives while the Brexit-related anxiety will continue to play out ahead of the EU Summit next week.
- Brexit deadline extension has its own challenges for the UK PM Theresa May.
- The quote needs to cross 1.3190 and 1.3260 resistances in order to justify its bounce off 1.3000 round-figure.
The British Pound (GBP) is taking the bids near 1.3140 versus the US Dollar (USD) ahead of London open on Friday. The GBP/USD pair has been on a recovery mode since Thursday-end as EU leaders finally agreed over the Brexit deadline extension with the two-factor system giving unconditional stretch till April 12. Though, uncertainty over the Brexit still remains on cards as the UK PM Theresa May has to jostle with the British parliament soon. Also directing the immediate trade sentiment will be second-tier data from the US.
The EU lawmakers agreed to shift the Brexit deadline off from March 29 during late-Thursday. The news report triggered the GBP/USD pair’s U-turn from 1.3000 round-figure and has been pleasing buyers off-late as the USD is likely witnessing profit-booking after yesterday’s overall advances.
In spite of getting unconditional deadline extension till April 12, PM May has to convince lawmakers at home to support her plan in the parliament’s voting sometimes next week in order to grab the May 22 data for the Britain to leave the EU. Having been defeated twice at home, it would become tough for PM May to persuade British politicians for her third Brexit plan considering the fact that it won’t be too different from the previous one.
Other than Brexit uncertainty, US data could also play their role in directing near-term trade sentiment. Among them, the current month Markit composite purchasing manager index (PMI) and February month existing home sales could gain market attention.
The US Markit PMI composite could soften to 55.2 from 55.5 but likely increase in existing home sales to 5.10M over 4.94M earlier might favor the greenback.
GBP/USD Technical Analysis
While a descending trend-line joining highs since March 19 offers immediate resistance around 1.3190, a week-long resistance-line at 1.3260 could limit the pair’s further advances.
On the downside, eleven-week old ascending trend-line and 50-day simple moving average (SMA) around 1.3060/65, near to recent low at 1.3000 round-figure, can please sellers ahead of questioning their strength by 200-day SMA figure of 1.2980.
- Brexit news couldn’t please bulls for long as North Korea, China triggered risk off.
- The US data and the UK PM’s ability to progress over Brexit remains in highlight.
USD/JPY failed to extend yesterday’s pullback beyond 111.00 as the quote dropped to the lows near 110.60 around early Asian session on Friday. Return of Japanese traders after a holiday met renewed risk aversion wave. Investors may now focus on risk events like Brexit and political pessimism surrounding the US, North Korea and China, coupled with the US data, in order to determine near-term trade moves.
Early Friday, news that the EU agreed to postpone the Brexit deadline off from 29 March and triggered some risk-on moves; though, news that North Korea has asked the US to remove its weapons from Hawaii and Guam led the balance.
Following that, news that China announced anti-dumping duties over certain products from the EU, Japan, South Korea and Indonesia further leveled out the risk-off and pleased USD/JPY sellers.
It should also be noted that JPY traders gave little importance to Japan’s national core consumer price index (CPI) measures published earlier as Finance Minister Taro Aso said the economy is on a moderate recovery mode.
Other than EU and US leaders’ response to the North Korean and Chin’s recent actions, Brexit worries could continue directing immediate risk sentiment as the UK PM Theresa May is still to get British parliament approval for her third proposal in order to avail deadline extension till May 22.
On the data side, the US Markit PMIs and existing home sales figures should be observed closely for predicting immediate moves. While expected weakness in the composite PMI may favor USD/JPY sellers, likely improvement in housing market stat could challenge the present mood.
USD/JPY Technical Analysis
50-day simple moving average (SMA) and an upward sloping trendline stretched since January 04 highlights the importance of 110.40/30 area for USD/JPY traders. A break of which can trigger the pair’s drop to 110.00 and 109.80.
Alternatively, 100-day SMA level of 111.30 and 200-day SMA level near 111.50 can confine the pair’s immediate upside, clearing which 112.00 can lure bulls.
- Risk-off amid fresh trade worries, downbeat Aussie data weigh negatively
- Focus on US economic release, risk sentiment for the next moves.
AUD/USD is on a steady decline so far this Asian session on Friday, now struggling around the 0.71 handle, having hit fresh session lows at 0.7095 some minutes ago.
The overnight bounce in the Aussie faded at 0.7120 and from the Aussie witnessed a fresh leg lower, despite the renewed US dollar selling across the board, as the Australian flash manufacturing PMI dropped to 52.0 vs. 52.9 previous.
Moreover, a renewed risk-aversion wave gripped the Asian markets amid latest US-North Korea issue while the report that China is said to impose temporary antidumping measures on some products from the European Union (EU), Japan, South Korea and Indonesia further dented the risk sentiment, with the higher-yielding Treasury yields continuing to remain in the red following the Fed’s outright dovishness.
Attention now turns towards the US macro news due later on Friday, including Markit manufacturing and services PMI reports, existing home sales and wholesale inventories, for fresh trading impetus. In the meantime, the USD dynamics and risk trends will continue to have a major bearing on the spot, as markets keep an eye on fresh trade-related developments.
AUD/USD Technical Levels