USD/CAD eases from near 4-week tops amid rallying oil prices

• The USD fails to benefit from a strong recovery in the US bond yields.
• Resurgent oil prices underpin Loonie and prompt some profit-taking.
• Traders now eye Canadian monthly GDP/US data for a fresh impetus.

The USD/CAD pair traded with a mild negative bias through the early European session and is currently placed at session lows, around the 1.3425-20 region.

The pair failed to capitalize on its positive move witnessed over the past two trading sessions and struggled to make it through the 1.3450 supply zone, with a combination of factors prompting some profit-taking on the last trading day of the week.

Despite a strong follow-through recovery in the US Treasury bond yields, the US Dollar consolidated the overnight goodish up-move to near three-week tops and was seen as one of the key factors keeping a lid on any follow-through up-move for the major.

Meanwhile, traders shrugged off the US President Donald Trump’s tweet about high oil prices on Thursday and a fresh leg of a positive move in crude oil prices further underpinned the commodity-linked currency and added to the pair’s offered tone.

The downside, however, remained limited as market participants now look forward to the release of monthly Canadian GDP print, which coupled with the Fed’s preferred inflation gauge – core PCE Price Index might produce some meaningful trading opportunities.

Technical levels to watch

Any further pull-back now seems to find some support near the 1.3400 handle, below which the pair is likely to accelerate the slide towards weekly lows, around the 1.3375-70 region, before eventually dropping to test the 1.3340-35 support area.

On the flip side, the 1.3440-50 region might continue to act as an immediate strong hurdle, which if cleared decisively would set the stage for a further appreciating move and assist the pair to aim towards reclaiming the key 1.3500 psychological mark.

USD/JPY: Risks skewed to the downside in coming months – Morgan Stanley

In the view of the analysts at Morgan Stanley, the path of least resistance for the USD/JPY pair remains to the downside in the coming months.

Key Quotes:

“USD has been supported by USD repatriation flows, foreign buying of USD assets but now diminishing.

US equity market experiencing a rotation from cyclical into defensive shares, shows a similar behaviour as in August/September 2018, just before indices declined by about 20%.

The only difference is that US bond yields are now lower compared to September, but bond volatility is higher.

Yen remains the most sensitive currency to higher US bond volatility, and:

Japanese MPs passed (Wednesday) a record-breaking fiscal 2019 budget that includes JPY2.03trn in measures aimed at softening the impact of a looming consumption tax hike on an economy that is already facing broader uncertainty.

Nonetheless, the 10-year JGB bond yield has declined to its lowest level since September 2016.

It was in 2016 when USDJPY fell from 121 to 100.”

Gold Technical Analysis: 100-day MA support could be tested for the first time since Nov. 28

Gold fell 1.49 percent yesterday – the biggest single-day drop since Mar. 1 – bolstering the bearish view put forward by the inside-day bearish reversal confirmation witnessed over the previous two trading days.

The bearish crossover of the 5- and 10-day moving averages (MAs) and the 5- and 50-day MAs also indicates the path of least resistance is to the downside. What’s more, the 14-day relative strength index (RSI) is reporting bearish conditions with a below-50 print.

The yellow metal, therefore, could drop to the 100-day MA support at $1,279.78 before the NY close. As of writing, gold is trading at $1,291 per Oz.

Daily chart

Trend: Bearish

NZD/USD Technical Analysis: Sellers focus on 9-week old ascending trendline

  • NZD/USD trades near 0.6780 during early Asian sessions on Friday.
  • The quote failed to extend its recovery beyond March 20 lows and is presently declining towards an upward sloping trend-line stretched since January 22, at 0.6760 now.
  • Given the prices slip under 0.6760, 0.6740 and 0.6715 can offer intermediate halts during a downturn to 0.6700 round-figure.
  • Alternatively, the pair need to surpass 0.6825-30 horizontal-line connecting recent high and March 20 low in order to aim for 0.6870.
  • Also, pair’s ability to sustain its strength past-0.6870 enables it to claim 0.6900 whereas 0.6920 and 0.6945/50 could challenge buyers afterward.

NZD/USD 4-Hour chart

AUD/USD: Probing 50-hour MA hurdle, Australia’s housing credit growth hit record low in February

AUD/USD is currently attempting a break above the 50-hour MA hurdle at 0.7088.
Australia’s housing credit growth in February was the slowest on record. The AUD, however, has shrugged off the weak data and is likely tracking the S&P 500 futures higher.
AUD/USD is better bid at press time even though the data released earlier today showed Australia’s credit growth in February was the lowest on record.

Credit growth for housing rose 0.3 percent month-on-month in February, following a 0.2 percent rise in the preceding month, the Reserve Bank of Australia reported earlier today. The annualized growth rate, however, was just 4.2 percent, the lowest since 1977.

Further, Credit growth for owner-occupiers slipped to 5.91%, the lowest level since August 2015. Investor credit grew by only 0.85% over the same period, the slowest pace on record, according to Business Insider.

Housing credit growth tends to lead home prices by around six months, according to the Commonwealth Bank. So, with credit growth hitting record lows, house prices are set to fall further in the near future. The data validates the widespread belief that the RBA would have to cut rates in the second half of this year to support the economy.

So far, however, the Aussie dollar has ignored the dismal housing credit growth number, possibly due to signs of risk reset in the financial markets. The anti-risk JPY hit an eight-day low versus the US dollar earlier today and the S&P 500 futures are currently up 0.23 percent on the day.

As of writing, AUD/USD is trading just above the descending (bearish) 50-hour moving average (MA), currently at 0.7102. Acceptance above that average line could yield further gains toward the 200-hour MA at 0.7102.

EUR/USD Technical Analysis: Recovers from three-week lows but falling trendline is still intact

EUR/USD is currently trading at 1.1228, having hit a three-week low of 1.1214 yesterday. The outlook, however, remains bearish, as the trendline trending south from the March 20 and March 26 highs is still intact.

While a break above that trendline hurdle, currently at 1.1239, may yield stronger oversold bounce, the outlook, as per the daily chart would remain bearish while the spot is held below the descending 10-day moving average at 1.1304. The pair found acceptance below 1.1280 (61.8% Fib R of 1.1176/1.1448), confirming a bullish-to-bearish trend change.

Rejection at the descending trendline, if followed by a break below the previous day’s low of 1.1214, would reinforce the bearish setup and could yield a slide to the recent low of 1.1176.

Hourly chart

Trend: Bearish

GBP/JPY risk reversals hit lowest since August 2016 on put demand

GBP/JPY one-month 25 delta risk reversals (GBPJ1MRR) are currently trading at -4.275 in favor put options (bearish bets) – a level last seen in August 2016.

More importantly, risk reversals have fallen sharply from highs near -3.00 seen on March 19, which indicates the demand for put options has spiked in the ten days, possibly due to Brexit uncertainty.

Risk reversals is a gauge of calls to puts on the British currency. A negative number indicates implied volatility premium or demand for puts is higher than that for calls, while a positive number represents a higher demand for calls.

GBPJ1MRR

USD/JPY Technical Analysis: Pullback from channel resistance favors the return of 110.60

  • Having witnessed pullback from a week-long ascending trend-channel resistance, the USD/JPY pair trades near 110.80 ahead of European open on Friday.
  • Considering the pair’s repeated failures to surpass the channel resistance, the chances of its immediate decline to the adjacent upward sloping support-line, at 110.60, can’t be denied.
  • However, 38.2% Fibonacci retracement of its downturn from March 15 to 25 could challenge sellers around 110.50, failing to which might recall 110.20.
  • It should also be noted that the quote’s additional south-run past 110.20 may find it hard to sustain unless the channel-support figure of 110.00 breaks.
  • In that case, 109.70 and 109.00 could gain bears’ attention.
  • Meanwhile, an upside clearance of 110.90 channel resistance may still not favor pair’s rally as a fortnight-long resistance-line at 111.00, followed by 61.8% Fibonacci retracement of 111.05 and March 19 low around 111.15 might question the buyers.
  • Should there be a rise beyond 111.15, 111.40, 111.65 and 111.90 may appear in the spotlight.

USD/JPY hourly chart

GBP/USD: Recovery capped around 1.3070/75 ahead of UK GDP, Brexit parliament vote

Investors remain cautious ahead of data and Brexit parliament vote as uncertainty looms over the UK’s departure from the EU.
Immediate descending trend-line and 50-day SMA restrict the pair’s nearby upside whereas 200-day SMA becomes the crucial downside support to observe.
The British Pound (GBP) trades near 1.3060 versus the US Dollar (USD) ahead of London open on Friday. The GBP/USD pair recovered during the early-day trading but couldn’t clear 1.3070-75 resistance as investors turn cautious prior to the key events. Not only economic data from the UK and the US but Brexit parliament vote will also entertain investors during the day.

While monthly reading of the UK GfK consumer confidence survey provided initial support to the Cable by posting higher than -14 forecast figure to -13 mark, speculations that the soft Brexit is still on the card helped the quote stretch its recovery afterward. However, investors turned skeptic ahead of the key events like the fourth quarter (Q4) gross domestic product (GDP) and Brexit parliament vote. Not to forget that the US also has some second-tier data like personal income, spending, new home sales and Chicago purchasing managers’ index (PMI) to release.

The US 10-year Treasury bond yield recovers from its 15-month low of 2.35% to 2.40% but is still second lowest during the week.

The UK Q4 2018 GDP is less likely to deviate from 0.2% initial forecast whereas the US personal income and spending could print 0.3% growth for both personal income and spending during the February month. Further, Chicago PMI may soften to 61.0 from 64.7 for March while new home sales bear the market consensus of +0.620 million increase during February versus +0.607 million prior.

In the case of Brexit, the Democratic Unionist Party (DUP) has already signaled that they are going to vote against the British PM Theresa May’s Brexit proposal around 14:30 GMT. Additionally, some of the influential lawmakers like Jacob Rees-Mogg and party rebels are also likely to join the opposition in giving another humiliating defeat to PM May. Though, the market focus may shift to chances of a soft-Brexit considering May’s defeat could help the parliament to request the EU for a year’s extension to the Brexit deadline.

GBP/USD Technical Analysis

While a two-day long descending trend-line is likely the immediate upside barrier for the GBP/USD pair around 1.3070/75, 50-day simple moving average (SMA) level of 1.3090 may act as a comparative strong resistance to disappoint buyers. Should optimists surpass 1.3090, an upward sloping support-turned-resistance-line since January 03, at 1.3110, seem crucial to watch.

Meanwhile, 1.3000 and 200-day SMA level of 1.2980 may try to limit the quote’s nearby declines, a failure to do so can push bears to aim for 100-day SMA level of 1.2925.

WTI Oil Technical Analysis: Potential double top pattern

WTI failed to penetrate the March 21 high of $60.37 earlier this week and is now trading near $59.20 per barrel. The price action has taken the shape of the double top pattern on the 4-hour chart.

Acceptance below the neckline support of $58.15 would confirm a bullish-to-bearish trend change and would open the doors to $55.93 (target as per the measured move method).

A drop to the neckline support looks likely as the 4-hour chart RSI is charting lower highs, having created a bearish divergence on March 21.

4-hour chart

Trend: Bearish