NZD/JPY shorts were the best trade this week

Rough week for the kiwi

Rough week for the kiwi

The FX market is certainly flashing different signals than equities. The yen was the top performer this week in a potential sign of risk aversion. That said, the Swiss franc was near the pile so flows are likely a bigger part of the story here than fundamentals.

At the bottom of the pile was the New Zealand dollar after a surprising drop in Q1 CPI.

The overall moves are a bit of a surprise because it felt like a quiet week. However many currencies were jarred by various one-off factors in quick moves. 

Techncially, NZD/JPY is in the midst of a technical break below its recent range. On the CPI numbers it fell to the lowest since Feb 13 and we're revisiting that area now after a failed bounce. A break could easily be on its way to 74.00 or worse. 


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Haven flows dominate as poor Eurozone economic data reignite global growth worries

10-year bund yields slump by 5 bps to just 0.03% now

Germany 10-year bond yields

The sluggish data from Germany and overall Eurozone PMIs are spreading jitters across markets as haven flows start to dominate once again. 10-year bund yields are down by 5 bps to 0.03% while Treasury yields are seen slumping by 4.5 bps to 2.548% currently.

And in the currencies space, that is helping to keep the likes of the dollar, yen and swissie bid on the day. All major currencies are close to session lows currently against the three currencies mentioned as haven/risk-off flows start to dominate proceedings.

According to Markit, they view that the Eurozone economy should only grow by 0.2% in Q1 2019. That's really awful and it is just going to spread more fear on global growth worries.

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Euro troubles resurface as German manufacturing PMI disappoints expectations again

EUR/USD brought lower from 1.1290 to a low of 1.1265

EUR/USD H1 18-04

Much like the reports on ECB doubting economic growth earlier this week, the German data earlier basically highlights the fragility of the recent rally in the euro. While the manufacturing print improved from March to April, it's the sheer disappointment relative to expectations is what markets are focusing on upon the release.

EUR/USD is sent lower as a result from 1.1290 levels to a low of 1.1265. More significantly, price is looking to hold a break below the 200-hour MA (blue line) @ 1.1284 now. A break below that will see the near-term bias shift to being more bearish again.

Despite the overall improvement in German PMI data from March to April, the manufacturing sector continues to be weak (contracting for a fourth month in a row) and that's enough to put a drag on the euro and bund yields considering that factory activity is the backbone that drives the German economy.

For EUR/USD, it looks like sellers are back in near-term control and that bodes ill for those looking for an upside extension as we look to wrap up the week. Further support is now seen near 1.1250 before additional support at 1.1215-20 comes into play. Following which, bids at the 1.1200 handle will be called upon next.

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AUD/USD continues to challenge the 200-day moving average following jobs data release

AUD/USD buyers still looking for a firm break above the 200-day moving average

AUD/USD D1 17-04

Yesterday's run higher failed to culminate into anything meaningful as buyers failed to secure a daily close above the 200-day MA (blue line). Today, that level rests at 0.7190 and will be a key point of contention once again as price lingers around 0.7180-90 levels after touching a high of 0.7199 earlier.

The high came after the release of the Australian jobs data for March which showed a jump in employment figures but the unemployment rate crept slightly higher since February. The data failed to offer much to market participants in general as it didn't show the kind of decline sellers are hoping for to price in a RBA rate cut further.

Hence, it is suggesting markets to 'carry on as you were' to prior to the data release as we will have to wait on more clues before being able to find firm direction based on fundamentals. From a technical perspective however, the 200-day MA highlighted above remains key and any firm daily break above that will represent a significant change in AUD/USD bias (reverting the bias back to the upside).

That being said, over the next few sessions, it's best to be aware of thinner liquidity conditions with Australian markets among those set for a four-day weekend. I never trust breaks that happen during periods on thin liquidity and the flash crash on 3 January is a prime example of why that is the case.

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Sterling pares earlier gains as UK inflation is seen to stay below target

GBP/USD slips from 1.3060 to 1.3040 levels

GBP/USD D1 17-04

The pound also slips to the day's lows against the euro with EUR/GBP rising to 0.8680 on the back of the report earlier. Meanwhile, cable is inching lower towards 1.3040 currently as the data misses on expectations.

However, as mentioned in the release, the bigger takeaway for me is that London house prices is seen slowing at its quickest pace since the global financial crisis. That owes much to Brexit but it certainly doesn't help the pound's case when Brexit is still nowhere near to being resolved at the moment.

The inflation report is not likely to offer anything new as CPI figures hold steady compared to February (still below the 2% target on annual headline inflation). Hence, the main focus for the pound will still remain on Brexit developments.

As for cable price action now, near-term bias is more bearish as price holds below the key hourly moving averages but there is near-term support around 1.3030-35 from last week's lows. However, the key support level for me remains the bottom side of the triangle pattern, which rests at 1.3005. That and bids around 1.3000 will be key support levels to watch out for in cable as we navigate through the sessions ahead.

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AUD/USD buyers look to extend upside but must break the 200-day moving average first

AUD/USD is knocking on the door of an upside extension, but buyers must be able to hold a daily close above the 200-day moving average first

AUD/USD D1 17-04

It's yet another make or break time for AUD/USD buyers as they contend with the 200-day MA (blue line) once again. This time around, price manages to trade above it for the first time since March 2018 but the issue is can buyers hold a daily break above it?

The level rests at 0.7191 today so that is the figure that AUD/USD will be looking to break above in order to attempt at a more bullish bias and a further extension to the upside. However, there are several things still to consider before we get carried away with the break of the key level above.

Firstly and most importantly, tomorrow we'll get the release of the Australian labour market report for March. Given the RBA's intense focus on labour market conditions, the release tomorrow will be treated as a gauge of rate cut expectations in the coming months.

Hence, I reckon resistance around 0.7107 (21 February high) and 0.7235 (11 January high) may well play a role in limiting any upside if buyers search for a break today.

Secondly, there are a host of expiries sitting in between 0.7150 to 0.7200 today for AUD/USD. That could very well play a role in trapping price action before they roll off later in US trading, so that could potentially put off buyers for the time being given that they have to consider the risk event tomorrow as well.

Lastly, risk sentiment remains a tad indecisive for the time being and we'll have to once again wait on Wall Street for more direction. Earnings will once again play a role but it's more of the fact that we're seeing a lack of follow through among risk assets after some relief from the Chinese economic data earlier.

Sure, bond yields are a tad higher but they're not really racing and overall equities sentiment remains more subdued as we begin the European morning.

In my view, the 200-day MA is definitely key to see a further squeeze higher in AUD/USD but the technical break must be supported by tomorrow's labour market report. Overall, the squeeze could lend itself towards a move to 0.7300 and 0.7400 but it'll only be a matter of time before the RBA's dovishness comes back into play thereafter.

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EUR/USD inches higher as dollar continues to lose further ground

EUR/USD holds above the 1.1300 handle in early European trading

EUR/USD H1 17-04

The dollar and yen are holding a little weaker as we begin the European morning as markets look to be leaning slightly towards a more risk-on mood. Chinese economic data earlier mainly helped markets breathe a sigh of relief, easing some fears on global growth.

In particular, bonds are showing a significant response with Australian yields rising earlier and now we're seeing the same come out of Europe as well. 10-year bund yields hit a high of 0.086% earlier, rising to four-week highs.

And that is helping to give some impetus to currency traders with EUR/USD and EUR/JPY rising to session highs of 1.1314 and 126.66 respectively.

For EUR/USD, the near-term bias is now more bullish once again as price holds above both key hourly moving averages. However, there is near-term resistance around 1.1316 before the swing region around 1.1325-30 comes into play once again.

Those will be the key levels to watch out for in the session ahead. Besides that, do take note that there are large expiries resting at 1.1300 so that could play a part in keeping price action anchored around the figure level as well.

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EUR/USD buyers lose their grip as euro falls on ECB growth doubts

EUR/USD challenges a break of the 100-hour moving average

EUR/USD H1 16-04

The Reuters report earlier highlights how fragile the euro can be to news related to economic data/growth outlook in the current market environment. The only good news I can think of in relation to this is that there are some green shoots in the Eurozone economy still and that's providing some support for the euro until they also start to turn for the worse.

EUR/USD slipped from 1.1305 to a low of 1.1280 on the headlines earlier and is continuing to do battle around 1.1290, where the 100-hour MA (red line) lies.

Fall below that and the near-term bias will turn from being more bullish to more neutral. Over the past two weeks, there hasn't been much to really shake things up in the euro (the ECB meeting was more or less a repeat of the March meeting) but this is certainly a new development to add to the picture.

This could suggest potential forecast downgrades moving forward and will cast doubt on future economic data as well. The reaction in the euro so far suggests that markets have reason to be pessimistic but confirmation of any doubts and negativity will rest in the hands of future economic data releases.

That said, any sustainable rallies in the euro will also prove to be elusive as long as policymakers are also expressing similar doubts to that of market participants. I reckon the single currency will only be able to find a significant extension higher only if the growth outlook clears and that may not come until 2H 2019.

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USD/CAD falters at first attempt to firmly break above the 1.34 handle

USD/CAD continues to rise after the poor Bank of Canada business outlook survey for Q1 in overnight trading

USD/CAD H1 16-04

The pair reached a high of 1.3403 and tested resistance from the 5 April high at the similar level, before retreating now to near 1.3390. Near-term price bias is still more bullish as buyers broke above the key hourly moving averages in overnight trading following the release of the BOC Q1 business outlook survey.

They are keeping the momentum going in the new day as price is now challenging a break of the 1.3400 handle but for the time being, buyers are lacking a follow through.

Looking at the bigger picture:

USD/CAD D1 16-04

The upside bias in the pair remains very much intact as price holds above the 100-day MA (red line) as well. Daily resistance is seen around 1.3384 but a firm break above 1.3400 will help allow buyers to extend the upside move to test resistance near 1.3445-50 next.

For me, the key level in USD/CAD is the trendline support stemming from February last year. It has helped to act as a key support for the pair twice already this year and as long as that level holds, buyers will have a safety net to search for further moves higher in the pair.

Adam made a good point recently in that Canadian economic data has been surprising to the upside to begin Q1 2019. However, the falloff in recent weeks has been rather stark and at this rate, it looks be leading towards a rate cut by the Bank of Canada.

Citi Canada

If something (the loonie) can't rally on good news, then it's going to be a tough road ahead when headlines start turning against it over the next few months.

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The AUD/JPY breakout is starting to look more like a fakeout

AUD/JPY threatens to fall back below the topside of its previous range

AUD/JPY D1 16-04

The pair has been ranging between 77.50 to 79.85 since mid-January up until we saw price broke out last Friday to climb to its highest levels this year. At the same time, price also broke above the 200-day MA (blue line) as buyers look to capitalise on the break but so far in the new week the pair has been nothing short of a disappointment.

Currently, price is lurking around the 80.00 handle but is threatening to fall back below the previous three-month topside range of 79.85. This comes as the aussie is weaker after the RBA minutes revealed the central bank discussing scenarios for rate cuts moving forward.

AUD/JPY is often seen as a barometer for risk sentiment in markets and the fact that US earnings season also begin mixed is leaving for an indecisive tone for risk assets to really rally thus far. Yesterday, Goldman Sachs and Citigroup reported beats on earnings but the details were less impressive as profit and revenue disappointed estimates.

If anything, this goes to show that any risk rallies will not be a given at this point and things can easily switch back if there aren't any positive headlines to bolster sentiment.

I reckon US-China trade talks progress will be the much needed impetus for risk assets to rally this quarter. However, the odds of any potential deal being wrapped up in the next few weeks look to be fleeting.

For a trade that promised much, this is starting to look more like a fakeout as other risk assets are failing to back up what currency traders have managed at the end of last week.

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