The EUR was the biggest looser on Friday as German preliminary manufacturing data for March showed substantially decreased economic activity and the German Mfg PMI dropped to its lowest level in over 5 years. It should be noted though that also France showed a decrease of economic activity for the same period while the Eurozone as a whole still shows some expansion at the Services sector. On other news, in the US the yield curve inverted on Friday, with the 3 month yield surpassing the 10 year note yield, hence the spread inverted for the first time since 2007, according to analysts. The news caused the greenback to weaken especially against safe havens such as the JPY. We expect safe havens to be on the rise and should new financial data remain soft, we could see the EUR weakening even further. EUR/USD dropped heavily on Friday breaking the 1.1340 (R2) and the 1.1300 (R1) support lines (now both turned to resistance lines). We could see the pair correcting somewhat after its stabilization late in the American session on Friday and today’s Asian session, yet the risk of another dip still exists. Should the pair find buying orders along its path, we could see it breaking above the 1.1300 (R1) resistance line and aim for the 1.1340 (R2) resistance barrier. Should on the other hand the pair come under the selling interest of the market, we could see it breaking the 1.1265 (S1) support line and aiming for lower grounds.
Pound strengthens after EU’s proposal, yet uncertainty remains.
The pound strengthened on Friday after the EU provided Theresa May with a two week extension of the Brexit date, pushing a possible hard Brexit temporarily further away. Analysts point out that the pound’s strengthening, at least partly also derived from the EUR’s and USD’s weakening the same day. We expect volatility to remain present for the pound as the inner UK political stage gets the market’s attention this week, as Theresa May’s deal is expected to be presented to the UK Parliament once again. Please note though, that the UK PM may not find support once again for her deal, in which case the issue could drag on. The pound could remain range bound, yet volatility is also expected as the Brexit uncertainty persists. Cable rallied on Friday, breaking the 1.3175 (S1) resistance line (now turned to support). We expect the pair to remain range bound over the next few days yet with volatility remaining present in the any of the pair’s direction. The pair could remain Brexit driven, yet at the same time it should be noted that any possible weakness of the USD side could also provide for a bullish sentiment. Should the bulls dictate the pair’s direction, we could see the pair breaking the 1.3265 (S1) support line and aim for higher grounds. Should on the other hand the pair come under the control of the bears we could see it breaking the 1.3175 (S1) support line and aim if not break the 1.3070 (S2) support barrier.
Other economic highlights, today and early tomorrow
In today’s European session we get from Germany the Ifo Business Sentiment for March and during the late American session, from New Zealand the trade balance figure for February. Please note that during tomorrow’s early Asian session, BoJ’s summary of opinions will be released and that Philadelphia Fed President Harker as well as RBA’s assistant governor Ellis are scheduled to speak today.
As for the week ahead:
On Tuesday Germany’s Gfk Consumer Sentiment for April and US CB consumer Sentiment for March due out. On Wednesday RBNZ interest rate decision, and US and Canada’s trade balances for January to be released. On Thursday the CNB Interest rate decision, US GDP for Q4 and Germany’s HICP for March due out. On Friday we get Japan’s Industrial production, unemployment Rate and Retail sales for February, Germany’s unemployment data for March and retail sales for February, UK’s GDP for Q4 and Canada’s GDP for January and Eurozone’s CPI for March.
EUR/USD
Support: 1.1265 (S1), 1.1200 (S2), 1.1175 (S3)
Resistance: 1.1300 (R1), 1.1340 (R2), 1.1390 (R3)
GBP/USD H4
Support: 1.3175 (S1), 1.3070 (S2), 1.2970 (S3)
Resistance: 1.3265 (R1), 1.3350 (R2), 1.3450 (R3)
