The USD remained largely unchanged, maintaining any gains made in the past days as the market seems to still be nervous after the sudden oil price drop. It should be noted that OPEC members are discussing about production cuts, while U.S. President Trump announced that the U.S. will be increasing its strategic petroleum reserve, yet the market does not seem to be convinced. Analysts tended to note that the drop of oil prices consisted a reality check for the markets, which highlighted the safe haven qualities of the USD. It was characteristic that the JPY also gained as a safe haven, practically keeping the pair virtually unchanged. We expect the USD to continue to be driven by market sentiment, yet at the same time focus could also be on the US Congress and especially the House of Representatives that is about to discuss an additional stimulus for the US economy of about $484 billion. USD/JPY maintained its sideways movement just below the 107.75 (R1) resistance line yesterday and during today’s Asian session. We expect the pair to maintain its current direction as a base scenario. Should the pair’s long positions be favored by the market we could see USD/JPY rise breaking the 107.75 (R1) resistance line and aim for the 109.10 (R2) resistance level. Should the pair come under the selling interest of the market, we could see it aiming if not breaking the 106.80 (S1) support line.
GBP weakens as Brexit worries re-emerge
The pound fell to its lowest in almost two weeks on Tuesday against the dollar and also weakened against the euro and JPY yesterday. As expected, the mixed data deriving from the UK employment report yesterday passed largely unnoticed, as they referred to February, a period before the COVID 19 outbreak in the UK. The outlook for the UK economy remains dark, as the UK is under lock down and for the time being no thoughts are being made, to lift it soon. At the same time, headlines started to emerge once again about Brexit as the negotiations are to restart. The situation seems to remain uncertain as differences between the EU and the UK about their future relationship have not been resolved. At the same time the fact that the UK side insists that the deadline for any agreement with the EU remains unchanged at the end of the year, does not provide any confidence for GBP traders, as Brexit may prove messy at the end. A key take away from yesterday’s movement, would be that the return of Brexit risks seems to give the pound additional reasons to worry about, which are not existent for other currencies, differentiating the pound. GBP could be under pressure and any gains to be of a temporary nature, while pound traders may find today’s CPI releases interesting. Cable dropped yesterday breaking the 1.2400 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair, yet some signs of stabilisation may be present in the pair’s price action. It should be noted that the RSI indicator below the pair’s 4 hour chart, shows a reading at the level of 30, which on the one hand confirms the dominance of the bears yet at the same time may imply that the short position of the pair may have become overcrowded. Should the bears maintain control over the pair, we could see it breaking the 1.2200 (S1) support line and aim for the 1.2015 (S2) support level. On the flip side should the bulls take over, we could see the pair breaking the 1.2400 (R1) resistance line and aim for the 1.2580 (R2) resistance level.
Other economic highlights today and early tomorrow
Today, during the European session, we get UK’s CPI and PPI rates for March, while later on we get from Turkey CBRT’s interest rate decision. In the American session, we get Canada’s CPI rates for March and from the US the EIA crude oil inventories figure for the week ended on the 17th of April. During tomorrow’s Asian session we get the preliminary PMI’s for April from Australia, as well as the Jibun preliminary manufacturing PMI from Japan.
USD/JPY 4 Hour Chart
Support: 106.80 (S1), 105.30 (S2), 104.15 (S3)
Resistance: 107.75 (R1), 109.10 (R2), 110.60 (R3)
GBP/USD 4 Hour Chart
Support: 1.2200 (S1), 1.2015 (S2), 1.1815 (S3)
Resistance: 1.2400 (R1), 1.2580 (R2), 1.2770 (R3)
