eFXplus DATA

• GBP/USD makes third assault on 1.40 former support turned resistance level
• Pre-figure offers capped prior assaults Wednesday and during ECB briefing
• Break through 1.4000/10 could spur some short-covering. 1.4010 = 55DMA
• 1.3895 was six-week low in early European trade nL1N1S308L
• UK PM May feels more heat over EU's customs union nL8N1S344Y nL1N1S308D
• CBI-Little rebound for UK retailers after "Beast from the East" nL8N1S34O6

TD Research discusses CAD outlook and thinks that a temporary spike in oil prices towards $80/bbl is worth a big figure or two in USD/CAD.

For the next few sessions, we look towards the 50dma near the figure for support.

Next week's GDP will be critical to watch to determine whether we can break through 1.30 so some consolidation is in order before the break comes. Still, the CAD probably has some room to outperform on some of the crosses, as CAD's beta to the USD looks lower than some of the other well-populated longs like EUR, JPY, and GBP," TD argues

We prefer to sell CADJPY rallies towards 86 and buy into EURCAD dips near 1.53," TD advises. 

While EUR/USD has buckled this week to hit a low of 1.2155, matching the March base, there is good chance of a recovery after today's ECB rate decision nL8N1S30Y7 as downside fears may be overdone.
EUR/USD options are showing heightened concerns of further falls which have spurred demand and raised premiums for EUR put options.
These downside fears might well be excessive going into the ECB, meaning shorts that have built up by net selling on the EBS will be vulnerable to a squeeze.
If Draghi fails to acknowledge a softening in euro zone growth and continues with a positive tone, this could lead to solid EUR/USD gains.
EUR/USD has been on the back foot on the back of a resurgent dollar as the 10-year UST yield broke and held above the much-touted 3% level.
The pair's fall has paused ahead of large 1.2150 option barriers and the major 1.2137 Fibonacci level -- 50% retrace of 1.1718 to 1.2556 (December to 1.2556) rise.
A daily close below 1.2137 will spur further losses.

• EUR/USD trading on hold ahead today's ECB rate call and Draghi statement
• Pair matches the March 1 low at 1.2155 before basing ahead 1.2150 barriers
• Subsequently drifts back up to 1.2187 just below Asia's 1.2188 peak
• Option pricing suggests a range close to 75 pips today
• EUR 5 billion vanilla option expiries at 1.2200 a big potential magnet
• Breaks 1.2150-1.2250 to meet support, resistance close by 1.2100/1.2300

• Bear side stall gives way to a small breach of the daily cloud base, 1.3902
• New trend low of 1.3895 then back to 1.3918
• Still potential consolidation/bear continuation to ease for o/s condition
• However, cls below cloud and tenkan-kijun cross opens up 1.3781 Mar 8 low
• Weeklies look to be building for a 21WMA break at 1.3850 too
• Selling rebounds to 1.3960 favoured strategy

• EUR/USD 1.2160-1.2182 range in Asia underpinned by 1.2150 options
• Mar 1 low @ 1.2155. O/n options suggest a range close to 75 pips today
• EUR 5.1 bln vanilla expiries at 1.2200 today a likely magnet for 15GMT
• 1.2150 break opens 1.2100 options and Jan 2, 4, 5 highs 1.2081/89/83
• Another strong defence of barrier is highly likely at 1.2100
• Close over daily Ichimoku at 1.2242 needed to alleviate bearish pressure

• USD/JPY does little after the to-do usually seen around time of Tokyo fix.
• Early push up to 109.49 but market capped by defense of presumed 109.50 KOs.
• Stops eyed above the option barriers tipped at 109.50, larger up at 110.00.
• Japanese importer buys again at fix, exporters sales help cap it.
• Support-bids eyed from @109.23 hourly Ichi kijun, low 109.22, 109.04 55-HMA.
• US yields remain high, supportive, Nikkei +0.6% into TSE close.

• +0.1% in Asia, bargain hunting/profit taking into yesterday's 0.5% fall
• Neutral momentum studies, 5, 10 & 20 DMAs trend south - bearish setup
• Targets a test of 0.7480/00, Dec trend low & 50% 2016/2018 rise
• Earlier 0.7562 low & 0.7587 London high initial support/resistance
• TWI closed on Mar 62.30 low - close below targets 61.20, 76.4% 2015/17 rise
• Tight range but plenty of interest in Asia - Click here

EUR/USD: Neutral (since 05 Mar 18, 1.2335): A clear break of 1.2153 would suggest a much deeper down-move in EUR.

Our ‘focus level’ of 1.2153 that was indicated on Tuesday (24 Apr, 1.2205) was almost touched as EUR dropped to an overnight low of 1.2158. As noted, a clear break of 1.2153 would suggest that EUR is ready for a much deeper down-move in the weeks ahead (the next support below 1.2153 is at 1.2090). The prospect for a break of 1.2153 has improved but in view of the oversold shorter-term condition, EUR has to continue to extend lower or it would lose it momentum quickly. On the upside, a break of the ‘key resistance’ at 1.2270 (level previously at 1.2300) would indicate that a short-term low is in place.

GBP/USD: Neutral (since 07 Mar 18, 1.3895): Still chance for a test of 1.3900.

GBP traded in a reatively quiet manner for the past couple of days and downward momentum is showing signs of tiring. That said, we continue to see chance for a test of 1.3900 but the odds for a sustained move below this level are not high. On the upside, only a break of 1.4040 (‘key resistance’ unchanged) would indicate that the current weakness has stabilized.

AUD/USD: Neutral (since 22 Mar 18, 0.7770): Further weakness not ruled out but 0.7500 is likely out of reach.

We noted yesterday that “there is no sign of stabilization just yet” and “we have to contend with further weakness to 0.7550”. AUD subsequently hit a low of 0.7553 before staging a mild recovery. While further weakness is not ruled out, the combination of oversold conditions and waning momentum suggest that the odds for a sustained move below 0.7550 are not high. The next support below 0.7550 is at 0.7500, the low in December last year. At this stage, it appears that AUD would likely make a short-term low ahead of this major support. To put it another way, 0.7500 is likely out of reach this time round. Resistance is at 0.7605 but only a break of 0.7650 (‘key resistance’ previously at 0.7690) would indicate that a short-term low is in place.

NZD/USD: Neutral (since 05 Feb 18, 0.7280): Further weakness to 0.7035 would not be surprising.

NZD continues to ‘melt’ and our expectation for 0.7070 to temporarily check the drop in NZD was incorrect (low of 0.7058). Despite being severely oversold, there is still no sign of stabilization yet and further NZD weakness to 0.7035 would not be surprising. However, the next support at 0.7000 could be out of reach. On the upside, resistance is at 0.7110 but only a break of 0.7145 (‘key resistance’ previously at 0.7190) would indicate that the current weakness has stabilized.

USD/JPY:  Neutral (since 21 Feb 18, 107.35): Focus is at 110.00 now.

The 109.30 ‘target’ that was first highlighted on Tuesday (24 Apr, 108.70) was exceeded as USD hit a high of 109.45 during NY hours. As indicated previously, a break of 109.30 would suggest that USD is ready for a move to 110.00. We attach high importance to 110.00 as a clear break of this level would indicate that USD has likely made a significant low at 104.55 last month. In the meanwhile, we continue to expect USD to stay supported and only a break of 108.45 (‘key support’ previously at 108.15) would indicate that a top is in place.

• EUR/JPY in holding pattern just below 133.43 daily Ichi cloud top.
• Top pierced marginally/briefly Tuesday with move to 133.48.
• Top to ratchet down some to 133.23 tomorrow.
• EUR/JPY 132.95-133.25 so far in Asia, touch choppy on lack of liquidity.
• Flat 100-DMA 133.04, daily Ichi tenkan 132.76 below.
• Ascending 55-HMA 133.02, cloud top 133.11, latter pivot of sorts.

• +0.1% in early Tokyo, bargain hunting into yesterday's 0.6% fall
• ECB tonight - no change, but Draghi likely optimistic nL3N1S24EN
• Momentum studies slip, 5, 10 & 20 DMAs trend lower - bearish setup
• Yesterday's close below 1.2172, 38.2% Nov/Feb rise was negative
• 1.2154 March low a base offshore - sustained break targets 1.2008 200 DMA
• 1.2200 4.7BLN strikes cap & 1.2160 NY low is initial support

• +0.1% as Tokyo open - AUD bargain hunting - closed +0.1% - JPY led
• Market USD component driven rather than risk/cross led at present
• 82.27 Kijun line & falling 82.69 under pressure cloud base pivotal levels
• Kijun/Cloud have contained for 3 weeks - close outside likely directional
• 83.26 Tenkan line then 83.75, 38.2% 2018 fall first resistance
• NY 82.41 low then 82.27 Kijun line initial support

• Move above 3.0% in the 10-yr US yield pushing USD higher across the board
• EUR/USD opens 0.59% lower and just below the March 1 trend low at 1.2154
• A clear break below 1.2150 targets the ascending 200-day MA (1.2008 today)
• Resistance at former support at 100-day MA at 1.2217
• EUR/USD likely to consolidate ahead of ECB meeting later today
• Market expecting dovish hold so a risk to shorts in ECB a bit more upbeat

Barclays Research discusses EUR/CHF outlook and sees some consolidation around current levels in absence of a trigger for bullish continuation on the EUR-leg of the pair.

"In Switzerland, EURCHF has once again gained considerable market traction as it briefly broke the psychological 1.20 level, last seen in January 2015 before the SNB let the floor go.

Despite the improvement in risk sentiment, we are sceptical about material EURCHF gains without a EUR-led catalyst. As a base case, we continue to expect some consolidation in the cross from current levels," Barclays argues. 

• Cable elicited support pre-1.3919 after EUR/USD loss-influenced drop
• 1.3919 was Tuesday's 5-week low and 5th consecutive lower daily low
• GBP-positive M&A news is helping to hold back the stronger USD tide
• Comcast confirms GBP 22bln bid for Sky, sparking battle with Fox
• See: nL8N1S23IX. Hot on heels of Shire/Takeda news nL8N1S14PR
• EUR/GBP down to six-day low of 0.8732 ahead of ECB event risk

The rise in U.S. 10-year yields above 3 percent has highlighted concerns about EUR/USD ahead of tomorrow's ECB meeting, especially in light of the market's heavy long position in Europe's single currency.
The big risk is that Draghi could sound more dovish than expected tomorrow, intensifying the exodus from EUR/USD longs.
EUR/USD's break of 1.2182 negated yesterday's signs of a bullish reversal and the pair set a new low.
Concerned EUR/USD longs now look to protect against a deeper slide via EUR/USD put options with strikes at 1.2100, 1.200 and even 1.1800 nL1N1S207N.
A dovish ECB could set up a test of the 1.2100/50 zone, a break of which would target 1.2000 and 1.1900.
Suspicions of a dovish ECB contrast with the Fed's full-steam-ahead rhetoric on rate hikes.
Such rhetoric helped the U.S. 10-year yield in its rise above 3 percent.
Though eurozone yields are also rising, they're being outpaced by Treasuries, resulting in a widening of DE-U.S.
spreads and an increased cost of carrying dollar shorts.

Bank of America Merrill Lynch Research discusses USD/JPY outlook around this week's BoJ policy meeting, and maintains a bullish bias on USD/JPY into the meeting, while holding a long AUD/JPY* position targeting a move to 90.

"With no major change expected (by the market and our economists), USD/JPY should exhibit no more than knee-jerk reaction through the policy meeting. If anything, reconfirmation of the BoJ's on-hold stance can open a scope of policy divergence should foreign interest rates continue to climb, adding to the nascent uptrend in USD/JPY.

...Abe's struggle to regain lost public support poses key political risk and the geopolitical risk on North Korea carries uncertainty heading into a potential Trump-Kim summit, but we think the positive flow for USD/JPY is gradually outweighing negative political risks. We remain constructive on USD/JPY and also long AUD/JPY," BofAML argues. 

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*Recorded in eFXplus Orders

USD/JPY is rising on higher U.S. rates as 10-year yields surpass 3 percent and test their 2014 high, but the potential for increased risk aversion generated by the higher borrowing costs could limit the dollar's gains against the yen.
And unlike EUR/USD, where IMM specs are net long EURs worth $23.4bln, specs are now virtually flat versus the yen, having exited a large short position over the past few months.
Five straight days of U.S. equity market losses have driven S&Ps back down toward the 200-DMA support and the VIX back up closer to 20%.
Rising rates undermine equities and higher risk investments generally.
A breakout above 3% in 10-year yields should run into resistance near 3.25%, particularly in a rising USD environment.
USD/JPY is headed for a test of key resistance and Japan Inc's FY average target at 109.65, with 110 seen the top of a wider 105-110 range.
Already overbought, USD/JPY will be ripe for a pullback toward the flattening cloud top by 108 after the BOJ meeting and US GDP report Friday, particularly if risk-off flows persist.

BTMU Research discusses GBP outlook in light of yesterday's positive UK economic data for the budget deficit figures for March which confirmed that the UK finances are in better shape than originally expected.

"At a time when market participants are focusing more and more on USD downside risks linked to the potential explosion of the US ‘twin deficit’, the news from the UK is very positive for the pound. 

The better fiscal position will not go unnoticed by the BoE and at the margin the knowledge that the government is currently in a position to build a bigger buffer to provide scope for some degree of fiscal expansion will reduce concerns over the gradual monetary tightening that the BoE is currently signalling to the markets.

The UK government’s very notable contrast to the fiscal position in the US that is currently contributing to US dollar weakness will certainly help provide support for the pound," BTMU argues. 

TD Research discusses its potential new trade positions and puts USD/JPY under the radar for a short medium-term trade, and looks to sell CAD/JPY at 86. 

"USD/JPY is reaching attractive levels to sell, especially as our medium-term forecasts look for a push below 100. The pair is sitting close to our gauge of HFFV, increasing the risk/reward of selling ahead of 100.

For USDCAD, the path of resistance leans higher. Two of the key risks we have flagged en route to 1.30 was a knee-jerk move on NAFTA and possible scrapping of the US/Iran deal. If Trump holds steady on the latter, then a return to 1.30 is the very near future, which also dovetails with our sell-on-rallies view of CADJPY. For this trade, our preferred entry level is 86," TD argues.