eFXplus DATA

• Flat after closing little changed in a quiet period for data and news
• Neutral momentum studies, 5, 10 & 21 DMAs trend south - bearish setup
• Sustained break of the 1.2963 200 DMA adds to the negative bias
• Next stop is 1.2773/80, February low and 61.8% of the 2019 rise
• Pivotal resistance at 1.3025/31, TL from the March high and 21 DMA
• London 1.2866 low and NY 1.2914 high initial support/resistance

• USD/JPY declines as JPY crosses sold ahead of April 29-May 6 Japan holiday
• Fear of illiquid markets, scope for ECB, RBA easing dent EUR/JPY, AUD/JPY
• Perception grows that ability of BOJ to ease further limited nL3N2270H5
• USD downside limited on growing optimism on U.S. economy nL1N2270N0
• Position squaring to dominate in Asia, SSEC watched after 2.4% fall Thursday
• Supports 111.37, 38.2% of 109.70-112.40 rise & 111.20-25 ; 111.70-80 resists

Danske Research discusses EUR/CHF outlook and adopts a neutral bias in the near-term, while maintains a constructive bias in the medium-term.

"EUR/CHF has been relatively steady lately, notwithstanding the latest ECB-induced volatility. With the ECB sidelined, the case for EUR upside has been postponed. Near term, risk sentiment is set to remain fragile which could deliver pockets of safe-haven demand and benefit the CHF. However, we expect a China-led stabilisation by mid-year, led by dovish central banks, a trade deal and a ‘decent Brexit’, which should support EUR/CHF.

However, a sustained break higher would require ECB support, which now seems far away. As a result, the SNB will be stuck with an empty toolbox and a below-target inflation for an extended period. There is also a risk that the market could test the SNB’s willingness to do more and send EUR/CHF towards 1.10 again. But, in our case base, where economic and political risks are set to clear in Europe, we still see some limited upside potential in the cross," Danske notes. 

"We project EUR/CHF at 1.12 in 1M, 1.13 in 3M, 1.15 in 6M, and 1.17 in 12M," Danske adds. 

• Pair hits new low in early NY on US data & risk-off sentiment nL1N2270H2
• Bears can't extend slide much below 0.6990, equity bounce eases risk-off
• AUD/USD back near 0.7010 & 50 Fib of 0.6715-0.7295 late in the day
• EM ccys stay weak & USD/CNH near high late, remains traders of bear risks
• Despite AUD/USD resiliency risks to downside increase nL1N2270V6
• U.S. Q1 GDP now eyed, if upbeat more bear pressure on AUD/USD is likely

A 1.3 percent surge in core U.S. durable goods orders in March bodes well for a strong Q1 GDP report Friday and should underpin relatively attractive Treasury yields Japanese investors are buying nL1N2270H1, limiting USD/JPY losses.
The 37k rebound in jobless claims from the previous week's nearly 50-year low partially offset the durables.
The bigger question is how much of the yen short covering expected to occur before the long Japanese holiday has already occurred nL1N2260M1.
Those flows have reduced dollar gains against the yen compared to its rise versus other currencies this week.
The breakdown in yen-funded carry trades extended today after a surprise drop in South Korean GDP, tumbling Chinese stocks and yuan, as well as fresh concerns about Germany's banking sector and the European economy.
USD/JPY's Wednesday close above 76.4 percent of the 114.55-104.10 November-January plunge and new 2019 high at 112.40 look bullish.
But today's pullback below the prior two days' 111.68/65 lows suggests a broader topside breakout will at least await tomorrow's U.S. GDP report for impetus.
Today's biggest options expiries are at 111.40-50, with 112s a staple, if smaller, into next week.
The 200-DMA at 111.50 looks pivotal on a closing basis.

MUFG Research discusses EUR/USD outlook and adopts a tactical bearish bias, expecting the pair to trade with a downward direction in 1.1300-1.0900 range in the near-term.

"The euro has finally broken to out to the downside of the recent trading range between 1.1200 and 1.1400. It opens the door to a retest of the 1.1000-level, and even potentially as low as 1.0900 in the near-term. The continued weak performance of the euro-zone economy has finally played a role in encouraging an even weaker euro/stronger US dollar," MUFG notes. 

"Selling pressure on the euro could even intensify in the week ahead if Italy is downgraded by S&P, and/or President Trump announces that he has decided to raise tariffs on imports of autos. On the other hand, the US data flow should confirm that growth is slowing but to a lesser extent than overseas. The Fed should remain comfortably on hold unless they begin to express more concern over “subdued” inflation. It is unlikely at the upcoming FOMC meeting," MUFG adds. 

• Cable helped to 1.2906, from 1.2866, by some profit-taking on USD longs
• 1.2866 was fresh 10-week low in early NY trade (1.2871 was Ldn am low)
• Scope for more profit-taking on USD longs if US Q1 GDP below 2.1 f/c Friday
• GBP/USD resistance levels include 1.2915, 1.2945 and 1.2965 (200DMA)
• Offers just shy of 1.2965 capped cable Wednesday--before drop to 1.2887
• UK wants Brexit deal approved before July - May's deputy nL5N22757V

TD Research notes that its high-frequency fair-value models put EUR/USD around 1.12, and likes buying EUR/GBP on dips

"The USD's on a tear the past few days. The DXY marked its highest level in roughly two years, reflecting a notable drop in the EUR. An essential question is whether this move reflects genuine USD strength, G9 weakness or something more technical. For one thing, we don't think the narrative has changed all that much. One critical fundamental point relies on the emerging growth rotation, which has been painfully slow to emerge," TD notes. 

"GBP is the one currency that hints of the positive transition where good data dovetails with a positive read on growth expectations. Brexit throws a monkey wrench into this type of framework but EUR falls close behind on these measures. Indeed, it shows a decent data surprise pulse but it has yet to generate a buy signal on the growth front. While positioning remains short, we note that EURUSD HFFV sits around 1.12. Still, we think there is enough evidence here that EURGBP looks attractive on dips, "TD adds. 

Societe Generale Research discusses its latest tactical view on EUR/USD and AUD/USD.

"The dollar is expensive, supported by stronger growth and 2-year rates that are 70bp higher than the next highest in the G7 economies . The euro is cheap, dragged down by weak growth, political uncertainty and 2-year rates that are even lower than Japan's. Furthermore the market's long dollars and short euros.

The risk then, is that having broken through the bottom of the recent EUR/USD range, all we do is add another coat of paint to the bottom of it, and settle into a marginally lower range, that is just as claustrophobic as the previous one. Alternatively, we may be entering a buying area If that's the case, the low for this EUR/USD cycle may not be very far from here. Q1 GDP data are due on March 30,"SocGen notes. 

"AUD/USD has fallen right back to the bottom of its range, but if AUD/USD 0.70 holds through tomorrow, it's worth buying," SocGen adds. 

• Short-term trend high at 0.8681 Tues, matching the Apr 17 top
• Pullback extends below 10DMA, 0.8652, looks to stronger support at 0.8627
• Daily cloud base and 55DMA sat at 0.8627 today
• Positive momentum fading, slow stochs already confirming a potential top
• Still watching a monthly doji candle, highlighting market indecision
• We stand aside until clearer signals appear

• Cable falls to fresh 10-week low of 1.2872 on further buying of the USD
• Simultaneous EUR/USD drop to 1.1129 (new 22-month low)
• Buying of 1.10 EUR put/USD call options has been noted nL1N227067
• 1.2887 was Wednesday's cable low amid foreign demand for USTs nL1N22613W
• GBP/USD bear targets include 1.2773 (Feb low) and 1.2409 (Jan low)
• Meagre 16 pip range for EUR/GBP thus far today, 0.86375-0.86535

• AUD/USD hits 0.6992 after tripping stops below 0.7000 (0.7003 = March 8 low)
• 0.6992 is the lowest level for AUD/USD since the Jan 3 flash crash
• Drop through 0.7000 influenced by the SSEC closing down 2.4 pct nZZN2RKD00
• 0.7004-0.7023 was Asia range (Anzac Day). 0.7005 was Wednesday's low
• Wednesday's drop to 0.7005 was spurred by soft Australian inflation data
• 12 of 23 economists tip RBA rate cut on May 7 - Reuters poll nL3N22621P

• On Wednesday EUR/USD registered the 5th biggest one-day drop of 2019
• That ahead of the consolidation on Thursday
• We remain bearish on this market, looking to get short on recovery attempts
• There are layers of Fibonacci levels below Wednesday's peak
• 1.1184/1.1211 Fibos are 23.6%/38.2% retrace of the 1.1324-1.1141 decline
• Outlook mixed had been mixed nL1N22604Q. Offer placed at 1.1190

• Removal of the 50% Fibo, 1.2895 from 1.2409-1.3380, is significant
• Next Fibo comes at 1.2780 and provides a viable bear target
• Heavy market and price now testing 30DMA Fibo support at 1.2885
• Converged 100-200DMA give resistance at 1.2965, then 10DMA and cloud base
• A falling and thickening weekly cloud add further to the bearish outlook
• Weekly momentum poised to flip negative after holding a bull bias since Feb

• ANZAC day market closure thins liquidity as key barrier tested
• AUD/USD rebounds after failed attempts to break 0.7000 nL1N22700G
• Defense of large option barriers, stoploss orders keep it aloft
• Tentative relief for risk currencies comes as early USD surge ebbs
• Profit-taking before BOJ policy outcome amid thin AUD liquidity
• Stocks in Asia attempt to clamber out of negative territory

EUR/USD: EUR is still under pressure, next support at 1.1070.

We shifted to a negative stance yesterday (24 Apr, spot at 1.1225) and expected EUR to “stay on the defensive”. However, we held the view that “lackluster momentum suggests any weakness could be limited to the next support at 1.1140”. In that context, the decline in EUR yesterday that cracked the year-to-date low of 1.1174 was not exactly unexpected (EUR touched 1.1139 during late-NY hours). While the decline of -0.65% yesterday was rather substantial, there were several instances this year wherein EUR failed to extend lower despite registering a large one-day drop. Not only it did not extend lower, EUR subsequently rebounded strongly (see the circles in the chart below which show the 4 largest one-day drop this year). That said, we are not anticipating a rebound for now. The improved downward pressure suggests EUR could weaken further even though it is unclear at this stage if the next major support at 1.1070 would come into the picture. On the upside, the ‘key resistance’ has moved lower to 1.1240 from yesterday’s level of 1.1285. EUR is expected to stay under pressure until it can break the ‘key resistance’

GBP/USD: GBP remains under pressure but Feb’s low of 1.2773 may be out of reach.

We highlighted yesterday (24 Apr, spot at 1.2940) “GBP is expected to move to 1.2900 followed by 1.2870”. GBP subsequently dropped to 1.2887 during late NY hours. The vastly improved downward momentum suggests that a break of 1.2870 would not be surprising. However, the next major support at 1.2773 (low in Feb) may be out of reach this time round. All in, GBP is expected to remain under pressure until it can move above the 1.2995 ‘key resistance’ (level was at 1.3020 yesterday).

AUD/USD:  A NY close below 0.7005 would open up the way for AUD to move to 0.6950. No change in view from yesterday, see reproduced update below. From here, a NY closing below 0.7005 would open up the way for AUD to move to 0.6950. ‘Key resistance’ has moved lower to 0.7100 from 0.7140.

We highlighted on Monday (22 Apr, spot at 0.7145) that “last week’s 0.7206 peak is a short-term top”. We added, “AUD is expected to stay under mild downward pressure” and held the view that a sustained drop below 0.7100 is unlikely. However, AUD dropped sharply to a low of 0.7082 yesterday and the just released Australia inflation data sent it reeling further (low of 0.7045 at the time of writing). The price action has resulted in a rapid increase in downward pressure and from here; a move to last month’s low near 0.7005 seems likely. 0.7000/05 is a rather critical support and a break of this level would indicate AUD could move even lower in the weeks ahead (next nearest support is at 0.6950). For the next few days, we expect AUD to stay below the 0.7140 ‘key resistance’.

NZD/USD: NZD is still weak but unclear if can extend weakness to next support at 0.6485.

We indicated yesterday (24 Apr, spot at 0.6655) that the “prospect for further weakness to the year-to-date low 0.6591 has increased”. NZD subsequently dropped to a low of 0.6582 before ending the day on a weak note (-0.96%). From the perspective of multi-week, the next significant support is about another 100 pips lower at 0.6485 (rising trend-line on the weekly chart, not visible in the chart below). However, the current decline is deep in oversold territory now and it is unclear at this stage whether NZD could extend lower to 0.6485. Note that the current negative phase (that started in late March) is in its fourth week now. Overall, NZD is still weak and only a move back above the 0.6680 ‘key resistance’ (level was at 0.6705 yesterday) would indicate that the negative phase has ended.

USD/JPY: USD is expected to trade with a positive bias but 112.60 could be out of reach.

We have held the same view since last Monday (15 Apr, spot at 112.00) wherein USD is “expected to trade with a positive bias but 112.60 could be out of reach”. After trading in a quiet manner for several days, USD finally ‘broke’ higher and hit an overnight high of 112.39. However, the swift pull-back from the high suggests that USD may not be ready to challenge 112.60 just yet. That said, the current positive phase is deemed as intact until the ‘key support’ at 111.60 is taken out (level previously at 111.40). Looking ahead, a break of 112.60 would indicate that USD could appreciate further to 113.00 (and likely beyond).

• AUD/USD close to caving in as stoploss orders below 0.7000 attract
• Break of that psych barrier may lead to cascade much lower
• Nearest pitstop could be Jan 2016 low of 0.6828
• Key level breached on Wed after poor Australia CPI nL1N226034
• Entered Bollinger downtrend channel, broke Ichimoku Cloud base
• Now Chikou span below Cloud indicates momentum is stronger

• DE & FR disappointing data have EUR/USD heavy in early NY nL1N2260CP
• Italian political concerns ahead of EU elections help weigh
• Global bond yield drops, wider DE-US & IT-DE spreads help sink pair as well
• US$ bid intensifies, USD/CNH breaks s-t resistance, AUD/USD nears 0.7000
• EUR/USD takes out March low, options say slide will be a grind nL1N2260LW
• Techs are bearish, RSIs fall & not oversold,61.8 Fib of 2017-18 rally breaks
• US durable goods, weekly claims & Q1 GDP are the next risks for investors

Citi discusses the recent expectations for S&P to downgrade Italy's rating by Friday.

"The overnight move lower in EURUSD comes as Italian bonds drop amid reports of coalition government tensions ahead of the S&P ratings review this week. However, Italy’s coalition parties manage to reach a compromise on the introduction of debt-relief measures for Rome overnight. Nevertheless, markets remain concerned about the S&P review of Italy’s BBB rating on Friday, which is on negative outlook. Downside risks have risen as Italy’s DEF’s growth estimate of 0.2% for 2019 is below S&P’s 1.1%, and debt forecast of 132.7% for 2019 is higher than S&P’s 128.5%," Citi notes. 

"However, Citi analysts think a downgrade is unlikely because – (1) the fiscal expansion is not been as bad as feared by the agency; (2) there is still a commitment to fiscal tightening in 2020; (3) there is already a downward qualitative adjustment to model-based rating; and (4) the rating is already lower than in 2011 (during the start of euro zone the sovereign debt crisis)," Citi argues. 

• Pair consolidates AU CPI induced losses in early NY trade
• Global bond yields fall, AU-US spreads widen, US$ goes broadly bid
• US housing data nL1N2240YU helps US$ gain vs EM ccys & CNH nL1N22611S
• AUD/USD dives toward 0.7000 support and likely barrier nL1N2260DR
• New April low & falling RSIs have technicals leaning bearish
• Hopes of AUD/USD bottom dented nL1N2260QC, US econ data now in focus