• NZD/USD probes the four-day winning streak.
  • Weekly rising support line, 38.2% Fibonacci adds to the downside barriers.
  • 61.8% Fibonacci retracement holds the key to a mid-month top.
  • Nearly overbought RSI favors pullback.

Having surged to the eight-day top the previous day, NZD/USD steps back from 100-bar EMA to 0.5960 during the Asian session on Friday. Even so, the pair remains above 50% Fibonacci retracement of its March 09-19 declines.

In addition to the 100-bar EMA, nearly overbought RSI conditions also increase the odds to the pair’s pullback below 50% Fibonacci retracement of 0.5960 to the one-week-old rising trend line, at 0.5835 now.

If at all bears fail to respect the support line, the return of 0.5600 on the charts can’t be ruled out.

Meanwhile, buyers remain hopeful to confront 61.8% Fibonacci retracement level of 0.6075 once they overcome the 100-bar EMA level of 0.5975.

Following that, the mid-month highs surrounding 0.6150 will be on the bull’s radars.

NZD/USD four-hour chart

Trend: Pullback expected

 

Japanese Economy Minister Yasutoshi Nishimura has stated that job offers are plunging with the job and household income conditions souring rapidly due to the COVID-19 impact. The job market had been a rare bright spot in a weakening economy, but the Economy Minister said it was taking a hit from the rapidly spreading coronavirus pandemic.

“Job offers are plunging recently. Job and household income conditions, which had been very good up until now, are also souring sharply,” Nishimura told parliament.

Market implications

On the heels of the Tokyo summer Olympics being pushed back to 2021, Japan’s capital on Thursday reported an unprecedented number of new coronavirus cases with 
47 cases of the infection which was the biggest number in a single day. This follows 41 cases yesterday, triggering concern that the virus is rampant in the country. This complicates the risk-on sentiment in markets, although for now, traders are cheering the stimulus packages and cheap money supply in the system. 

  • Wall Street Close: US benchmarks were rallying hard on Thursday, cheering stimulus

 

  • USD/MXN fell for a third straight day on Thursday, confirming Peso’s longest daily winning run since mid-February. 
  • Technical studies suggest scope for further gains in the recently battered Peso. 

Mexico’s Peso jumped 4% against the US dollar on Thursday, having gained 2% and 3.69% on Tuesday and Wednesday, respectively. The three-day winning streak is the longest since Feb. 14 

The sharp pullback in USD/MXN from the record high of 25.4590 registered on Tuesday to a low of 22.8617 seen early Friday has put the bears back into the driver’s seat. 

The 14-day relative strength index has rolled over from the overbought or above-70 territory, signaling scope for a deeper pullback and the 5- and 10-day averages look set to produce a bearish crossover. The MACD histogram, which is used to identify trend strength and trend changes, is about to cross below zero in favor of the bears. 

As a result, a drop to 22.00 cannot be ruled out. For outlook to turn bullish, the spot needs to end Friday above Thursday’s high of 22.2484. The resulting bullish engulfing candle will likely allow a re-test of recent highs. 

The Mexican Peso fell from 18.55 to 25.4590 in the four weeks to March 24 as the coronavirus pandemic triggered recession fears and the Saudi-Russia oil price war fueled a sharp drop in the black gold, which is Mexico’s key export. 

Daily chart

Trend: Bearish

Technical levels

 

  • GBP/USD pulls back from an eight-day high.
  • 38.2% Fibonacci retracement, 21-day SMA limit immediate upside.
  • Sellers will refrain from entry unless breaking 10-day SMA on a daily closing basis.

GBP/USD steps back from an eight-day high to 1.2177 during Friday’s Asian session. In doing so, the pair also respects 38.2% Fibonacci retracement of its fall from December 12, 2019, as the immediate resistance. However, sustained trading beyond 10-day SMA and likely MACD turn towards the bullish horizon keep the buyers hopeful.

As a result, a sustained break of 1.2215 immediate resistance could escalate the recovery moves towards a 21-day SMA level of 1.2360.

However, 50% Fibonacci retracement, near 1.2465, followed a 200-day SMA level of 1.2670 and 61.8% of Fibonacci retracement around 1.2710, could challenge the bulls afterward.

On the downside, sellers will refrain from entry unless the GBP/USD prices drop below the 10-day SMA level of 1.1860 on the daily closing basis. Though, 1.20000 can offer nearby rest during the pair’s further declines.

In a case where the quote remains below 1.1860, 1.1630 and 1.1410 regain the bears’ attention.

GBP/USD daily chart

Trend: Bullish

 

China reports 55 COVID-19 cases in Mainland as of end-March 26 (vs 67 a day earlier) while the death toll rises by 5 (vs. 6 a day earlier)

  • -54/55 cases are imported.
  • -74,588 virus patients discharged.

More to come…

  • USD/JPY extends the losses amid risk reset.
  • Tokyo inflation data remains largely unchanged, core inflation matches forecast.
  • Coronavirus spreads in the US, House voting on COVID-19 bill is in focus.

While following mostly unchanged Japan’s inflation data, USD/JPY extends the previous day’s declines to 109.25 before a few minutes of the Tokyo open on Friday.

Tokyo Consumer Price Index (CPI) for March reprinted the previous 0.4% YoY figures while stepping behind the 0.5% forecast. The CPI ex Food, Energy matched prior and expectations of 0.7% while the CPI ex-Fresh Food matched the consensus of 0.4% versus 0.5% prior.

Also read: Tokyo area march overall cpi +0.4 pct YoY

The coronavirus (COVID-19) pandemic has been spreading speedily in the US off-late. The world’s largest economy recently crossed China with more than 81,000 cases of the virus. The epidemic has already fuelled the US Jobless Claims, which rose from 282K (revised) to 3,283K. Even so, the CNBC came out with the news, while relying on the New York Mayor Bill De Blasio, to suggest that the half a million New Yorkers will be unemployed soon.

While the news recently probed the risk-takers, overall trade sentiment remained positive the previous day with Wall Street marking the third day of gains.

Also challenging the risk tone could be the news from Saudi Arabia that downed Houthi drones.

On the positive side, US President Donald Trump reiterated nearness to the $2 trillion aid package, which passed through the Senate on Thursday and will be voted in the House today. The Republican leader also mentioned that he will have a call with China’s President XI Jinping and talk about the virus with this.

Although House voting on the US COVID-19 Bill will be the key, US Michigan Consumer Sentiment and virus updates will also be important to follow.

Technical analysis

A daily close beyond 111.70 becomes pre-requisite for the pair to recall buyers targeting February month top near 112.25, until then 21-day SMA level of 107.80 remains on the sellers’ radar.

 

Core consumer prices in Tokyo rose 0.4 percent in March from a year earlier, government data showed on Friday. The core consumer price index for Japan’s capital, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 0.4 percent annual rise.

  • Tokyo area March cpi excluding fresh food, energy prices +0.7 pct YoY – govt.
  • Tokyo area March coreCPI +0.4 pct YoY – govt (Reuters poll: +0.4 pct).

Market implications

The data is not important at the moment. COVID-19 is. The re-emergence in the Tokyo new cases of the virus is concerning markets and the estimates of damage from the postponement of this year’s Olympic Gamse in Tokyo by one year range from 600 billion yen (US$5.4 billion) to 2 trillion yen (US$18 billion). However, eve the delay is overshadowed by the coronavirus outbreak which has deepened Japan’s recession fears – Tourism has ground to a halt.