Analysts at Nomura note that the US personal income rose a healthy 0.4% m-o-m in February, after a 0.4% gain in January as wages and salaries rose 0.5%, after climbing 0.6% in January.

Key Quotes

“The savings rate increased to 3.4% in February, after it had jumped to 3.2% in January from 2.4%, likely driven by a technical factor.”

“Personal spending rose at a modest 0.2% m-o-m in February, matching our and markets’ expectations, after a 0.2% gain in January. Spending on durable goods rebounded by 0.2%, but spending on autos and parts fell 0.6%.”

“Although nominal spending growth looks steady, after adjusting for inflation, real spending appears weak. It remained flat in February, and January was lowered to a 0.2% decline from a 0.1% decline. The weakness so far in Q1 highlights the dichotomy between elevated consumer sentiment and personal spending.”

“One possible factor behind this weakness is the slower-than-usual tax refunds in 2018. The pace of tax refunds in 2018 thus far has been close to that in 2017, but slow by historical standards. Consequently, it is likely that tax-refund-induced demand has not fully materialized yet, confounding seasonal factors. Moreover, delayed refunds may have offset increased disposable income from lower withholdings. That said, late arrivals of refunds could boost spending later in Q1 or early in Q2. Although we continue to expect the strong job market and the recent tax cuts to support personal consumption in the coming quarters, continued weakness in personal consumption may raise the risk that the slowdown in Q1 is not transitory.”

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Analysts at National Bank of Canada, suggest that in the U.S, the publication of non-farm payrolls for March will be watched closely next week and they expect a moderation in the pace of job creation following a stellar result in February (+313K).

Key Quotes

“Initial jobless claims continued to hover around historical lows in March, suggesting that the pace of layoffs remained subdued. What’s more, Markit’s composite PMI report showed employment expanding at the fastest pace since early 2015 in March, hinting at a good month for hiring.”

“All in all, our call is for a 195K print. Meanwhile the unemployment rate may drop one tick to 4.0% if, as we believe, the household survey shows moderate positive employment gains in March. Also, in March, the ISM manufacturing index could have continued its increase if Markit’s manufacturing PMI is any guide. We’ll also keep an eye on the publication of several indicators for February, including factory orders, construction spending, trade balance and consumer credit.”

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According to the breakdown of a Reuters poll that sees Japanese household spending likely up for a second month in February.

Key quotes (source: Reuters)

“Household spending is seen likely up 0.3 percent in February from a year earlier after a 1.9 increase in January, the poll found.”

““Price gains in daily necessities such as fresh vegetables and gasoline weighed on consumer spending. In addition to that, seasonal product sales didn’t perform well due to cold weather,” said Yosuke Yasui, senior economist at Japan Research Institute.”

“A separate poll showed the Bank of Japan’s quarterly tankan business sentiment survey, due out on April 2, is expected to show the headline index for big manufacturers’ confidence declining by one point to plus 25 in March.”

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Dismal UK Q4 GDP print weighed over the GBP/USD pair on Thursday.
Bullish price-RSI divergence on 1H chart signals pullback could be over.

The GBP/USD pair fell for the third straight day yesterday as the dismal UK Q4 GDP release weighed over the British Pound.

The economy expanded by 1.8 percent between 2016 and 2017, slightly less than the 1.9 percent seen between 2015 and 2016, meaning the UK was the slowest-growing major economy in the world and that seems to have hurt the Pound.  

As of writing, the currency pair is trading at 1.4025, having clocked a session low of 1.4012 earlier today. Further, the pair also looks set to test the ascending 50-day moving average (MA) located at 1.3992.

That said, the decline will likely be short-lived as indicated by the bullish price-relative strength index (RSI) divergence seen on the 1-hour chart. Also, it is worth noting that unwinding of the USD shorts ahead of the quarter end played a big role in the GBP/USD’s three-day losing streak. So, the losses could be reversed next week, unless the focus shifts to the widening interest rate differential.  

GBP/USD Technical Levels

The 10-day MA is still biased bullish (sloping upwards). So a move above 1.4090 (10-day MA) would put the bulls back into the driver’s seat and could yield a rally to 1.4245 (March 26 high). A close higher would allow re-test of the yearly high of 1.4346.

On the downside, acceptance below the 50-day MA of 1.3992 would see the daily RSI roll over into the bearish territory, signaling the potential for a decline to 1.3890 (March 16 low) and 1.3781 (March 8 low).  

 

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The Euro is looking for some bids heading into the holiday Friday markets.
Thin macro data leaves the pair exposed to thin volumes as Easter closes in.

The EUR/USD is lifting ahead of the European markets, continuing the bounce seen in the previous New York session after hitting a low of 1.2284, and the pair is now testing around the 1.2315 region.

The Euro tended sideways yesterday ultimately losing some ground against the US Dollar to end the day slightly lower after several failed attempts to push higher. Today’s session is geared to be a quiet affair, with Germany and other major economies shuttered for the Easter long weekend, though we will be seeing Consumer Spending, Producer Prices, and Consumer Price Index figures for France at 06:45 GMT, followed by Italian CPI figures at 09:00 GMT. The French CPI preliminary figure (EU Normalized) is expected at 1.5 percent versus the previous reading of 1.3 percent, while the initial Italian CPI (EU Normalized) is forecast at 2.1 percent, a big upswing from the previous period’s -0.5 percent contraction.

Next week will be bringing the Europea Union’s (EU) preliminary CPI figures for March, and traders will be looking for some positive news to push the European Central Bank (ECB) further down the path to fiscal tightening. With a slowdown for economic growth on the cards for the first quarter of 2018, the ECB is hesitating at pulling the rate hike trigger, and many expect the ECB to remain on hold for a little while longer.

EUR/USD Levels to consider

The pair has wound up largely flat for March, and the month’s gains have been hard-fought thus far, but the pair has failed to either make up ground from February’s decline or make siginificant headway from the bottom at March’s outset, and current action has been middling closely into the 34 EMA at 1.2320, and current support is sitting thin at the last swing low of 1.2297 with further support from last week’s low of 1.2240, while resistance is sitting at last week’s high of 1.2388 and this week’s high of 1.2475.

Further reading: Commerzbank’s Karen Jones’ outlook on EUR/USD from yesterday, pre-German CPI.

 

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Comments from Bank of Japan (BOJ) policymaker Amamiya are crossing the wires via Reuters: 

The pace of BOJ’s bond-buying can fluctuate depending on market conditions but that is different from Fed’s tapering, which is completely different from the US Federal Reserve’s tapering, which is an intentional, steady slowdown (of asset purchases) aimed at normalizing monetary policy,
Japan’s real effective exchange rate is falling as inflation picks up, heightens public inflation expectations. 

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The yen strengthens in holiday-thinned trade.
Creates a bull flag pattern on the hourly chart.

The Yen picked up a bid in Asia, pushing the USD/JPY below the 4-hour 200-MA (moving average) and to a session low of 106.14.

USD/JPY eyes a quarterly drop

The pair is all set to end the first quarter down, at least 5 percent. That said, as discussed yesterday, much of the bad news has been priced-in, so the spot could regain some poise in the next quarter. However, the sell-off may resume if the S&P 500 index finds acceptance below the 200-day MA.

For now, it appears the pair has bottomed out at 104.57. Further, the hourly chart shows a bull flag – a bullish continuation pattern. A break above 106.50 (flag resistance) would signal a continuation of the rally from the March 28 low of 105.43.

USD/JPY Technical Levels

FXStreet Chief Analyst Valeria Bednarik sees scope for a further upside move in the upcoming sessions.

“Technically, the 4 hours chart shows that the pair managed to hold above a bearish 200 SMA, despite briefly breaking below it, while technical indicators stalled their declines and are attempting to regain the upside, having corrected extreme overbought readings, all of which leans the scale toward the upside for the upcoming sessions.”

Support levels: 106.25 105.90 105.50   

Resistance levels: 106.60 107.00 107.40

 

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Japanese Finance Minister Aso says the nation should resist entering a free trade agreement (FTA) with the US to rectify the trade imbalances and believes the issue hould be tackled by global trade partners as a whole and via bilateral agreements. 

“We want to avoid falling into a bilateral deal” with the United States in exchange for exemptions from steel and aluminum tariffs, Aso said, according to a Reuters report. 

 

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Rising US shale output will likely push oil prices back to near $50 a barrel, according to investment bank J.P. Morgan.

Christian Malek, the head of EMEA oil and gas equity research at J.P. Morgan,  while talking to CNBC said:

“Everything is gravitating towards $50 a barrel”

“I think to see Russia continue with OPEC over the medium term is quite bullish. Our base case would be that you’d find that they sort of agree on an independent framework, work together but ultimately just around a range in production”

“History says that OPEC complying with individual quotas has never happened, so I think this framework would arguably be a paper framework”

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GBP/JPY  rejected at 100-day moving average (MA) hurdle earlier this week.
The pair hit a four-day low of 148.86 in Asia, looks set to report 2 percent drop in the first quarter.

GBP/JPY failed to beat the resistance of 100-day MA on March 28 and fell to 149.00 yesterday, only to extend losses further to a four-day low of 148.86 in the Asian session today.

The retreat from the 100-day MA indicates the corrective rally from the March 2 low of 144.99 may have run out of steam.

The data released yesterday showed the UK GDP increased by 1.8 percent between 2016 and 2017, slightly less than the 1.9 percent seen between 2015 and 2016, meaning the UK was the slowest-growing major economy in the world and that seems to have hurt the Pound.  

Also worth noting is the fact that GBP/JPY is set to report a 2 percent quarterly drop, given the stock markets remained risk averse for a better part of the first quarter. As for today, the pair may remain comatose, given the major markets are closed on account of Good Friday.

GBP/JPY Technical Levels

A close below 148.43 (200-day MA) would open doors for 147.67 (March 23 low) and 147.05 (March 19 low). On the other hand, a move above 149.48 (ascending 5-day MA) could yield a rally to 150.32 (March 21 high) and 150.58 (100-day MA).

 

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