A break of 0.7750 could lead to a test of the 0.78 handle.
Reserve Bank of Australia’s Kent is scheduled to speak at 00.45 GMT. 

The AUD/USD is trading at around 0.7747 up 0.57% so far as the negative sentiment on the greenback persists from last week ‘dovish rate hike’ on the FOMC´s day. The US Dollar Index is now flirting with the 80.00 mark.

Fed’s Quarles speech is scheduled to speak at 23.10 GMT while RBA’s Governor Kent has its speech scheduled at 00.45 GMT. 
 
On Monday, the US equity market recovered from last week´s sell-off which it what was the worst trading week recorded since January 2016. Today, Bonds were well-bid and the USD kept selling off as fears over an escalation in the US-China trade war cooled down. Traders are starting to focus on the quarter-end funding pressures and the impending Easter holiday.

AUD/USD weekly chart

The AUD/USD is in a bull wedge flag with traders supporting the market at the 0.7700 handle. the market is currently testing the 50-period simple moving average and is now trapped between the 100 and 200-period simple moving average. Bulls want to break out above last week’s high and the 0.7800 handle, but they have the 200 WMA to overcome; on the flip side, the bears want to break below last week’s low below the 0.77 handle. If the bears manage to break below 0.7700, they will have to overcome the 100-period simple moving average located  nearby at 0.7630. 

AUD/USD daily chart

Bulls are challenging yesterday’s high. A clear break of the 0.78 handle would open the gate to the next resistance seen at the 0.79 handle. 

AUD/USD 1-hour chart

The AUD/USD is testing the 200-period simple moving average and the 0.7750 level which was a supply level in recent sessions. A clear break above 0.7750 could open the doors to the 0.7800 level. Alternatively, a failure at 0.7745 might see the AUD/USD trading back into the 0.7720 territory with the 100 and 200-period simple moving averages. 
 

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According to analysts from Brown Brother Harriman, Chinese officials are taking the recent announcement from the US in “stride” and consider that they will take a “resist when possible, make concessions when necessary” approach. 

Key Quotes: 

“While the pundits are talking trade wars, Chinese officials are taking the latest US provocations in stride.  Pressure on China’s trade practices are not new.  The US has been complaining about intellectual property violations since Bill Clinton was President.  China’s trade practices have also raised the ire or US and Europe, which has resulted in tens of dozens of anti-dumping action.”
  
“By threatening the economic equivalent of “mutually assured destruction”, the Trump Administration will likely win Chinese concessions. It seems that many of the concessions, like a better defense of intellectual property rights and a reduction of tariffs, are low hanging fruit, and actions Chinese officials were likely willing to make given their own domestic agenda.”

“China is not defenseless in a trade war, but many observers trying to game out the extent of its weapons lack imagination. They focus on agriculture or some other products, like big-ticket item airplanes. Some see the exchange rate as a possible tool and others have given some thought to the reduced buying of Treasuries, or even their sales. However, many of these actions could hurt China.”

“It seems as if Chinese officials are drawing the same insight as others are after Trump’s first year in office:  Resist when possible, make concessions when necessary, avoid antagonizing needlessly. There seems to be a general acceptance that Trump represents an anomaly–a vocal minority of the political and economic elite–who won control of the levers of state, but their hold on power is tenuous at best and could in any event be circumscribed by the November mid-term elections.”  

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As USD continues to slide, EUR/USD keeps rising. 
Euro heads for the highest close since February 15. 

The EUR/USD pair continued to move higher during the US session driven by the decline of the US Dollar. It reached a fresh 5-week high at 1.2462 and it was holding near the top, up more than a hundred pips for the day. 

The euro was among the top performers of the day. Against the Swiss Franc rose above 1.1750 for the first time since mid-January. On the contrary, the greenback is down across the board, rising only against the yen. The Japanese currency weakened amid risk appetite. 

Earlier today, comments from ECB official Jens Weidmann, about the possibility of a rate hike around mid-2019 added support to the euro. While easing tensions about a trade war between US and China, weakened the greenback. US Dollar Index futures dropped below 89.00 to 88.55, the lowest levels in five weeks. In a few minutes, Fed’s Mester will be speaking about monetary policy. 

EUR/USD technical outlook 

“The pair broke above the daily descendant trend line coming from February’s yearly high, 1.2554,  at the beginning of the day and stands now some 100 pips above it, which favors another leg higher, and even a retest of the mentioned yearly high on a break above 1.2480 a major static resistance level”, warns Valeria Bebnarik, Chief Analyst at FXStreet. 

The short-term picture is bullish according to readings in the 4 hours chart, affirms Bednarik, with indicators in overbought territory, but with no signs of changing course.

Immediate support now could be seen at 1.2435, followed by 1.2380/85 and the strong area around 1.2330. 

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Axel Rudolph, Senior Analyst at Commerzbank, point out that the Brazilian real (BRL) remains under pressure against the US Dollar. He mentions that USD/BRL is probing the February high at 3.3188, and a rise above will target the 3.3347/3.3463 area.

Key Quotes: 

“USD/BRL is trying to overcome resistance at the 3.3188 February high. Once bettered, the November and December highs at 3.3347/3.3463 will be in focus.”

“Longer term we still have the November 2016 high at 3.5789 in our sights.”

“Minor support can be seen between the breached four month support line at 3.2980, at last week’s low at 3.2645 and also between the 55- and 200-day moving averages at 3.2406/3.2219.”

“More significant support can be spotted between the 3.2010/3.1994 November trough and mid-February low. Still stronger support remains to be seen at 3.1227/3.1087. It is made up of the October and January lows as well as the 2017-18 support line at 3.1164. Below it lie the February and September 2017 lows at 3.0804/3.0418.”
 

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Spot accelerates after breaking key support levels. 
US dollar weakness driving USD/CHF higher. 

The USD/CHF pair is falling for the fourth day in a row as it continues to drop from the highest level in almost two months, above 0.9560. The short-term tone points to more losses. 

A weak US Dollar drove the pair lower on Monday. The easing in trade tensions between the US and China lowered the demand for haven currencies, including the Yen and the Swiss franc. But, despite falling against the Euro and the Pound, the Swissy is up versus the greenback. 

US Dollar Index Futures dropped to 88.55 hitting the lowest level since February 16 and approached 2018 lows. 

USD/CHF Levels to watch 

The pair broke last week an uptrend line from February lows. The decline continued today when it dropped to 0.9431, the lowest in 10 days. It is headed toward the first close below the 20-day moving average. Price is moving within a bearish channel. The key dynamic resistance is seen at 0.9475. A break higher would ease the downside pressure. 

On the downside, below daily lows, the next support might be seen at 0.9420 followed by 0.9395/0.9400 and 0.9360. 
 

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UK GDP is the key macroeconomic release of the week. 
The 200-period simple moving average is a line in the sand. 

The GBP/USD is trading at around 1.4229, up 0.60% so far on Monday as the Sterling keeps its bullish strength from last week´s hawkish tone from the Bank of England. 

The BoE, last Thursday, “tied the likelihood of future interest rate hikes to UK growth of 1.5% yr/yr” according to Reuters. It is worth noting that a GDP growth of 1.5% would actually be equal to the lowest reading since June 2013 year-on-year. While the prospect of hiking rates strengthened the Pound, “the likelihood that higher rates will stifle an economy that has markedly slowed suggests that any rally will be undermined by fundamentals.”, according to Reuters. This Thursday, Q4 GDP is expected to decelerate and come in at 1.4% y/y and this may discourage the MPC to hike while a rate hike of 25bps in May has already been priced in by the market. This would suggest that a close above the 200-period weekly simple moving average would become unlikely. On the other hand, if the GDP is higher than expected a jump to 1.5500 become a possibility, according to Reuters analysts.  

GBP/USD weekly chart

The bulls are quickly approaching the 200-period simple moving average in the weekly chart which may act as dynamic resistance while both the RSI and MACD remain constructive. 

GBP/USD daily chart

Cable bulls are eyeing the high of 2018 at 1.4347. 

GBP/USD 1-hour chart

The bull trend is intact as bulls keep printing higher highs and lower highs, however, the market is about 70 pips away from the 1.43 handle which is a resistance area with the high of 2018 at 1.4347 and the 200-period simple moving average on the weekly chart. Support is seen at the 1.4100 figure, the 61.8% Fibonacci retracement of the January-March bear leg, followed by the 1.40 handle swing low and 1.3900-1.3950 area with the 100-period simple moving average. 

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FOMC´s member Mester is scheduled to speak at 20.30 GMT.
The US dollar remains under pressure as the week starts.  

The NZD/USD is trading at around 0.7290 up 0.90% as earlier in the Asia session, the New Zealand trade data showed strong exports at 4.46b while imports were at 4.24b in February resulting in a positive Trade Balance of 217m in February. The USD is still under pressure since last week dovish hike and the escalating trade war between the US and China. Although tensions seem to have eased as China retaliation seems less aggressive than previously anticipated.

Loretta J. Mester, president and chief executive officer of the Federal Reserve Bank of Cleveland is scheduled to deliver a speech about monetary policy at 20.30 GMT. 

NZD/USD weekly chart

The bulls are trying to break above a descending trendline. The NZD/USD pair is trading above its 50, 100 and 200-period simple moving average while the RSI and MACD are constructive.

NZD/USD daily chart 

The bulls are challenging the 50-period simple moving average dynamic resistance at 0.7295 while the next resistance is seen at 0.7350 last swing high, followed by 0.7439 the high of 2018. To the downside, support is initially seen at 0.7200 demand zone and 0.7150, a cyclical low. 

NZD/USD 1-hour chart

The Kiwi is testing the 0.7300 figure resistance. If bears win the next support level is seen at 0.7240, the 50 and 200-period simple moving averages; followed by 0.7200 swing low. If the bullish momentum persists, next resistances are at the 0.7320 and 0.7340 supply levels. 
 

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According to the NAB FX Strategy Team, persistent US-China trade tensions and reducing NAFTA fears implies scope for a decline of more than 5% in both AUD/CAD and NZD/CAD crosses.

Key Quotes: 

“Last week we saw intensification of concerns over US trade actions against China and the likelihood of retaliatory measures from China against the US usurped the FOMC meeting as the key driver of market price action – in equities and FX at least. And Friday night saw higher Canada CPI inflation, with all key core measures now hovering around target at 2%.”

“The price action speaks volumes about the greater vulnerability of the Australian and New Zealand economies relative to Canada in the event of a US-China trade war.”

“Positive news on NAFTA will undoubtedly remove one constraint on the BoC taking further steps along the road to monetary policy normalisation. Canada will also benefit from fiscal-charged US growth.”

“This is at a time when incoming inflation indicators from New Zealand are suggesting the RBNZ is at least a year away from lifting rates and incoming Australian labour market data are reducing the likelihood of higher RBA rates this year.”

“Canada inflation data are showing clear signs of recovery, with the BoC’s inflation target now essentially met alongside a backdrop of still-building inflationary pressure.”

“NAB/BNZ FX Strategy forecasts have AUD/CAD at 0.95 and NZD/CAD at 0.89 a year from now. These forecasts sit well above our estimates for ‘fair value’ based on Purchasing Power Parity that use our 15-year moving average framework. These currently sit around 0.91 for AUD/CAD and 0.83 for NZD/CAD, but would be even lower if we used a longer-term filter.”

“AUD/CAD and NZD/CAD could be headed much lower than suggested by our current forecasts, which have lows of 0.94 and 0.88 respectively in 2019. We emphasise that these are big picture views.”

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Tensions between US and China over trade war is easing. 
The US Dollar index is under pressure as the week starts. 

The US Dollar Index is trading at around 89.09 down 0.46% on the day so far as tensions of a trade war between the US and China seem to somewhat cool off.

The U.S and China are negotiating trade agreements so that the U.S can have access to Chinese markets. China is willing to buy more semiconductors from the US in addition to opening up the financial services sector to foreign investment, according to the Financial Times.

The China retaliation to US tariffs should have minimal impact as only a “relatively small part of trade is being impacted and the retaliatory steps seem symbolic”. According to BBH analysts.

New York Federal Reserve Bank President William Dudley has a speech scheduled at 17:30 GMT about regulatory reform at the US Chamber of Commerce while Cleveland Federal Reserve Bank President Loretta Mester will speak about monetary policy at 20:30 GMT.

Earlier the Chicago Fed National Activity came in at 0.88 vs 0.19 expected while the Dallas Fed Manufacturing Index in March came in at 21.4 vs 33.4. 

US Dollar Index weekly chart

Weekly support is seen at 89.00 supply/demand level; followed by 88.25 last cyclical low. On the other hand, weekly resistance is seen at the 90.00 psychological mark, followed by 90.96 last cyclical high. 

US Dollar daily chart

Support is seen at 88.50, previous demand level; followed by 88.25 cyclical low. Resistance is seen at 89.45 supply level and the 90.00 psychological mark. Both RSI and MACD are bearishly configured. 

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