The pair remains under pressure within a tight range.
USD slightly bid against the backdrop of rising US yields.
Final Services PMIs in Euroland, US trade balance next on tap.

The demand for the single currency stays subdued so far this week, motivating EUR/USD to meander the lower en of the range in the 1.2275/70 band ahead of the opening bell in Euroland.

EUR/USD looks to data, risk trends

Alternating risk appetite trends, a better tone around the buck and US-China trade war tensions continue to dominate the sentiment among traders.

The pair, consequently, has embarked in an erratic performance and it has broken below the key short-term support/resistance line off YTD lows, where it now seems to look for some consolidation.

The down move in the pair has been accompanied by a moderate rebound in yields of the key US 10-year reference, which managed to retake the 2.81% handle and above.

In the data space, final Services PMIs in the euro area for the month of February are unlikely to spark any noticeable move in EUR. In addition, Retail Sales in the region are also due for release.

Across the pond, February’s Trade Balance figures will be the salient event along with Initial Claims and the speech by Atlanta Fed R.Bostic (voter, centrist).

EUR/USD levels to watch

At the moment, the pair is retreating 0.02% at 1.2276, facing immediate contention emerges at 1.2253 (low Apr.3) followed by 1.2241 (low Mar.21) and finally 1.2206 (low Feb.9). On the upside, a break above 1.2327 (10-day sma) would target 1.2478 (high Mar.27) en route to 1.2537 (high Jan.25).

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ANZ job ads for New Zealand economy increased 0.9% m/m in March, after dipping 1.2% in February, notes Liz Kendall, Senior Economist at ANZ.

Key Quotes

“The annual growth rate increased to 6.1%, but remains well below the strong rates seen during 2016. We are not surprised to see job ads growing at a modest pace. It reflects the maturity of the economic cycle, with the labour market tight and skilled labour difficult to come by. The current pace of growth is consistent with our forecast for moderating employment growth.”

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Nikkei recovers from risk-off topple, clears a new high for the week.
Risk recoveries are coming faster as traders begin to tune out tariff spats.

The Nikkei is holding at the 21,700.00 level after climbing steadily from Wednesday’s low.

The Nikkei index is holding at a new high for the week after rebounding from the early week’s risk flights on continued trade tensions. 

Sentiment has improved after both the US and China have expressed a willingness to negotiate through the current trade tensions after a week of steady tariff threats.

Many traders are beginning to note that the real impacts from trade tariffs will be far less than the headline’s impact, and risk appetite is beginning to recover quicker following bouts of aversion on geopolitical headlines.

Nikkei Levels to watch

Immediate support is being provided by yesterday’s high at 21,560.00 and Wednesday’s low near 21,020.00, while a bullish continuation will need to clear early March’s swing high at 22,100.00, before contesting February’s top at 22,500.00.

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Patrick Artus, Research Analyst at Natixis, suggests that global banks have become more robust and corporate profitability is higher, which will contribute to resilience in the next crisis.

Key Quotes

“Overall the global economy has become more fragile as a result of:

The very high level of debt (public and private), which could easily give rise to a borrower insolvency crisis in the event of a shock (increase in interest rates, fall in activity);
The extremely high level of liquidity (the money supplied by central banks), which can give rise to drastic fluctuations in the prices of financial and real estate assets in the event of a shock, as large quantities of liquidity then shift to risk-free assets;
The lack of leeway to conduct countercyclical economic policies, as the high level of public debt and fiscal deficits reduces the scope to use fiscal policy and the low level of interest rates and the high level of liquidity leads to very little room for manoeuvre for monetary policy.”

“All this means that a negative shock in the future would lead to a much more drastic fall in activity and recession than in the past.”

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Risk-recovery was the main underlying sentiment in Asia this Thursday that sent the Asian equities rallying amid holiday-thinned light trading. The Chinese markets are closed in observance of Tomb Sweeping Day.

The demand for the safe-havens Yen and gold was hit by easing trade war concerns after the US offered to negotiate with China over the trade spat. Despite an improvement in the risk sentiment and better Australian trade figures, the Aussie slipped, as weaker gold and copper prices weighed down on the commodity currency. The Kiwi tracked the sell-off in its OZ counterpart and dropped below the 0.73 handle.

Main topics in Asia

US plans sanctions on Russian oligarchs – Reuters

The US is planning to sanction Russian oligarchs close to Vladimir Putin this week under a law targeting Moscow for meddling in the 2016 election campaign, as reported by Reuters.

Trump to send National Guard to border wall – Reuters

Reuters is out with reporting that US President Donald Trump, frustrated with lack of funding for his campaign-platform Mexico border wall, is sending the US National Guard to the US-Mexico border to beef up border security.

Australia’s trade surplus narrowed less than expected in February

Australia’s trade surplus in February narrowed to AUD 825 million from the downwardly revised January surplus of AUD 952 million (from UD1055 million), according to Australian Bureau of Statistics (ABS). 

Mexican Officials: US and Mexico agree to continue NAFTA dialogue

The Mexican officials are reported by Bloomberg as saying that the US and Mexico finally agreed to continue the dialogue on the North American Free Trade Agreement (NAFTA).

Ex-BoJ’s Hayakawa: BoJ is likely to raise its yield target within a year

Former Bank of Japan (BoJ) Chief Economist Hideo Hayakawa was on the wires earlier today, expressing his take on the BoJ’s monetary policy programme in an interview with Bloomberg.

Canada says progress on NAFTA, but ways to go yet – Reuters

According to reporting by Reuters, Canada’s Foreign Minister Chrystia Freeland stated that NAFTA renegotiations are making good progress, but there is still lots of work to do.

BoJ’s quarterly public opinion of Household Sentiment

The Bank of Japan (BoJ) is out with its quarterly public opinion of Household Sentiment, with the key highlights found below.

Key Focus ahead

With ebbing fears over a potential US-China trade war, the focus shifts back towards the fundamental drivers this Thursday, as markets gear up for another eventful European session. Ahead of the European open, the German factory orders data will be released, which is expected to show a turnaround in the Eurozone’s economic powerhouse. The Swiss CPI and a raft of the Euro area final services PMI readings will keep the EUR, GBP traders busy alongside the releases of the UK services PMI report. Also, of note remains the Eurozone PPI and retail sales data due to be reported at 0900 GMT.

Moving on, trade figures from both the US and Canada will remain the main highlight in the NA session today while the US jobless claims data will be also eyed heading into Friday’s US payrolls release. Besides, the speeches by the FOMC member Bostic and Swiss National Bank (SNB) board member Maechler will also grab some attention.

EUR/USD middling beneath 1.23 ahead of EU PMIs

Thursday’s session has a bloated docket for EU data filled with Markit Service and Composite PMIs for the broad region, most notably German Markit Services/Composite PMIs due at 07:55 GMT, immediately followed by the general Eurozone Markit Service/Composite PMIs shortly after at 08:00 GMT. 

GBP/USD eyes UK services PMI for a big move

The GBP/USD pair dropped for three straight sessions in the run-up to the Easter holidays, but since then has been trading largely in a sideways manner in the range of 1.40 to 1.41.

Two scenarios for the US-China trade conflict

‘Phase two’ of the US-China trade conflict is now over and we are starting to enter more uncharted waters. Both ‘Phase one’, with tariffs on steel and aluminum, and ‘Phase two’, with the latest round of Donald Trump tariffs in defense of US technology – and China’s retaliation … 

US Jobs Preview: Wages to tick higher in March – Barclays

Analysts at Barclays released their preview of the March US labor market report due on the cards this Friday at 1230 GMT.

 

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Analysts at Nomura note that the US ISM non-manufacturing index pulled back very slightly by 0.7pp in March to 58.8, just below expectations (Nomura: 59.7, Consensus: 59.0).

Key Quotes

“Despite the decline, non-manufacturing business sentiment remains elevated. The new orders index declined 5.3pp to 59.5 but stayed close to the six-month average of 60.5. Meanwhile, indicators of increased demand, such as the backlog of orders and supplier deliveries index, picked up. Businesses in the construction and finance/insurance industries reported some concern about the proposed Trump administration tariffs but, consistent with the higher tariff impact on manufacturing, nonmanufacturing industries overall seemed less concerned compared with the March manufacturing survey.”

“Elsewhere, the employment index for March improved 1.6pp to 56.6, consistent with other positive labor market signals for the month.”

“GDP tracking update: Downward revisions to core capital goods orders suggest slightly less momentum in equipment investment in Q1. However, upward revisions to durable goods inventories at factories and a healthy gain in nondurable goods inventories in February point to modestly more contribution from inventory buildup in Q1. On net, after rounding, our Q1 real GDP tracking estimate remains unchanged at 1.8% q-o-q saar.”

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According to reporting by Reuters, Canada’s Foreign Minister Chrystia Freeland stated that NAFTA renegotiations are making good progress, but there is still lots of work to do.

Key quotes (Source: Reuters)

Freeland also said she would be flying to Washington for a meeting on Thursday with U.S. Trade Representative Robert Lighthizer, who is pushing hard for a quick deal in principle to finish before a July 1 presidential election in Mexico.

The three members of the North American Free Trade Agreement (NAFTA) could announce by mid-April the outlines of a settlement that would likely tackle the key issue of autos content while leaving other contentious chapters to be dealt with later, say sources familiar with the matter.

“We’re making good progress on NAFTA … having said that, we’re not there yet,” Freeland told business executives in Winnipeg.

One of the biggest chapters to be resolved is a U.S. demand that the North American content of vehicles made in NAFTA nations be increased to 85 percent from 62.5 percent.

Only six of the roughly 30 chapters have been closed and wide differences remain on topics such as dispute resolution and government procurement.

Canadian officials do not see how the three nations can close the remaining chapters in the next two weeks, a source familiar with Canada’s negotiating position said on Wednesday.

“There’s a possibility they could come up with a symbolic agreement in principle that signaled they had reached a consensus on five or six key issues,” said the source, who requested anonymity given the sensitivity of the situation.

 

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Gold continues to drop in cycles as market sentiment falters and recovers amidst geopolitical turmoil.
The possible trade war lead-up is likely to cool off following this week’s round of tariff threats.

Gold is continuing to slump in Asia trading, bumping into the 1,330.00 handle and maintaining the bearish momentum that rolled over from Wednesday’s action.

Gold initially lifted on the week’s outset, but repeated rounds of tariffs between the US and China has knocked market sentiment back. Recovering risk appetite has returned to the broad markets, and Gold is stumbling lower after reaching a weekly high at 1,348.22.

Gold levels to watch

As FXStreet’s own Falvio Tosti noted earlier, “key support is seen at $1,321 last week’s low. Bears will need to break the $1,330 level with the 50 and 100-period simple moving average. Unless the bulls can retake the $1,400 level the short-term momentum is currently seen as bearish. Resistance is seen at the $1,340 psychological level and at $1,348.40 swing high, while support is seen at $1,328.60 swing low and confluence zone, followed by $1,321.06 swing low.”

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