Ahead of the FOMC this month, analysts at Nomura noted that the Fed’s preferred measure, the PCE price index, was essentially unchanged (+0.032%) m-o-m in March, in line with the market consensus (0.0%) but slightly below our forecast of 0.063%. 

Key Quotes:

“On a 12-month basis, PCE prices rose 2.0% (2.014%) in March from 1.7% (1.731%) previously, matching expectations (Nomura: 2.046%, Consensus: 2.0%). Excluding food and energy, the core PCE price index, the FOMC’s preferred measure of the underlying inflation trend, rose by 0.2% (0.153%) m-o-m in March (Nomura: 0.191%, Consensus: 0.2%), translating into an increase of 1.9% (1.882%) on a y-o-y basis (Consensus: 1.9%, Nomura: 1.917%), up from 1.6% (1.571%) in February. 

Given on a 12-month basis, both overall inflation and core inflation reached or moved closer to 2%, the FOMC will likely reflect those developments into their post-meeting statement on Wednesday this week. The Committee might stress that, despite the large increases in the y-o-y metrics, incoming inflation data have been in line with its forecast as expressed in their latest Summary of Economic Projections (SEP) from March.”

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Israel claims to have secret archives of Iran’s nuclear program. 
Netanyahu hopes that Trump will pull out of the Iranian deal on May 12.

The USD/CAD is trading at around 1.2824 virtually unchanged on Monday.

The CAD is sensitive to oil prices as the Canadian economy is tightly linked to oil. 

The commodity-linked currency appreciated on news indicating that Iran moved its nuclear weapons program to a secret location and Israel has “exact copies” of Iranian nuclear archives, according to a press conference offered by Netanyahu. The Israeli President added that Iran is continually expanding the range of its nuclear-capable missiles and was “brazenly lying” when it said it never had a nuclear weapons program. He went on saying that the Iranian deal failed to address the Iranian’s enrichment in uranium ballistic missiles and nuclear weapon and calling it a “terrible deal”. He concluded his speech by saying that he was certain that Trump “will do the right thing” on May 12. 

Earlier in the day, Netanyahu said that he would reveal “significant development” on the Iranian deal with documents suggesting that Iran “cheated the world regarding its nuclear program”. The statement took place at 17:00 GMT on Monday and was followed by an emergency meeting of Netanyahu’s Security Cabinet. Crude oil got a strong boost from the news. 

The USD/CAD is trading sideways on Monday, still within the 1.2810-1.2900 range started last Tuesday. After Netanyahu’s speech, the USD/CAD rebounded from the 1.2810 support level. 

USD/CAD 1-hour chart 

The market is trading sideways. Supports are seen at 1.2800 and at 1.2752 swing low while resistances are seen at 1.2876 swing high and at 1.2900 cyclical high.  

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An update to the Iran/Israel PM Netanyahu speech where it has been said that Iran has indeed moved its nuclear weapons program to highly secret location where Netanyahu said that ‘incriminating files’ were shared with US.

A US Official confirms authenticity information provided by Israel

Markets are bracing for a war in the ME, oil higher, with the tenuous nuclear agreement looking even more vulnerable as comments from Israeli PM Netanyahu hit the wires, saying that Iran moved its nuclear weapons program to highly secret location:

Iran’s nuclear project has ‘all 5 elements of nuclear weapons program’
Iran has secret ‘project AMAD’ to design, produce and test warheads
Specific goal of Iran’s project was to put 10 KT nuclear bombs on warheads
Iran was ‘brazenly lying’ when it said it never had plans to build nuclear weapons
Israel has shared ‘incriminating files’ with US, US has verified their authenticity, will share with other countries and IAEA

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Markets are bracing for a war in the ME, oil higher, with the tenuous nuclear agreement looking even more vulnerable as comments from Israeli PM Netanyahu hit the wires, saying that Iran moved its nuclear weapons program to highly secret location:

Iran’s nuclear project has ‘all 5 elements of nuclear weapons program’
Iran has secret ‘project AMAD’ to design, produce and test warheads
Specific goal of Iran’s project was to put 10 KT nuclear bombs on warheads
Iran was ‘brazenly lying’ when it said it never had plans to build nuclear weapons
Israel has shared ‘incriminating files’ with US, US has verified their authenticity, will share with other countries and IAEA
 

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Analysts at Scotiabank have a bearish outlook for sterling.

Key Quotes:

“The GBP’s position has deteriorated sharply in the past few weeks, with market topping out above 1.43 for a second time this year, losing key supports around the 1.40 level along the way to a retest of the early Mar low at 1.3715.” 

“After successive tests of 1.43+, we see this point as a major breakdown risk for Cable, implying downside potential for some 600 ticks, especially as the low 1.37 area also represents the base of trend support from the late 2017 low. Sterling looks at risk of a significant tumble below 1.37.”

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USD/JPY: yields, risk off, take your pick, where next?
USD/JPY: will bulls commit at  109 the figure, or 108.15 uptrend here we come?

Despite an hourly set back on the charts today, (109.47 down to 109.12), USD/JPY has continued in the weekly advance to the 100-W SMA at 109.48, propped by prospects of the Fed in fourth gear at this week’s meeting, signalling to markets that rate hikes will follow in due course as economic data and inflation continue to pick up. 
Currently, USD/JPY is trading at 109.18, up 0.11% on the day, having posted a daily high at 109.47 and low at 109.01.

USD/JPY is being pressured as the NY session gets going with a fall in stock prices. Price son Wall Street were initially bid at the start of the day, with pre-trading activity spurred by better than expected profits and revenues for MC Donalds in Q1. 

Fundamentals at play, weighing on stocks

However, there are fundamental concerns at the fore, including the Iran nuclear deal, China trade talks his week, the Fed and Korea, all simmering away in the background. At the same time, the dollar has taken a hit, trading below the dau’s highs so far within a range of 91.4820-91.9190, at 91.7180 at the time of writing, fuelling a bid in the yen below the 100-hr SMA at 109.18. The dollar is being weighed by US yields that have come off the recent highs, with the benchmark 10-year yield falling to as low as 2.94% on Monday. 

USD/JPY levels

Bulls are safe above the 109 handle, but a break below the 108.50 level, support is at the 108.15 uptrend and 107.90 mid-February high, then the round 108.00, 107.00, 106.83 (50-D SMA) and 106.00 levels are exposed. The 2018 low is at 104.63 as a key support. 104.20 gives way to a downside measured target of 102.58, guarding a run to 101.19/99.00 as the June-to-November 2016 lows ahead of 100.70/99.00. On the flip side, 110.00 is the next target to meet (200-D SMA 110.23) ahead of the Feb highs at 110.50. 

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Netanyahu will reveal “significant development” on the Iranian deal at 17:00 GMT on Monday.
Crude oil bounces to $68.30 a barrel on the news and could potentially continue higher after Netanyahu’s statement.

Crude oil West Texas Intermediate (WTI) is trading at about $68.40 a barrel up 0.84% on Monday.

Earlier in the day, Haaretz Israeli news agency reported that Netanyahu might reveal new documents suggesting that Iran “cheated the world regarding its nuclear program.” The statement will then follow an emergency meeting of Netanyahu’s Security Cabinet. 

Netanyahu will detail what he calls “significant development” regarding the Iran nuclear deal on Monday at 17:00 GMT.  

May 12 is the deadline for the US President Trump to renew the Iranian deal, however, analysts believe that the odds are slim that the renewal will take place as Trump wants a harsher version of the deal while the other countries involved in the deal want to leave it as it is. Recently French President Macron and German Chancellor Merkel went to Washington in order to discuss the issue with Trump but the odds remain small that Trump changed his mind on the Iranian deal. 

WTI Crude oil 4-hour chart

The long-term trend is bullish. Supports are seen at 67.30 and 65.55 demand zone while resistances are seen at 68.30 and 69.00 figure. 

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Analysts at Scotiabank explained that sterling is under-performing on the day following the resignation of UK Home Sec. Rudd over the weekend.

Key Quotes:

“Rudd had become caught up in an immigration row and was found to have misled parliament on an issue.”

“Her replacement is Sajid Javid, an EU-skeptic and Rudd’s ouster tilts the composition of PM May’s cabinet a little more clearly towards the Eurosceptical.”

“This may complicate the PM’s own position as she tries to steer her party through the Brexit policy maze and may dampen the market’s hopes for a soft Brexit.”

“Political risks are rising just as the economy appears to be faltering—which is a poor combination for the pound.”

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The US dollar keeps being well-bid as traders are pricing in a rate hike in June but Wednesday’s FOMC is crucial.
Talks about denuclearization between North and South Korea hurt demand for safe-haven CHF.

The USD/CHF is trading at about 0.9914 up 0.35% in Monday’s trading. 

The bulls managed to break above the 0.9900 level in the second part of the European session and the pair is now consolidating in a tight range above the 0.9900 handle. 

The US bullish sentiment from last week rolled over into Monday. The US Dollar Index is trading at a 3.5-month high currently trying to break the 0.9190 level to the upside at the time of writing. Earlier in the day, the US Core Personal Consumption Expenditure (PCE) price index rose 1.9% y/y in March matching analysts expectations. The PCE is the favorite inflation indicator of the Fed. 

The USD/CHF bull run is mainly US dollar-led. Rising US Treasury yields and inflation, as well as positive macroeconomic data, have sparked a strong demand for the greenback. Investors are pricing in that the Fed will hike in June. However on Wednesday on the FOMC meeting, if the Fed expresses doubts and sounds dovish blaming market conditions or rising yields, there is a danger that investors will sell the greenback according to analysts. 

On the other hand, the Swiss National is not expected to enter a hiking cycle any time soon. Earlier in the day, the Swiss KOF Economic Barometer fell to the multi-month low level of 105.3 in April. Additionally, talks about denuclearization between the two Koreas do not favor safe-haven currencies such as CHF or JPY.

USD/CHF daily chart

The trend is bullish. Resistance is seen in the 0.9978-1.000 region and at the 1.0038 swing high while support is seen at 0.9871 Friday’s low and at the 0.9800 handle. 

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EUR/GBP: most will depend on the UK data this week, a trio beat is required.
EUR/GBP: BoE continues to weigh on the outlook for the pound, what will the week bring?

After running up to a fresh six week high in early European trade/Asia handover, EUR/GBP has run into supply through the 0.88 handle and is losing sight of it quickly while now trading below prior 0.8795 resistance level. Currently, EUR/GBP is trading at 0.8773, down -0.31% on the day, having posted a daily high at 0.8830 and low at 0.8765.

EUR/GBP was weighed by softer German retail sales, (German retail sales fall 0.6% mm in March compared to a 0.8% forecasted), and EZ M3 data, (the lowest point since November 2014 at 3.7%, M3 compares to a 4.1% forecasted and is well below the ECB’s 4.5% reference rate), while the euro dropped below the 1.21 handle. However, sterling has also had a poor run of things and extended lower to a fresh new 8-week low of 1.3712 in European/London trade while the recent and dovish shift in BoE expectations continues to weigh on the pound. 

The bears need a trio beat from UK data this week 

Eyes are now on April’s Markit/CIPS UK PMIs and after a series of data misses of late, these will be critical while the pound has already lost over 600 pence in just over ten days. A trio of beats is what is required to keep the BoE May 10th meeting on traders radars for a possible rate hike; Data starts tomorrow with manufacturing, then construction Wednesday and then services on Thursday. 

EUR/GBP levels

The 100-D SMA has capped the reversal of the early March sell-off from 0.8967 down to 0.8620. a firm close above the 21-W SMA at 0.8811 is required if the bulls are going to fend off the bear’s attack once again with a target of the 78.6% retracement at 0.8527 in mind, being the move up from the 2017 low.

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