Analysts at TD are looking for the Canadian retail sales to build on recent gains with a 1.4% advance in March, reflecting broad strength in household goods consumption.

Key Quotes

“Gasoline stations and motor vehicle sales should lead the move, with the former benefitting from a 10% m/m increase in the price at the pump. This will allow the ex. autos measure to come in near the headline print at 1.3%, although sales should see more modest gains (0.8%) when excluding gasoline as well.”

“Core retail sales rose by 0.4% in February for their first increase since September and we expect this performance to continue into March on the heels of a sharp increase in consumer goods imports and strong labour market data.”

“Real retail sales should underperform the headline print owing to the sharp increase in gasoline prices although we still expect to see an increase of roughly 0.8% m/m. This is consistent with a flat print on Q1 after soft data in Jan/Feb which may reignite concerns about the Canadian consumer after an abysmal Q4, but it will provide a solid handoff to Q2.”

• The British Pound witnessed some short-covering move ahead of PM May’s statement.
• Improving risk-sentiment undermines JPY’s safe-haven demand and remained supportive.

The GBP/JPY cross finally broke out of its three-day-old consolidative trading range and surged to multi-day tops, around the 141.00 neighborhood during the mid-European session on Tuesday.

After an initial dip to 139.65 area – closer to four-month lows set on Friday, the cross witnessed a dramatic turnaround in what could be termed as some near-term GBP short-covering move ahead of the UK PM Theresa May's statement.

PM May will set out a new proposal for her deal in a speech at 15:00 GMT and speculations that her offer might be compelling enough to convince the UK lawmakers to pass the Withdrawal Agreement Bill was seen as a key factor behind the move.

This coupled with improving global risk appetite, as depicted by a positive trading sentiment around equity markets, dampened the Japanese Yen's relative safe-haven status and remained supportive of the pair's goodish intraday bounce to multi-day tops.

It, however, remained to be seen if bulls are able to capitalize on the recovery move or the uptick is still seen as a selling opportunity amid concerns about May's early exit and that her replacement with a pro-Brexit hardliner might lead the UK into a no-deal split.

Hence, it would be prudent to wait for a strong follow-through buying before confirming that the cross might have actually bottomed out in the near-term and positioning for any further near-term recovery towards reclaiming the 142.00 round figure mark.

Technical levels to watch

  • AUD/USD selloff weighs on the pair on Tuesday.
  • US Dollar Index clings to modest gains a little above 98.
  • Coming up: Speeches by FOMC members Bostic and Rosengren and retail sales data from NZ.

The NZD/USD pair came with a touching distance of the 0.65 mark today and renewed its lowest level since October 2018 as the pair came under a renewed bearish pressure during the Asian trading hours. With the market action turning subdued in the last hours, the pair has started to move sideways in the lower half of its daily trading range and was last losing 0.35% on a daily basis at 0.6510.

The dovish shift in the Reserve Bank of Australia's monetary policy outlook as revealed by Governor Lowe's remarks and the bank's minutes of its May meeting caused the AUD to suffer heavy losses against its major rivals and weighed on the strongly-correlated kiwi. Meanwhile, the data from New Zealand showed that credit card spending grew by 4.5% annually in April to fall short of the market expectation of 5.9% and put additional weight on the currency's shoulders.

On the other hand, with major European currencies and antipodeans struggling to find demand on Tuesday, the greenback gathered strength and the US Dollar Index rose above the 98 handle to touch its highest level of May at 98.13, keeping the bearish pressure on the pair intact.

Later in the session, Boston Fed President Rosengren and Chicago Fed President Evans will be delivering speeches. In the early trading hours of the Asian session on Wednesday, retail sales data from New Zealand will be looked upon for fresh impetus.

Technical levels to watch for

With a daily close below 0.6500 (psychological level/daily low), the pair could extend its slide to 0.6465 (Oct. 26, 2018, low) and 0.6425 (Oct. 8, 2018, low). On the upside, resistances are located at 0.6540 (daily high), 0.6580 (May 16 high) and 0.6615 (May 10 high).

• Over the past few trading sessions, the EUR/USD pair has been trending lower along a short-term descending trend-channel formation on the 1-hourly chart.

• The pair has managed to stage a modest recovery from the mentioned trend-channel support, albeit might struggle to make it through 50-hour EMA resistance.

• The mentioned hurdle coincides with the top end of the ascending trend-channel and might now act as a key pivotal point for any subsequent recovery.

Technical indicators on the 1-hourly chart have just started catching up with the recovery move but maintained their bearish bias on 4-hourly/daily charts, suggesting that the near-term selling pressure might still be far from over.

Hence, it would be prudent to wait for a convincing break through the said confluence resistance before traders start positioning for any further short-covering move back towards reclaiming the 1.1200 round figure mark.

Alternatively, fresh rejection from the current resistance zone might turn the pair vulnerable to challenge the trend-channel support, currently near the 1.1140 region before dropping to yearly lows, around the 1.1110 area.

EUR/USD 1-hourly chart

  • GBP/USD is having a 50-pip boost to the daily high, however, buyers will need to reclaim 1.2760 and 1.2800 to have a more convincing bottom.
  • Brexit drama could be the main driver behind the recent jump in the New York session. UK PM May will announce a new Brexit deal at 15:00 GMT.

GBP/USD daily chart

GBP/USD is finding some relief from after the intense selling of the last weeks. The main supports to the downside are at 1.2700 figure, 1.2670 swing low and 1.2550 level.

GBP/USD 4-hour chart

GBP/USD is currently having a boost to the upside from the 1.2700 figure.

GBP/USD 30-minute chart

GBP/USD is consolidating its losses above the 1.2700 figure. Cable is trading below its 200 SMA while above the 50 and 100 SMA. Bulls would need to trade above 1.2760 Monday high – to get out of the woods and create a more convincing reversal. Further up the next resistance is seen at 1.2800 figure. Supports are at 1.2700 and 1.2670 levels.

Additional key levels

According to Greg Gibbs, analyst at Amplifying Global FX Capital, the currency impact in recent weeks of the trade dispute/Huawei action has been dominated by a weaker CNY flowing onto weaker Asian currencies.

Key Quotes

“As USD/CNY has approached previous highs near 7.0, the fall in CNY has slowed, helping slow the fallout to currencies in the region.”

“The USD has tended to gain broadly, but this may also reflect the deteriorating Brexit process and the conflicting political ambitions of European political parties ahead of the EU parliamentary elections on 23-26 May.”

“The trade dispute, in the early phases, is dampening global economic growth and generating weaker trends in riskier assets, including EM and commodity currencies, especially those with significant trade links to China. This includes the EUR and AUD.”

“However, we have to be wary of the trade dispute undermining confidence in the US economy, and bringing forward rate cut expectations in the USD. This may tend to weaken the USD at some point. This is more likely to show-up first against JPY, CHF and gold.”

“We see a high risk that USD/CNY continues to rise as the Chinese economy shows signs of weakness and the trade dispute undermines economic confidence.”

“The INR and AUD bounced on election results that provide specific reasons for these currencies to strengthen. But they will not be immune from a weaker CNY and weaker Chinese economy.”

According to Carla Slim, economist at Standard Chartered, the worst may be over for the business cycle of the Turkish economy, but the path to recovery is not straightforward.

Key Quotes

“We believe GDP should return to growth in Q1-2019 on a quarterly basis (data to be released on 31 May), which means Turkey would have come out of ‘technical recession’ (characterised by two consecutive quarters of negative q/q growth). This view appears to be supported by industrial production, retail sales, economic confidence and PMI data, which have recently improved at the margin.”

“Looking ahead, turbulent markets and uncertainty over the outlook could weigh on GDP performance beyond Q1, however.”

“Persistently elevated risk perception clouds the outlook. Q1-2019 was characterised by impending signs of stabilisation following last summer’s FX crisis. A protracted period of volatility clouds Turkey’s outlook, which makes restoring confidence key in order to address risk perception.”

“We see both the suspension of the weekly repo window and any upcoming cabinet re-shuffle in this vein. Against this backdrop, the Central Bank of the Republic of Turkey (CBRT) will likely be reluctant to embark on an easing cycle to avoid exacerbating existing pressures.”

“We maintain our 2019 policy forecast at 22.0%, but push back the timing of our first cut to 25 July instead.”

• UK PM May will set out a new proposal for her Brexit deal at 15:00 GMT.
• Traders opt to cover short positions in anticipation of a compelling offer.

The GBP/USD pair quickly reversed a mid-European session dip to fresh multi-month tops and rallied over 50-pips in the last hour.

Having dropped to 1.2685 level – the lowest since mid-Feb., the pair witnessed an intraday turnaround and the latest leg of a sudden upsurge came after the UK government spokesman confirmed that PM Theresa May will set out a new proposal for her deal in a speech at 15:00 GMT.

The spokesman further added that Cabinet discussed a new deal that is to be presented in parliament, which includes alternative arrangements, assurances on UK integrity in the event that the backstop is triggered – though there was nothing significant in terms of positive Brexit development.

The price action, however, seemed to suggest some short-covering move ahead of the event risk, wherein May's offer might turn out to be compelling enough to convince the UK lawmakers to vote for her and pass the Withdrawal Agreement Bill.

Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have actually bottomed out in the near-term and positioning for any further near-term recovery amid persistent Brexit uncertainties.

Technical levels to watch