Canada’s March CPI rates eyed

The USD strengthened against its counterparts yesterday, continuing the upward motion of the past six days. We note that the USD may have gotten some support from the better-than-expected US retail sales growth rate for March, which was released yesterday and tended to highlight the resilience of the demand side of the US economy, despite the tight financial environment. On second base though the release may also imply that a strong demand side may continue feeding inflationary pressures in the US economy, which in turn may force the Fed to maintain high rates for longer. It’s characteristic that San Francisco Fed President Daly yesterday stated that should not act urgently to cut rates unless required. The statement tended to lean on the hawkish side as it underscored the hesitation of Fed policymakers to start cutting rates. The data and the wider uncertainty in the market for the Middle East tended to weigh on US stock markets, while at the same time may have prevented gold’s price from rising further.

Back in the FX market, we note that the better-than-expected GDP rate for Q1 of China tended to boost the Yuan, yet at the same time, we still have some worries for the recovery of the Chinese economy as growth for the industrial sector and the demand side of the Chinese economy seemed to be subdued. In Europe, the worse-than-expected UK employment data to weigh on the pound and may add pressure on BoE to start cutting rates, yet we highlight for a better insight the release of UK’s CPI rates for March tomorrow.

On a technical level yesterday, Cable’s effort to correct higher was thwarted and the pair remained unchanged below the 1.2480 (R1) resistance line. Nevertheless, we tend to maintain our bearish outlook for GBP/USD given that the downward trendline guiding the pair since the 8 of March, remains intact and that the RSI indicator remains near the reading of 30, implying a strong bearish sentiment in the market for the pair. Should the bears maintain control over the pair, we may see it breaking the 1.2375 (S1) support line and aiming for the 1.2205 (S2) support level. Yet the price action has broken below the lower Bollinger band, which may slow down the bears. Should the bulls find a chance and take over, we expect GBP/USD to reverse direction, break the 1.2480 (R1) resistance line and continue to break the prementioned downward trendline, in a first signal that the downward motion has been interrupted. Should the downward trendline be broken, we set the next possible target for the bulls the 1.2600 (R2) resistance level.

その他の注目材料

In today’s European session Germany’s ZEW indicators for April. In the American session, we get Canada’s and the US Housing data and we highlight the release of Canada’s CPI rates, the US industrial output all being for March while later on oil traders may be more interested in the release of the API weekly crude oil inventories figure. On the monetary front, we note that NY Fed President Williams, Richmond Fed President Barkin, BoE Governor Andrew Bailey, Fed Chairman Jerome Powell and BuBa President and ECB policymaker Nagel are scheduled to make statements. During tomorrow’s Asian session, we get New Zealand’s CPI rates for Q1 and Japan’s trade data for March.

USD/CAD edged higher yesterday and during today’s Asian session. We tend to maintain our bullish outlook for the pair yet tend to warn for a possible correction lower. Please note that the RSI indicator remains above the reading of 70, which highlights the bullish sentiment for the pair among market participants on the one hand yet on the other tends to imply that the pair is at overbought levels and may be ripe for a correction lower. Similar signals are sent by the fact that the price action has broken the upper Bollinger band. Should the buyers continue to dictate the pair’s direction, we may see the pair aiming if not breaking the 1.3895 (R1) resistance line which marks a record high since mid-October 22. For a bearish outlook we would expect the pair to break the 1.3755 (S1) support line and continue lower to break the upward trendline supporting the pair’s motion, in a signal that the bulls have ceded control, with the next target for the bears being at the 1.3610 (S2) level.