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At 2:00:00 AM Germany March Wholesale sales y/y (exp n/f, prev -3.2%) Germany March Wholesale sales m/m (exp n/f, prev -0.8%) At 2:50:00 AM France Q4 GDP q/q detailes (exp -0.1%, prev 0.5%) France Q4 GDP y/y detailed (exp 0.9%, prev 2.1%) At 4:30:00 AM UK Q1 GPD y/y prel. (exp 1.3%, prev 1.6%) UK Q1 GPD q/q prel. (exp 0.4%, prev 0%)
The dollar edged higher against the yen in Asian trade, up from NY lows around 128.15 to a day's high of 128.90. Momentum now appears bullish, but since easing back from current highs around 128.90, traders warn that more dollar/yen selling at the start of European trade could be in store given that MoF protests against yen strength have been less aggressive than before. Meanwhile, the dollar traded rangebound against the European majors since US trade overnight when it reached 3-4 month lows against those majors.
USD/JPY rose to a session high of 128.90 but has since eased back to around 128.75. Look for either a break above 128.90 for a bullish signal or a fall below 128.42 (61.8% of 128.15-128.90) for a resumption of the bear. FX chief Kuroda spoke again today saying that Japan's yen policy had not changed, but dealers had expected a stronger stance and are now wondering why Kuroda has not spoken out more aggressively. Moreover, this is leading the market to suspect that the risks of actual intervention are relatively limited keeping a limit to any gains. But a break back over the 129.55 mark (61.8% of 130.50-128.15) would help quiet those fears.
EUR/USD remained rangebound between 89.75 and its overnight 3-month high of 89.92 just shy of the major psychological resistance at 90 cents. A repeat of yesterday's aggressive dollar selling in Europe could easily pierce that mark, but two technical indicators argue for a setback. First, the RSI is oversold territory at 80 indicating caution.
Second, momentum is at a level consistent with a consolidation or correction. However, any correction in EUR/USD should hold above 89.46 (61.8% of 89.20 to 89.92) followed by the region between 89.15 (61.8% of 88.70 to 89.92) and the previous high of 89.22. After that, the next move should be higher. Resistance is seen at 90-cents followed by 90.40 (61.8% of 93.35 to 85.63) and trendline resistance at 91.10.
Be advised that although current long EUR/USD positions are at the highest level since the post-9/11 attacks, many players are anticipating a reversal once the euro breaks above the 90-cent mark - a key psychological barrier which could cause the market sentiment to shift the burden of proof to the euro from the dollar. Similar failures above 90 cents (after an average of 6-days) have gone on to cause a total liquidation of EUR/USD speculative long positions and a steep fall in the currency.
London today will focus on UK GDP which is expected to rise 0.4% in Q1 after 0% in 01Q4 and just 0.4% and 0.5% in Q3 and Q2. If in line with estimates it should bring annual growth down to 1.3% from 1.6%, but would still point to a rebound in economic growth. With the MPC seen in no hurry to raise rates a better than expected figure could give the pound reason to be bullish against the euro, after rising to 61.74 today from 61.88 overnight.
GBP/USD held to a tight range around overnight 3-month highs of 1.4558 matching this year's high. A break of 1.4558 would target last December's high of 1.4605 but should not rise above trendline resistance at 1.4630. That level should mark an end to the pound's almost 3-month advance from 1.4045 and sterling could then reverse course and target the 1.44 mark ahead the 1.4250/55 level. Technically speaking, any additional longs taken around current highs should be met with caution as sterling is expected to be topping in the 1.4525-1.4630 area. Support is seen at 1.4530, 1.4453 (38.2% of 1.4283 to 1.4559) and 1.4434 which marks both micro-term trendline support and key Fibonacci support.