Euro Stays Weak in Mixed Markets, Canadian Attempting a Rebound

Market overviews

Euro and Swiss Franc remains broadly pressured today even though there is no follow through selling yet. But markets elsewhere are relatively mixed. While Australian and New Zealand Dollar attempted for a rebound, Dollar and Yen are not overwhelmed yet. Canadian Dollar is slightly stronger for now as oil prices continue to recover from this week’s horror decline. Stocks soften slightly but losses are limited. Gold struggles to break recent top made earlier in the month.

Technically, Euro’s selloff should continue as in EUR/USD, EUR/JPY and EUR/AUD. 1.5121 support in EUR/CAD is a level to watch as break will extends corrective fall from 1.5991 to 61.8% retracement of 1.4263 to 1.5991 at 1.4923.0.8681 temporary low in EUR/GBP is another one and break will resume whole decline from 0.9499 with risk of retesting 0.8726 low. As for Dollar, we’d look at Gold’s reaction to 1747.75 short term top as hint of the greenback’s next direction.

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In Asia, currently, Nikkei is down -0.83%. Hong Kong HSI is down -0.28%, China Shanghai SSE is down -0.63%. Singapore Strait Times is down -0.81%. Japan 10-year JGB yield is down -0.014 at -0.022. Overnight, DOW rose 0.17%. S&P 500 dropped -0.05%. NASDAQ dropped -0.01%. 10-year yield dropped -0.006 to 0.613.

Japan CPI core slowed to 0.4%, more downward pressure ahead

Japan’s all-item CPI was unchanged at 0.4% yoy in March, matched expectations. CPI core (ex-fresh food), slowed to 0.4% yoy, down from 0.6% yoy, matched expectations. CPI core-core (ex-fresh food & energy) was unchanged at 0.6% yoy, also matched expectations. Corporate service price slowed to 1.6% yoy, down from 2.1% yoy, missed expectation of 1.7% yoy.

The set of data suggested that underlying inflation in Japan was weakened further by the coronavirus pandemic. More downward pressure would be seen in the trend ahead due to falling oil prices. BoJ is going to meet next week and the central bank would be forced to downgrade both economic and price assessments.

Separately, Finance Minister Taro Aso said today that the Ministry is not discussing to remove the cap on asset purchase with BoJ. They’ll closely coordinate with each other on monetary policy. Economy Minister Yasutoshi Nishimura said that, the government’s new coronavirus economic stimulus package could boost GDP by 4.4%. The measures included expanded cash payouts to citizen are worth up to JPY 1.1T.

NZ Robertson: Any further government support will be substantial

New Zealand government is preparing for the budget for May 14 that puts a lot of focuses on supporting post coronavirus economic recovery. Finance Minister Grant Robertson emphasized “we need to be thinking about when stimulus would have its best effect”. “When consumers are feeling gun shy and restricted in what they actually can do and buy, that’s probably not the best time”, he added “we’ll continue to look at our options for that.” But any further government support “will be substantial”.

Regarding public finances, the country’s level of debt is kept relatively in check despite the fiscal stimulus measures. “One of the reasons we’ve kept it low is because we have tended to be susceptible to global economic shocks and also natural disasters,” he said. “We do this so we’re ready for a rainy day, and it’s pouring outside. We’ll continue to be careful with our spending, but as most countries around the world have done we’ve put in substantial support packages already and there will be more to come.”

UK Gfk consumer confidence unchanged at -34, no guarantee the fall has ended

UK Gfk Consumer Confidence was unchanged at -34 in April, hovering just 5 pts above historical low of -39 seen in July 2008.

Joe Staton, Client Strategy Director says: “Consumer Confidence has stayed steady at the minus -34 points recorded in our first COVID-19 flash of April 6th. It is too early to say whether this has now stabilised after weeks of adjustment to the reality of lockdown life, or whether further falls are to come…

“Overall, there is no guarantee yet that the fall in consumer confidence has ended, and we are only five points away from the record -39 low seen in July 2008.”

Looking ahead

UK retail sales and Germany Ifo business climate will be featured in European session. US will release durable goods orders later in the day.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3988; (P) 1.4093; (R1) 1.4185; More….

USD/CAD’s breach of 1.4005 minor support dampens our bullish view. Instead, the development suggests that corrective pattern from 1.4667 is still extending. Intraday bias is back on the downside for 1.3855 support and possibly below. But downside should be contained by 61.8% retracement of 1.3202 to 1.4667 at 1.3762 to bring rebound. On the upside, above 1.4265 will revive the case that correction from 1.4667 has completed, and turn bias back to the upside for retesting 1.4667 high.

In the bigger picture, rise from 1.2061 is likely resuming whole up trend from 0.9056 (2007 low). Decisive break of 1.4689 will confirm this bullish case. Next medium term target is 161.8% projection of 1.2061 to 1.3664 from 1.2951 at 1.5545. Rejection by 1.4689 will bring some consolidations first. But outlook will remain bullish as long as 1.3664 resistance turned support holds, even in case of deep pull back.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:01 GBP GfK Consumer Confidence Apr -34 -40 -34
23:30 JPY National CPI Core Y/Y Mar 0.40% 0.40% 0.60%
23:50 JPY Corporate Service Price Index Y/Y Mar 1.60% 1.70% 2.10%
04:30 JPY All Industry Activity Index M/M Feb -0.60% -0.40% 0.80% 0.60%
06:00 GBP Retail Sales M/M Mar -4.50% -0.30%
06:00 GBP Retail Sales ex-Fuel M/M Mar -3.50% -0.50%
08:00 EUR Germany IFO Business Climate Apr 79.8 86.1
08:00 EUR Germany IFO Current Assessment Apr 81.0 93
08:00 EUR Germany IFO Expectations Apr 75.0 79.7
12:30 USD Durable Goods Orders Mar -12.00% 1.20%
12:30 USD Durable Goods Orders ex Transportation Mar -6.10% -0.60%
14:00 USD Michigan Consumer Sentiment Index Apr 67.8 71