Yen Broadly Lower, Sterling Rises, as a Relatively Light Week Starts

Market overviews

Dollar stabilizes mildly as another week starts, as selling focus temporarily turns to Yen. Both are weak nonetheless and stay near term bearish as least. Meanwhile, Sterling is trading slightly stronger in Asian session with help from recovery in crosses against Euro and Swiss Franc. But commodity currencies, as led by Canadian Dollar, have more potential to lead the rises. In other markets, Gold is consolidating last week’s rise for now, while Bitcoin is taken up by other cryptos.

Technically, GBP/USD’s break of 1.4008 resistance suggests resumption of the rebound from 1.3668 to retest 1.4240 high. Similarly, GBP/JPY breaks 152.38 resistance to resume the rise from 149.03 towards 153.39 high. But we’d need to see GBP/CHF breaking through 1.2733 resistance, to indicate completion of correction from 1.3070, and to confirm the Pound’s own underlying strength. Otherwise, it’s just a following others’ moves.

In Asia, at the time of writing, Nikkei is up 0.52%. Hong Kong HSI is down -0.33%. China Shanghai SSE is up 0.06%. Singapore Strait Times is down -0.50%. Japan 10-year JGB yield is down -0.0004 at 0.085.

Australia NAB business confidence and condition rose to new records

Australia NAB business confidence jumped from 17 to 26 in April, a new survey high. Business conditions rose from 24 to 32, also a record high. The condition sub-component were also at record high. Trading condition rose from 35 to 40. Profitability rose from 25 to 33. Employment condition also rose from 15 to 22.

NAB said: “The April survey result is simply stunning – with many variables reaching survey highs. Conditions reset last month’s high, driven by further gains across trading conditions, profitability and employment. Confidence has also set a new high – pointing to ongoing strength in conditions in the near term.

“It looks like we have moved past the rebound phase of the recovery and are now seeing healthy growth in most of the economy. After lagging in the rebound phase, the services sectors are now showing strength. Retail continues to see healthy conditions but does have slightly softer confidence than the other industries suggesting less improvement from the already high level in conditions”.

Australia retail sales rose 1.3% mom in march, Victoria and WA led

Australia retail sales rose 1.3% mom in March, slightly below the preliminary results of 1.4% mom. Comparing with March 2020, sales rose 2.2% yoy. Ben James, Director of Quarterly Economy Wide Surveys said: “Victoria (3.5 per cent) and Western Australia (5.5 per cent) led rises at the state and territory level, following falls in February associated with local coronavirus lockdowns. Queensland (-0.5 per cent), which saw a short lockdown at the end of March, partially offset these increases.”

Overall, retail sales volume dropped -0.5% in March quarter. James said: “The quarterly volume fall was driven by households spending patterns gradually returning to those seen before COVID-19. Food retailing (-2.7 per cent) led the falls while household goods also fell (-1.6 per cent). The falls were partially offset by a rise in cafes, restaurants and takeaways (5.8 per cent), as eating out increased, while functions and events continued to return.”

CAD/JPY, NZD/JPY and AUD/JPY preparing to extend up trend

Yen opened the week generally lower, and selloff could accelerate further, in particular against commodity currencies. CAD/JPY is still leading the way and is now eyeing 90 handle. Near term outlook will remain bullish as long as 88.28 resistance turned support holds. Current up trend should target 61.8% projection of 77.91 to 88.28 from 85.40 at 91.80, which is close to 2019 high at 91.62.

After some jitters, NZD/JPY also breach 79.19 resistance today, and look set to resume medium term up trend. Sustained trading above 79.19 will pave the way to 61.8% projection of 68.86 to 79.19 from 75.61 at 81.99. This bullish case will remain in favor as long as 77.68 support holds, in case of retreat.

Similarly, AUD/JPY also breaches 85.43 resistance today, suggesting that the medium term up trend is ready to resume. Sustained trading above 85.43 will bring further rise to 61.8% projection of 73.13 to 84.53 from 83.04 at 90.64 next. This will remain the favored case as long as 83.91 support holds.

UK GDP, US CPI and retail sales to highlight a relatively light week

The economic calendar is relatively light this week. Main focuses will be on UK GDP, US CPI and PPI, as well as retail sales. Additional, some sentiment indicators will be watched including Eurozone Sentix and German ZEW. BoJ will release summary of opinions while ECB will release monetary policy meeting accounts. Here are some highlights for the week:

  • Monday: Australia retail sales, NAB business confidence; Eurozone Sentix investor confidence.
  • Tuesday: BoJ summary of opinions, Japan household spending; China CPI, PPI; Germany ZEW economic sentiment; Italy industrial production.
  • Wednesday: Japan leading indicator; UK GDP, productions, trade balance; Germany CPI final; Eurozone industrial production; US CPI.
  • Thursday: Japan current account; US jobless claims, PPI.
  • Friday: New Zealand BusinessNZ manufacturing; ECB accounts; Canada wholesale sales; US retail sales, import prices, industrial production, U of Michigan sentiment, business inventories.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3917; (P) 1.3961; (R1) 1.4035; More…

GBP/USD’s break of 1.4008 resistance suggests that rise from 1.3668 has resumed. More importantly, it should confirm that correction from 1.4240 has completed already. Intraday bias is back on the upside for retesting 1.4240 high first. Break will resume larger up trend from 1.1409 low. This will remain the favored case now, as long as 1.3890 minor support holds.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
01:30 AUD Retail Sales M/M Mar 1.30% 1.40% 1.40%
01:30 AUD NAB Business Conditions Apr 32 25
01:30 AUD NAB Business Confidence Apr 26 15
08:30 EUR Eurozone Sentix Investor Confidence May 14 13.1