The US recovery continues to gain traction, while the eurozone has been struggling, hampered by a sluggish vaccine rollout.
US Pending Home Sales posted a second straight decline in March. The decline of 10.6% was much sharper than the estimate of -3.1%. The week wrapped up with excellent nonfarm payroll numbers, which came in at 916 thousand. This was up from 379 thousand and crushed the estimate of 652 thousand.
The German CPI dipped to 0.5% in March, equalling the forecast given. This was down from 0.7% a month earlier. Eurozone CPI slowed slightly in March. Headline inflation decelerated from 1.4% to 1.3%, while Core CPI dropped from 1.1% to 0.9%. Manufacturing remains a bright spot, with PMIs showing growth throughout the eurozone with readings above the 50-level. Germany looked very strong, with a reading of 66.6.
In the UK, GDP for Q4 of 2020 was revised to 1.3%, up from the preliminary reading of 1.0%. Manufacturing PMI rose to 58.9 in March, its best showing since February 2011.
Although today is the Easter Monday Bank holiday in most major countries, this week we gave a variety of figures.
- US ISM Services PMI: Monday, 14:00. The services sector continues to show strong growth. The PMI came in at 55.3 in February and is expected to rise to 58.3 in March.
- UK Services PMI: Wednesday, 8:30. The Services PMI showed growth in March for the first time in 5 months, accelerating from 49.5 to 56.8. A reading above 50 indicates growth. The final reading is expected to confirm the initial release.
- Federal Reserve Minutes: Wednesday, 18:00. The minutes will provide details of the March policy meeting. Investors will be listening carefully to see if the Fed members are concerned over inflation or the rout in the bond markets.
- UK Construction PMI: Thursday, 8:30. The PMI improved to 53.3 in March, up from 49.2 beforehand. The final reading should confirm the initial release.
- Canada Employment Report: Friday, 12:30. After an impressive gain of 259.2 thousand new jobs in February, job creation is expected to slow to 90.0 thousand in March. The unemployment rate is expected to fall from 8.2% to 8.0%.
Major Currencies Performance and Signals
EUR/USD
As expected last week the euro fell during most of the week to maintain the overall bearish trend that we have seen over the last several months. It looks as if the euro is trying to catch itself. I think we probably still have a little bit of negativity to go, but we are getting close to a major support level, particularly as we get closer to the 1.1600 price. We remain Short.
FORECAST: SHORT
Resistance: 1.1800, 1.1850, 1.1900
Support: 1.1750, 1.1700, 1.1650
GBP/USD
Cable back and forth during the trading session on Friday as the Good Friday holiday and the jobs figure in the United States would have had a massive influence on liquidity and of course the direction of the market.
FORECAST: NEUTRAL
Resistance: 1.3850, 1.3900, 1.3950
Support: 1.3800, 1.3750, 1.3700
AUD/USD
The Aussie has broken down during the week, but also did recover towards the end of it. This is going to come down to the yield in the bond market, specifically the 10-year note. If that continues to spike, then we will more than likely drop towards the 0.73 level. For what it is worth, you should keep in mind that the February and March candlesticks both are shooting stars, so I think we will continue to fade short-term rallies, at least for the time being.
FORECAST: SHORT
Resistance: 0.7650, 0.7700, 0.7750
Support: 0.7600, 0.7550, 0.7500
USD/JPY
The US dollar continues to climb against the Japanese yen, but we think this week might be the beginning of a short-term pullback. It is not until we break down below the ¥108 level that I would be concerned about the uptrend but at the very least I would say it is overextended. I would not be a buyer all the way up here.
FORECAST: NEUTRAL
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
US dollar at first tried to rally during the week, but then gave back the gains to end up with a neutral candlestick. Now, we are starting to look at a potential bounce, but it seems to have been suppressed during the week. I think we are going to continue to see a lot of choppy behaviour in this general vicinity, because we are starting to approach rather significant support levels from the past.
FORECAST: NEUTRAL
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2550, 1.2500, 1.2450
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