EUR and GBP outperform vs USD despite event risks

EUR gains as Eurogroup meets

EURUSD stepped above the 1.0780 hurdle yesterday as a senior Greek official said he is expecting a positive sign from today’s Eurogroup meeting in Riga. The pair advanced to 1.0897 as European markets opened this morning. Given the current pace in negotiations, there would be a possibility to reach a bailout agreement by the end of this month. We remain cautious on such comments and do not rule out the downside risks regarding the Greek puzzle.

The short-term view turns cautiously positive with first line of resistance seen at 1.0907/25 (50-dma/technical resistance). A break above this level should send the EURUSD to the upper limit of the mid-term trading range of 1.0470/1.1080.

EURGBP rebounded from a month low. With political risks on both sides, the direction remains uncertain. A break out of 0.70143/0.73935 range (Mar 11th low/Fib 38.2% on Dec’14 – Mar’15 drop) is needed for fresh trend.

What is the upside potential in Cable before May 7 elections?

Cable extends gains, the short-term bullish momentum strengthens. A daily base is building stronger at 1.5080/1.5100 (Mar 22nd resistance / Fibonacci 50% of April 13-16 projection to April 21) as speculative short-term traders are chasing dips to jump on the bull trend. However, we see low probability of a sustainable follow-up on Cable’s bullish attempt as we step into the critical two week period before elections. The pending political uncertainties should cap the Cable rally pre-1.5200/30 (Fibonacci 76.4% on projection).This might be the last push before a downside correction. The latest poll results give no clear direction on the potential outcome of May 7 elections. The ComRes survey prints 36% for Conservatives, 32% for Labour; YouGov/Sun gives 35% chance for Labour and 33% for Conservatives.

Unimpressive US growth in Q1, US durable goods orders on the wire

The two-way volatility in US stocks continues as big American companies’ earnings flow in. The P&G and 3M Co. missed estimates and lowered their FY EPS forecasts as sturdier the US dollar is expected to further weigh on overseas sales. eBay rallied on higher-than-expected profits. Volvo and Biogen are among the companies to release results this Friday. As the majority of this week’s earnings have been published, today’s announcements should not have a significant impact on the market. The focus will certainly be on the US durable goods orders; a soft read should reinforce the USD weakness before the closing bell.

Nasdaq and S&P 500 hit new record highs of 5073.92 and 2120.49 respectively; the energy companies outperformed (+0.62%) on 4.5% surge in WTI yesterday. At this point, the equity traders find reason to push the stock markets higher in any scenario. Either we talk about a greater enthusiasm on company results or about a dovish shift in Fed expectations, the bias remains positive on equity indices. On the FX, the USD was broadly offered in New York as the initial jobless claims unexpectedly rose to 295K on week to April 18 versus 287K expected. The potential USD rebound is seemingly not on the agenda until the next FOMC meeting and the NFP release (due on April 29th and May 8th respectively).