Pound Plunged Ahead of Carney's Speech While the U.S. Market Expects Tomorrow's NFP

Wednesday has been a choppy, mostly range-bound session, with the currency markets seemingly heading into the most important event of the month, the U.S. Non-farm Payroll report for March. The March NFP report is forecasted to show a gain of around 205,000 jobs, with a more modest 0.2% gain in average hourly earnings and the unemployment rate to remain at 4.9%.

The ADP Employment Change revealed that economy added 200K jobs in March, more than forecasts of 194K but less than last month's revised figure of 205K. However, the dollar lost ground against all of its G10 peers, expect the pound and remained virtually unchanged against the Swiss franc. The biggest beneficiaries from the dollar drop were the commodity currencies.

Euro Confidence Mixed; Inflation Rate Scheduled for Today will be Eyed
The single currency ended Wednesday mixed performed against its G10 counterparts as the confidence indicators released yesterday were mixed as well. The Consumer Confidence remained stable at -9.7, the Service and Industrial sentiment came out lower than the market expected while Business Climate surpassed expectations. Later today, the flash estimate of March’s Inflation Rate will attract traders’ attention. The ECB Monetary Policy Meeting Accounts are also scheduled to be published.

The EUR/USD pair has once again used 1.1375 area as a resistance (1.1377 was our suggested target) following the aggressive rally from 1.1150. It may be too early to say this pair is looking bullish again following such a long period of consolidation – since March 2015 – but there is certainly a slight bullish bias being seen in the price action right now. There is no change to current view despite the strong recovery yesterday. For now, I would expect the pair to remain around 1.1300 until Friday when the U.S. NFP is due to release. A negative impact could push the pair towards the 1.1500 level, which I expect to hold, at least for now. Some traders preferred to remain on hold until seeing the Non-farm Payrolls figures, given its importance of the NFP in shaping the Fed’s monetary policy. The levels to watch for today will be the significant level at 1.1220, which includes the 50-SMA on the 4-hour chat while the 1.1345 – 1.1380 area will be the first obstacle for the bulls.

Pound lower ahead of Carney’s speech and GDP
The sterling plunged against the other G10 currencies ahead of final GDP release for the fourth quarter and Carney’s speech. The GFK Consumer Confidence for March came out at zero despite market consensus to have declined to -1. The GBP traders are tuned today for BoE Governor’s Mark Carney speech and afterwards the final GDP growth which is expected to show a growth of 1.9% yoy.

GBP/USD – Technical Outlook
The pound is looking pretty weak against the dollar at the moment, having broken through the significant level at 1.4350. The pair rejected the 1.4435 level and retraced all the way back to end the day negative. For confirmation of the end of the correction, we will need to see a break below the 1.4180 – 1.4200 zone, as well as below the 50-SMA on the 4-hour chart and the short-term ascending trend line. This provided significant support few days ago. Therefore, a break of all of these levels would strongly suggest there’s been a change of bias in the markets. Ahead of a busy UK day, I would be fairly neutral though on any directional move and we could yet see the pound come under further pressure, with much depending on the lead coming from Carney’s speech, as well as from tomorrow’s NFP report.

USD/JPY – Technical Outlook
The U.S. dollar is continuing to trade in a fairly tight range against the Japanese yen, with 114.50 capping any moves to the upside and 111.00 propping it up. Over the last couple of weeks, the USD/JPY pair hasn’t even reached these boundaries with the range appearing to have tightened further. It should be noted, that the price continued to increase the rate of attempts to reach the 114.50 level the last month. However, it will need a huge effort from the bulls to break the significant level at 114.50, which includes also the 50-SMA on the daily chart. Therefore, the key to watch over the next couple of days will be the 114.50 level, which I consider a turning point for the pair. On the downside, support will be seen at 112.00, ahead of 111.65 and 111.00. Below here looks unlikely at the moment, but further losses would head back towards the significant level of 110.65.

Overnight there are several key indicators from Japan, most notably the tankan survey for Q1. The large manufacturers’ Index is forecast to slump to 8 from 12 the previous quarter. The large non-manufacturing outlook is forecast to rise to 21 from 18 before. That’s a sign of diminishing expansion in Japan.

Gold – Technical Outlook
The precious metal has traded in a tight range and with the short-term charts looking mixed, more range-bound trade looks likely, with direction likely to be led largely by Friday’s NFP. The medium term charts remain mildly positive, so another test of $1,275 looks possible. On the downside, back below $1,207 would possibly look to retest the psychological level of $1,200 and we need to make a sustained effort to get back below that level to provide confidence of a medium term base. Buying rallies seem to be the plan for today, although I would not be looking for too much ahead of tomorrow’s NFP report which could create some major swings for the yellow metal. It should be noted that the metal has gained more than 15% in the first three months of the year, with February closing up 10.98%, its strongest performance since August 2011 (+13.13%).

Brent and WTI Crude Oil - Technical Outlook
Oil prices fell in Asian trade on early Thursday, with WTI crude hitting the lowest level in more than two weeks after Crude Oil Inventories posted a surplus of 2.3 million, well below the estimate of 3.1 million. The U.S. Crude oil which has risen about 50% since mid-February, have started to track lower in the past week following the failed attempt above the significant level of $42.50 (suggested target in the past). If the WTI continues to the downside, then back below the session low, the first support is seen at $36.40 and then at $35.80. Below here we would at $35.00. It is very significant that the commodity is trading below the 50-SMA on the 4-hour chart, as well as below $40.00. Therefore, I will remain slightly bearish on this commodity.

A similar picture prevails in Brent Crude oil. The UK Crude is failed to break above the significant level at $42.50, following several attempts and is now making is way back towards the key level at $39.00. The short-term momentum indicators still point lower and more particular with the 4-hour indicators – MACD and RSI – still pointing lower we could be in for a move back towards the significant zone at $35.80 - $36.40, which coincides with the 50-SMA on the daily chart.

U.S. Indices are ending March with the higher gains in five months!
The U.S. stocks closed positive for the third session in a row following Fed Yellen’s dovish comments. The Dow Jones Industrial Average marked a record for the most positive closed sessions in a month in the last six years. The Blue-chip index added 83.55 points, 0.5% up to close at 17,716.66, set the 17th winning day in March and the most since March 2010 and is headed towards the significant barrier at 17,900.00. For two months, November and December, the index was trying to break above that level without result. Therefore, the next upcoming attempts will be a very interesting battle to watch!

During yesterday’s session, the S&P 500 rose by 0.4%, 8.94 points, and closed at 2,063.95, recording the 15th gaining session this month, the most number of winning days in a month since October 2013. The next level target of the index is the zone between 2,080.00 and 2,100.00. The Nasdaq Composite also climbed 22.67 points, 0.5% higher to 4,869.29. Nasdaq is traded above the 200-SMA on the daily chart and is expected to continue to keep its bullish momentum for a while. The next level to watch is 4,580.00 and a strong push may send the index higher at 4,740.00.

It’s notable that all of the three indices are about to end March with the higher gains they assessed the last five months. Dow recorded gains of 7.27%, S&P 500 advanced 6.82% until now in March and Nasdaq 6.83%. Moreover, the three consecutive months before March the U.S. stocks declined.

What to watch today
Today, various significant indicators will dominate the agenda. During the morning, in Germany, the Retail Sales for February and the Unemployment Rate for March will be released. Shortly afterwards, investors will shift their focus to UK. The final GDP growth for the fourth quarter is coming out but no changes to the preliminary figures are expected. The qoq indicator is forecasted to remain at 0.5% and the yoy at 1.9%.

The Business Investments for Q4 and the Mortgage Approvals for February will be released as well. A while later, Eurozone’s final Inflation Rate for March is predicted to improve to -0.1% yoy from the first estimation of -0.2%.