Dollar Rebounds as Euro Rally Loses Steam
The greenback rebounds across the board as short-term traders took profit on euro and sterling long positions after recent sharp rally. The euro drifted from a high at 1.3650 versus the dollar to around 1.36. After breaking the 2 handle, the sterling accelerated its decline to test 1.99 level.
Today's economic calendar is light with only US weekly jobless claims. The number dropped from 339k to 321k, better than the consensus of 330k. The dollar pull back seen today was not driven by fundamentals and is more likely to be temporary than a real correction. Overall sentiment over the US economy and the Fed rate outlook remains negative.
The market will look to a bunch of US data due tomorrow morning. US PCE is expected to rose 3.3% in the first quarter, compared with a 1.0% decline in the previous quarter. Core PCE is seen at 2.1%, up from 1.8%. The employment cost index is estimated to rise 0.9%, up from 0.8%. Advanced GDP is forecasted to rise 1.8% in the first quarter, versus a previous reading of 2.5%. Besides, the university of Michigan consumer sentiment is likely to drop from 88.4 to 85.2 in April.
EURUSD will face interim resistance at 1.3620, followed by 1.3650 and 1.3670. Additional ceilings will emerge at 1.37, backed by 1.3730. Support starts at 1.36, backed by 1.3580, 1.3550 and 1.3520. Subsequent floors are eyed at 1.35.
GBPUSD encounters interim resistance at 1.9930, backed by 1.9950, and 1.9980. Subsequent ceilings will emerge at 2.0000, followed by 2.0020 and 2.0050. On the downside, support begins at 1.99, followed by 1.9890 and 1.9850. Additional floors are eyed at 1.9830, backed by 1.98 and 1.9750.
Yen Slumped Ahead of BOJ Report
The yen slumped across the board before the Bank of Japan issue its semi-annual report tonight. Japan CPI is estimated to fall at an annual rate of 0.2% in March, compared with a 0.1% decline a month earlier. The market will also focus on the economic and inflation projections made by the BOJ in the report. The dollar rose sharply from 118.50 to 119.65 versus the yen.The Reserve Bank of New Zealand raised rates by 25 basis point to 7.75% as expected, but did not show any bias to tighten further, which disappointed the market and induced some carry trades unwinding.
USDJPY encounters interim resistance at 119.70, backed by 120 and 120.30. Subsequent ceilings will emerge at 120.50, followed by 120.80 and 121. On the downside, support begins at 119.20 and 119, followed by 118.70. Additional floors are eyed at 118.50, backed by 118.20 and 118.