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Europe Roundup: Sterling Eases Following Weaker-Than-expected Retail Sales, Euro Declines As French Election Looms, European Shares Trade in red - Friday, April 21st, 2017

Market Roundup

  • EUR/USD -0.1%, USD/JPY -0.15%, GBP/USD -0.15%, AUD/USD +0.1%  
  • DXY +0.1%, DAX +0.25%, FTSE -0.1%, Copper +0.3%, Gold flat  
  • Euro a little lower ahead of French election, 1.0738-1.0695 Friday  
  • Sterling falls after weaker than expected retail sales data  
  • EU has no 'Plan B' if French voters deliver upset  
  • Germany Apr Markit Mfg flash PMI 54..7 vs previous 55.6. 55.5 forecast  
  • Germany Apr Markit Service flash PMI 56.3 vs previous 57.1. 56.8 forecast  
  • Eurozone Feb Current Account NSA 27.9bln vs previous 3.1bln revised  
  • Eurozone Apr Markit manufacturing flash PMI 56.8 vs previous 56.2. 56.0 forecast  
  • Eurozone Apr Markit Service flash PMI 56.2 vs previous 56.0. 56.0 forecast  
  • Great Britain Mar Retail sales -1.8% m/m, +1.7% y/y vs previous 1.7% revised/+3.7%. -0.2%/+3.4% forecast  
  • ONS: Weak Q1 retail sales consequence of price increases across whole range of sectors  
  • UK government says it will extend N. Ireland talks deadline to June 29  
  • French security forces fully mobilized to protect elections after Paris shooting-PM  
  • Putin and Erdogan to discuss Syria in Russia meeting on May 3 - RIA ​

Economic Data Ahead

  • (0830 ET/1230 GMT) The Statistics Canada is expected to report that annual inflation rate slipped to 1.8 percent in March from 2 percent in February, however, closer to the Bank of Canada’s 2 percent target. While core consumer price index rose 0.4 percent in February.  
  • (0900 ET/1300 GMT) Mexico's national statistics agency is expected to show that unemployment rate dropped to 3.30 percent in March from 3.40 percent the previous month.  
  • (0945 ET/1345 GMT) Financial firm Markit releases U.S. preliminary Manufacturing PMI for the month of April. The index is likely edged up to 53.5 after posting a final reading of 53.3 in the previous month.  
  • (0945 ET/1345 GMT) Financial firm Markit Economics is likely to report that preliminary U.S. service PMI business activity index rose to 53.0 in April after printing a final reading of 52.8 in March.  
  • (0945 ET/1345 GMT) Financial firm Markit releases final U.S. composite PMI for the month of April. The index posted a final reading of 53 in the previous month.  
  • (1000 ET/1400 GMT) National Association of Realtors is likely to report that U.S. existing home sales expanded 2.5 percent to 560,000 million units in March, from 548,000 million in February.  
  • (1300 ET/1700 GMT) Baker Hughes reports U.S. Oil Rig Count. 

Key Events Ahead

  • (0745 ET/1145 GMT) FedTrade operation 30-yr Ginnie Mae (max $975 mn)  
  • (0930 ET/1330 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a question-and-answer session as part of the Hamline University Community Economic Development Symposium.

FX Beat

DXY: The dollar rebounded across the board following the U.S. Treasury Secretary Mnuchin's optimistic remarks on tax reforms. The dollar against a basket of currencies traded 0.1 percent up at 99.96, having hit a low of 99.37 on Thursday, its lowest since Mar. 28. FxWirePro's Hourly Dollar Strength Index stood at 48.05 (Neutral) by 1000 GMT.

EUR/USD: The euro tumbled to a 3-day low below the 1.0700 handle, following the release of a slew of mixed Eurozone manufacturing and services PMI reports. Moreover, this weekend's first round of presidential voting in France continued to weigh on the major. The European currency traded 0.1 percent down at 1.0705, having touched a high of 1.0777 in the previous session, its highest since Mar. 29.  FxWirePro's Hourly Euro Strength Index stood at 42.51 (Neutral) by 0900 GMT. The supply zone is at 1.07775 (61.8% retracement of 1.09058 and 1.05694) and any violation above will take the pair till 1.08288/1.08735. On the lower side, psychological support and 100 -EMA stands at 1.0700 and any break below targets 1.06455 (61.8% retracement of 1.05694 and 1.0777)/1.06000.

USD/JPY: The dollar declined, pulling away from a 1-week high touched in the previous session, as cautious tone ahead of the first round of the French presidential elections on Sunday triggered a fresh bout of risk aversion. However, U.S. Treasury Secretary Mnuchin’s positive comments on tax reforms limited the further downslide. The pair traded 0.1 percent down at 109.16, having touched a peak of 109.48 on Thursday, its highest since Apr. 12. FxWirePro's Hourly Yen Strength Index stood at -27.88 (Neutral) by 0900 GMT. Any break above 109.45 will take the pair till 109.86 (50% retracement of 111.58 and  108.13)/110.95 (23.6% retracement of 115.51 and 108.13). On the lower side, minor support is around 108.72 and any break below will drag it till 108/107.30 (161.8% retracement of 109.48 and 108.13).

GBP/USD: Sterling eased below the 1.2800 handle after weaker than expected Britain's retail sales data indicated that the UK consumer spending dropped sharply last month. The economy's retail sales volumes contracted 1.4 percent in the first quarter following a 0.8 percent rise in the last three months of 2016. Sterling trades 0.2 percent down at 1.27988, having hit a high of 1.2901 earlier in the week, its highest since Oct. 3. FxWirePro's Hourly Sterling Strength Index stood at 47.59 (Neutral) by 0900 GMT. On the lower side, the pair downside remains capped by 23.6% retracement of 1.23650 and 1.29018 at 1.2768 and any break below will drag the pair down till 1.2700/1.2630 (200 –day MA)/1.2490 (100- day EMA). Any break above 1.2900 will take the pair till 1.3000. Against the euro, the pound traded 0.1 percent down at 83.68 pence, having hit a high of 82.99 on Tuesday, its strongest since July 22.

USD/CHF: The Swiss franc steadied after falling to an intra-day low of 0.9999, as investors eyed for results of the first round of a tightly-fought French presidential election. The major traded flat at 0.9984, having touched a low of 0.9940 in the previous session, its weakest since Mar. 29. FxWirePro's Hourly Swiss Franc Strength Index stood at 78.71 (Slightly Bullish) by 1000 GMT. The minor resistance is around 1.000 and any break above 1.0024 will take the pair till 1.00489 (61.8% retracement of 1.0107 and 0.99409)/1.0120/1.0170. The near term support is around 0.9940 (200- MA) and any break below will drag it down till 0.9925 (61.8% retracement of 1.0107 and 0.98135)/0.9860.

AUD/USD: The Australian dollar reversed early gains following broad-based greenback recovery led by the US Treasury Secretary Mnuchin's optimistic remarks on tax reforms. Moreover, weak trading sentiment surrounding European shares undermined the bid tone behind the major. The Aussie trades down at 0.7521, having hit a low of 0.7491 on Wednesday, it’s lowest since Apr. 12. FxWirePro's Hourly Aussie Strength Index stood at -56.36 (Bearish) by 1000 GMT. On the lower side, any break below 0.7450 confirms minor weakness, a decline till 0.7380/0.7325 likely. The major resistance is around 0.7584 (55- EMA) and a break above will take the pair till 07650/0.7680/0.7745.

Equities Recap

European shares declined in early trade, while the euro eased to a 3-day low as investors anxiously awaited the first round of the French presidential election over the weekend.

The pan-European STOXX 600 index tumbled 0.15 percent to 377.45 points, while the FTSEurofirst 300 index slumped 0.2 percent to 1,481.02 points.

Britain's FTSE 100 trades 0.18 percent down at 7,105.79 points, while mid-cap FTSE 250 lost 0.07 percent to 19,364.61 points.

Germany's DAX fell 0.1 percent at 12,012.73 points; France's CAC 40 trades 0.9 percent lower at 5,030.08 points.

Tokyo's Nikkei rallied 1.03 percent to 18,620.75 points, Australia's S&P/ASX 200 index rose 0.66 percent to 5,860.75 points. South Korea's KOSPI gained 0.74 percent to 2,165.04 points.

Shanghai composite index edged up 0.03 percent to 3,173.15 points, while CSI300 index surged 0.2 percent to 3,466.79 points. Hong Kong’s Hang Seng shed 0.1 percent to 24,042.02 points.

Commodities Recap

Crude oil prices declined, extending losses for the fifth straight session and were set for the biggest weekly fall in a month, as doubts that an OPEC-led production cut will restore balance to an oversupplied market weighed on investor sentiment. International benchmark Brent crude was trading 0.2 percent down at $52.88 per barrel by 0905 GMT, having hit a low of $52.56 on Wednesday, its weakest since Mar. 30. U.S. West Texas Intermediate fell 0.2 percent at $50.62 a barrel, after declining as low as $50.06 on Wednesday, its lowest since Apr. 4.

Gold prices edged up, recovering from a 1-week low touched earlier in the week, as the upcoming French presidential elections underpinned the safe-haven demand. Spot gold was trading 0.1 percent up at $1,281.09 per ounce by 0920 GMT, pulling away from a low of $1273.90 per ounce hit on Wednesday, its lowest since Apr. 12, however, was on track for its first weekly drop in six. U.S. gold futures slipped 0.2 percent at $1,281.40.

Treasuries Recap

The U.S. Treasuries remained mixed after Treasury Secretary Mnuchin’s comments that the US administration will unveil a tax reform plan “very soon” and expects it to be approved by Congress this year. The yield on the benchmark 10-year Treasury traded flat at 2.24 percent, the super-long 30-year bond yields rose 1/2 basis point to 2.89 percent while the yield on short-term 2-year note traded 1/2 basis point lower at 1.19 percent.

The UK gilts jumped after reading the worse-than-expected March retail sales data. The yield on the benchmark 10-year gilts, slumped 3 basis points to 1.04 percent, the super-long 30-year bond yields plunged 2-1/2 basis points to 1.64 percent while the yield on the short-term 2-year traded 2 basis points lower at 0.10 percent.

The German bunds gained, following a lower reading of the country’s manufacturing and composite PMI. The yield on the benchmark 10-year bond, fell nearly 1 basis point to 0.24 percent, the long-term 30-year bond yields also slipped around 1 basis point to 0.95 percent and the yield on short-term 2-year bond plunged 1-1/2 basis points to -0.80 percent.

The New Zealand bonds ended the session on a timid note on rising risk sentiments of investors ahead of this weekend's first round of voting in the French presidential election. Also, the country’s inflation rose to a 5-year high, which further waned investors from safe-haven assets. At the time of closing, the yield on the benchmark 10-year bond, jumped 2 basis points to 2.99 percent, the yield on 7-year note also surged 2 basis points to 2.70 percent and the yield on the short-term 2-year note too traded 2 basis points higher at 2.12 percent.

The Australian government bonds slumped as investors cashed in profits on the last trading day of the week amid geopolitical tensions that were offset by a more positive market reaction to the sudden announcement of the United Kingdom’s snap election, to be held on June 8. The yield on the benchmark 10-year Treasury note, jumped over 3-1/2 basis points to 2.55 percent, the yield on 15-year note also climbed over 3-1/2 basis points to 2.96 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 1.67 percent.

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Support and resistance levels

EUR/USD
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Jun 29 at 9:08 UTC