USDJPY and EURGBP

After failing to agree on more economic stimulus measures to support the economy through the Covid-19 crisis, EU Finance Ministers are set to meet again today. The Eurogroup talks went on for 16 hours on Tuesday but failed to reach a final agreement. The talks centred on a proposed aid package using the European Stability Mechanism bailout fund to provide cash worth up to 2% of a country’s economic output or €240B in total for the Eurozone. The talks did result in agreement on giving the European Investment Bank guarantees that would boost it’s lending by an additional €200B to struggling firms, a proposal the EU borrow €100B to subsidise wages and that an EU recovery fund is needed. A number of reports are emerging of plans by some governments to extend the lockdowns in their countries beyond the initial dates that were first reported. The UK’s Government Ministers are meeting to consider rolling the lockdown on for another 3 week period. With PM Boris Johnson still in intensive care, Foreign Secretary Dominic Raab will chair a Cobra emergency committee later today where he will discuss the lockdown measures with leaders of the devolved nations. The initial shut in reaches the 3 week mark on Easter Monday, the 13th, review of the measures must occur, by law, by the 16th at the latest. Singapore is also considering taking stricter measures after recent rises in locally transmitted cases, with 142 new cases reported yesterday. New measures were announced on Tuesday that shutdown all but businesses providing essential services, such as food, utilities and healthcare. Schools have moved online but PM Lee is still concerned that there are too many public gatherings. Aichi Prefecture in Japan will declare a state of emergency tomorrow, urging people to stay home. The prefecture is home to global Auto maker Toyoto. Japanese auto maker Nissan is seeking a ¥500 billion credit line from banks as it struggles with the fallout from the outbreak. After what appeared to be a fall in the number of reported new daily cases in Germany over the weekend, case numbers are rising again since Monday. Cases in the country peaked at 6,174 last Friday and fell to 3,677 on Monday but have increased each day since and have been reported at 4,974 this morning. The total cases in Germany stand at 108,202 but 46,300 people have recovered. Italy is also contemplating the extension of its lockdown for another two weeks. Markets are in risk mode once again as equity futures moved higher overnight. The Japanese 225 has closed lower by 0.4% as Japan prepares to declare a state of emergency. European Futures are also pointing higher ahead of the release of US Unemployment Claims this afternoon.

Eurogroup Meetings are set to reconvene today. OPEC is meeting to discuss Oil prices and productions levels today also. In the afternoon, US Unemployment Claims are expected to reach 5.0M from a reading of 6.648M last week. The Canadian Unemployment Rate is expected to come in at 7.4% from 5.6% previously. US FED Chair Powell is due to speak later in the afternoon.

USDJPY  

The USDJPY has sold off again after it found resistance at the 111.700 level with a move that took price down to 107.000 last week. The pair had made a V-shaped recovery move higher after it dramatically sold off in February. Price fell sharply but has recovered equally sharply to trade above the 110.000 level with support at 109.680. In the short term some of this move higher has been retraced and the pair is consolidating in the old range, with the 107.000 area acting as support. The 106.800 may be used as support in the event of a loss of this area. A test of this level and a failure to find support may open the way to the 106.300 area, which might lead to further selling taking hold and pushing price into the support area around the 105.800 mark followed by 105.000. The selloff in August found support at 104.450 and produced the rally to the current high at 112.228.

In the short term the 109.400 area is now acting as resistance, with the 109.500 area above it. A consolidation above the 108.500 level may seek to take price up to engage the area around the 110.000 round number. This area has acted on price in the past and was retested as resistance in February, with a breakout to the high at 112.227. A break above this area may open the path to the pair potentially attempting to gain a foothold above this resistance and establish a base to engage the 113.000 area. A break above this level may seek to test the 114.000 level followed by the potential resistance at 115.000.

EURGBP

The EURGBP chart is showing that the pair has broken down from 0.9500 level and is currently trading around 0.8770. The pair traded up to the 0.9500 area and found resistance in March. The move lower found some support at 0.9000/0.9070, but this failed at the end of the month. Support may now be found around the 0.8750 area where price is currently engaged. A loss of this level may push price down to 0.8700 level. Support may be seen at 0.8660 followed by 0.8620/0.8600. Below this level, the 0.8500 area may be supportive again, followed by the 0.8412 area. The low at 0.8276 from December and then the 0.8250 level may also be used as potential support for the pair.

The 0.8850 area may now form as resistance going forward, ahead of 0.9000 round number. The 0.90720 area may also be resistive to any advance higher. Above this area the 0.9250 area comes into play followed by the August high around 0.9323. The current high at 0.9500 remains the level to beat for buyers. A break higher may seek to test the 0.9550/0.9560. Beyond this the potential resistance area at 0.9620 might be used ahead of the 0.9700 level. The next area of interest may be found at 0.9720, followed by 0.9750 which may also be used as resistance to any potential move higher, while above the area the 0.9800 area may further resist attempts to push price up to the 0.9900 level. The round number level may also come into play at 1.0000.

Phillip Konchar

Core Spreads

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