The FOMC Meeting minutes were released yesterday showing that the March 17 meeting contained a serious discussion on rates and inflation. The minutes noted that rates implied by interest rate futures maturing over the next several years rose notably over the intermeeting period, reportedly reflecting a reassessment by market participants of the expected path of the target range for the federal funds rate. The economy remains far from the Fed's goals and it would be some time before substantial further progress on reaching those goals is achieved. The labour market conditions improved in January and February, but employment was still well below its level at the start of 2020 and the concentration of job losses among lower-wage workers since early last year had resulted in outsized increases in average hourly earnings and compensation per hour that were not indicative of tight labour market conditions. Consumer spending appeared to be increasing in the first quarter at a pace considerably faster, on balance, than in the fourth quarter of last year. Incoming data on inflation was a little above what the staff had expected. The 12-month changes in total and core PCE prices were expected to transitorily move above 2 percent in coming months, as the low inflation readings from the spring of last year dropped out of the calculation window. Thus inflation is forecast to be temporarily boosted this year by the expected emergence of some production bottlenecks and supply constraints. The minutes also noted that the uncertain course from the emergence of more contagious strains of the coronavirus was still viewed as tilting the risks to the economic outlook to the downside. The disorderly conditions in Treasury markets or a persistent rise in yields that could jeopardize progress toward the Committee's goals were seen as cause for concern. But most participants noted that they viewed the risks to the outlook for inflation as broadly balanced, while several remarked that supply disruptions and strong demand could push up price inflation more than anticipated. Various participants also noted that changes in the path of policy should be based primarily on observed outcomes rather than forecasts. A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. Markets took the minutes as positive and have moved higher in risk on mode since yesterday evening. The Japanese 225 has closed lower by -0.07%. The Hang Seng traded up 1.01% while the Shanghai Composite traded higher by 0.4%. Gold is trading at 1743.80 while USDJPY is trading at 109.620. 

Today the ECB Meeting minutes will be released in the afternoon. US Unemployment Claims are expected to come in at 682K from 719K last week. FED Chair Powell is due to participate in a panel discussion about the global economy at a virtual International Monetary Fund Seminar.


The USDJPY has moved higher after the trend line was broken around the 104.350 area in January. Price pushed back up through 109.000 last month and is now trading around 109.587. The run higher has now extended up to 110.960. Support may be seen around 109.500 and 109.365. The 108.500 area may be supportive followed by 108.400, 108.000 and the 107.060/107.000 area. The 106.225 area may act as support in the event of a deeper pullback, followed by 106.000 and 105.700. Price has now bounced up above the November high and is attempting to turn this level to support at 105.680. The 105.000/104.925 area may also be supportive followed by 104.350. The trend line is today just below the 104.000 round number and the 103.330 area may act as potential supports. A retest on the trend line at 103.600 cannot be ruled out. The 102.900/102.800 area may also provide some support on a break of 103.000 followed by the 102.500. This is in turn followed by potential support at 102.275. The 102.000 level may be used in price break these potential support with a view to testing down into 101.000.

In the short term, the 111.000 area is being tested as resistance after price broke the 109.365 area. The 110.000 round number may provide further resistance followed by 110.420. A rally above the 111.000 level may seek to take price up to engage the 111.500 area of resistance which is followed by the 111.800 area. This area is followed by 112.000, with a breakout to the high at 112.227 potentially on the cards if this level is breeched. The lower high at 111.700 may also act as resistance. 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. 


The EURGBP pair has moved back up through the broken falling trend line. The pair broke down from the March high at the 0.9500 level and is currently trading around 0.8628 after finding support at 0.8472 this week. The pair tested 0.9292 in December and has created lower highs at 0.9230 and 0.9217. The trend line is at 0.8500 today and may be used as support after price has crisscrossed the line in recent days. Resistance may be seen at the 0.8664 area. Below this level, the 0.8600 area may be supportive again, followed by 0.8583, 0.8500 and the 0.8450 area. The low at 0.8276, from December 2019, and then the 0.8250 level may also be used as potential support for the pair. 

Resistance may form at 0.8640, followed by 0.8670 with a break back above 0.8700 potentially setting up a short squeeze scenario. Previous resistance may be encountered at 0.8740 followed by 0.8800. Further resistance be used at 0.8866 or 0.8900/0.8930 followed by the 0.9000 round number level in the event of a retracement higher. Above this 0.9050/0.9065 may provide resistance followed by 0.9084 area. The area above 0.9100 may continue to offer resistance, with a focus on 0.9150 followed by 0.9177. The 0.9200 round number may provide further resistance followed by the 0.9235 area. A move back higher from there targets the 0.9250 area, followed by the higher high at 0.9275. Above this area, the 0.9290/0.9300 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. 

Philip Konchar

Core Spreads

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