09-APR-2019, TUESDAY

1) EUR/USD Gains Undermined by EU-US Trade War Fears
2) USDCAD Now Rests At Key Technical Support After Dipping
3) Gold Prices Rise but Technical Topping Signs Remain Intact
4) Crude Oil Prices Rise to Five-Month High on Libya Tensions

1) EUR/USD Gains Undermined by EU-US Trade War Fears

EUR/USD fell in early Asia Tuesday trade after the Office of the United States Trade Representative (USTR) proposed levying tariffs on European products. This is to be a countermeasure after the WTO repeatedly found that EU subsidies to Airbus, a major commercial aircraft producer, “have caused adverse effects to the United States”. This is another warning sign that US-EU trade tensions are re-igniting. The Euro gave up some gains from earlier in the day as the US Dollar underperformed against its major counterparts on Monday, weakening in the aftermath of a mixed local jobs report from Friday. Accompanying increased jobs gains were a disappointment in wage growth and labor force participation data. It traded broadly lower with falling front-end government bond prices, especially in the latter half of the day.

2) USDCAD Now Rests At Key Technical Support After Dipping

CAD is gaining ground today with the CXY Canadian Dollar Index advancing 0.59 percent. Consequently, USDCAD is being weighed down as the Canadian economy generally benefits from higher energy prices. USDCAD now trades around the 1.3310 price which appears to be a key level of support. If the currency pair fails to base at this area of confluence, additional downside risk could be on the table. USDCAD has held this price level for the most part, however, with the 38.2 percent Fibonacci retracement line proving support. Also, spot USDCAD rebounded slightly after touching its 100-day EMA while the bullish channel remains intact. Although, USDCAD weakness could be exacerbated if crude oil prices continue to rise. The currency pair has developed a short-term downtrend from the string of lower highs recorded throughout March which could hinder further advances. If spot prices fall below current support, forex traders will likely eye the 50.0 percent retracement line as the next possible area for USDCAD to base. That being said, event risk posed by the Fed meeting minutes due for release Wednesday – language that is interpreted as more dovish than expected could send spot USDCAD plunging to the 1.3220 level where the 61.8 percent Fibonacci retracement line and rising trendline support meet.

3) Gold Prices Rise but Technical Topping Signs Remain Intact

Gold prices rose as the US Dollar weakened yesterday, in a move that seemed to reflect the dovish implications of a surprise drop in wage inflation reported Friday on Fed policy bets. Looking ahead, the spotlight turns to an updated edition of the IMF World Economic Outlook (WEO). The fund has launched its annual spring meeting alongside the World Bank and this release will set the stage. A downbeat tone echoing recent deterioration in global growth may sour risk appetite. This might weigh on bond yields and stoke haven demand for the US Dollar, offering conflicting cues to gold prices. The relative potency of these forces relative to each other is likely to shape price action. Traders may withhold conviction altogether as minutes from last month’s FOMC meeting loom ahead. Gold prices bounced to retest resistance in the 1303.70-09.12 but the outlines of a choppy Head and Shoulders (H&S) top remain intact. The outer bound of the latest series of lower highs is now at 1313.45, with a daily close above that likely needed to neutralize near-term bearish cues. The next upside threshold is at 1326.30. Alternatively, confirmation of the H&S setup on break below its neckline – now at 1283.41 – sets the stage for a test of trend line support set from August 2018. This is currently at 1256.73.

4) Crude Oil Prices Rise to Five-Month High on Libya Tensions

Crude Oil prices rose as on-going tensions in Libya drove supply disruption fears. The response from pro-cyclical oil prices may be more straight-forwardly negative. Separately, the EIA short-term energy outlook and API inventory flow data will hit the wires. The latter will be judged against bets on a 2.48-million-barrel inflow. The former put output at a record 12.3mb/d in 2019 last month. Crude Oil prices rose to a five-month high to challenge support-turned-resistance in the 63.59-64.88 zone. This is swiftly followed by the 66.09-67.03 inflection area. A turn lower from here eyes rising trend line support set from late December. The outer layer of that barrier is now at 59.79, with a daily close above below that initially targets the 57.24-88 region.