Will UK CPI data drive cable even lower?; USDJPY still skyrockets ahead of Japanese CPI; China GDP may help AUDUSD exit from trading range
XM Group | 36 days ago

UK CPI data --> GBPUSD

Inflation in the United Kingdom dropped to 3.4% in February, and experts predict that it will fall to    3.1% in March. It is anticipated that the core figure will likewise fall once more. On Friday, eyes will be on the March retail sales figures to see if spending is increasing.

Currently, cable is trading higher after the strong sell-off on Friday, penetrating the long-term sideways channel to the downside. Incoming data might potentially lead to a decline in price if it indicates that the Bank of England is still planning to begin cutting rates in August, even while the Fed’s timeframe has begun to move to September. More losses may take the pair towards the 1.2370 support level, registered on November 17. Notably, the pair is holding beneath the simple moving averages (SMAs) and the technical oscillators are moving in oversold territories.

Japan CPI data --> USDJPY

Japanese inflation rose dramatically in February following a year-long drop. Core CPI, which excludes fresh food, climbed to 2.8% from 2.0%. While total CPI may have increased slightly, the core figure, released on Friday, is expected to fall to 2.6%, remaining above the Bank of Japan's 2% objective. Governor Ueda has hinted that the Bank of Japan may raise rates again at the end of the year.

In FX markets, USDJPY is creating higher highs over the last four days, touching today a fresh 34-year peak of 153.85 today. The extension of this aggressive rally may boost the market towards the 161.8% Fibonacci extension level of the downward wave from 151.95 to 140.20 at 159.15 but first traders need to be cautious about the psychological numbers of 154.00, 155.00. Any downside retracements could lead the market until the immediate support lines of 151.95, which overlaps with the 20-day SMA and the 150.87 barrier.

China GDP --> AUDUSD

China will release its GDP figures on Tuesday as hopes for its economic recovery grow. The economy possibly grew by 1.4% quarter-on-quarter in the three months ending in March. But the markets might be more interested in the fact that the annual rate is forecast to have dropped from 5.2% to 4.6%.

AUDUSD has been developing within a trading range since mid-January, facing resistance near the 0.6635 level and support at 0.6440.  An immediate turning point for possible upside pressures may be the 0.6440 barrier, heading towards the 200-day SMA at 0.6535. However, any tumbles beneath this support could open the way for steeper decreases towards the 0.6340 bar. The technical oscillators are showing some mixed signals as the MACD is moving horizontally beneath the zero level, while the RSI is pointing slightly up in the bearish region. 

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