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Calm start expected for European session

US stocks rallied last night as investors' risk appetite increased. 

The tech sector bounced back after a report stated President Trump won’t be taking any action against Amazon. The online retailer came under attack from the US president as he stated it was ‘scamming’ the US postal service out of billions of dollars. The tech sector has had a tough time lately, but the sentiment is now turning.

Even if the heat is taken off Amazon, the trade war between the US and China is still bubbling away in the background. Beijing were measured in their response in relation to the tariffs, and now the ball is in Donald Trump’s court. Trade disputes aren’t solved quickly so it is likely to be in the headlines for some time. President Trump is known not to back down from a fight, and he is determined to put ‘America first’. Protectionist policies may work with some voters, but they are unpopular with the markets – they tend to send stocks lower. Even though trade wars can cause economic uncertainty, we could see a firmer US dollar as tariffs could provide inflationary pressure.

Traders will be carefully watching the eurozone inflation report this morning, and economists are expecting a reading of 1.4%, up from 1.1% in February. The cost of living in the eurozone has been sliding, and a move from 1.1% to 1.4% would be a significant jump. The core inflation rate is tipped to increase to 1.1% from 1% - which suggests the anticipated rise in demand isn’t actually that high. The cost of living in the currency bloc has been relatively weak, and the report is likely to give the market an indication as to what the future policy of the European Central Bank (ECB) will be. The ECB has a bond buying scheme in place until September, and dealers will be taking their cues from the CPI data.

The ADP employment report will be in focus this afternoon, and traders are expecting a reading of 208,000. Economists have stated the US economy needs to keep adding at least 200,000 jobs per month in order to keep expanding. The report will lay the groundwork for the US jobs report on Friday.  

EUR/USD – has been broadly pushing higher over the past month and resistance may come into play at 1.2476, and a move beyond that might put 1.25000 on the radar. Support might be found at 1.2239 or 1.2154. 

GBP/USD – continues to be in the same upward trend that it has been in over the past year, and should the rally continue, it could target 1.4244. While a pullback may find support in the 1.3900 region.

EUR/GBP – has been losing ground for nearly one month, and while it remains below the 0.8800 mark, the bearish move is likely to continue. Support might come into play at 0.8667. A break above 0.8800 might put 0.8891 (the 200-day moving average) on the radar. 

USD/JPY – has been in a downward trend since November, and if the bearish moves continues it could target 104.63. Rallies may encounter resistance at 108.00 or 109.78.

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