CFD Markets News and Forecasts — 09-04-2023

• USD/CHF has continued its back-and-forth action above 0.9040 ahead of US Inflation.
• S&P500 futures have trimmed some gains amid deepening tensions between China and Taiwan.
• Resilience in demand for core goods due to the higher labor cost index in the US might keep inflationary pressures sticky.

The USD/CHF pair is continuously trading lackluster above the critical support of 0.9036 in the early Tokyo session. The Swiss Franc asset is struggling to find any direction as investors are shifting their focus toward the release of the United States Consumer Price Index (CPI) data, which will release on Wednesday.

Meanwhile, S&P500 futures have trimmed some gains amid deepening tensions between China and Taiwan. The rising momentum of drilling around Taiwan Island by the Chinese military has stemmed caution in the market mood. Also, US equities are likely to witness volatility amid recession worries.

Jamie Dimon, CEO of JPMorgan Chase, said the recent banking turmoil due to the collapse of Silicon Valley Bank (SVB) and Signature Bank has accelerated the risk of recession in the United States, in an interview at CNN.  He further added that while the banking system is strong and sound, the recent turmoil around the financial system is “another weight on the scale” toward recession.

The US Dollar Index (DXY) is defending the 102.00 support ahead of the US Consumer Price Index (CPI) data. As per the consensus, the headline inflation will soften to 5.2% from the former release of 6.0%. Also, monthly headline CPI would decelerate to 0.3% from 0.4% reported earlier. Oil prices remained lower in March and its effect is expected to get visible in inflationary pressures.

On the other hand, core CPI that excludes oil and food prices is expected to increase to 5.6% from the former release of 5.5%. Resilience in demand for core goods due to a higher labor cost index is keeping inflationary pressures sticky. An occurrence of the same might force the Federal Reserve (Fed) to hike rates one more time in its May monetary policy meeting.

On the Swiss Franc front, Swiss markets are closed on account of Easter Monday. This week, the Swiss Franc will be guided by the Producer Price Index (PPI) data.

• USD/CAD remains pressured around intraday low after snapping four-day uptrend on opening.
• China-Taiwan tension adds strength to the geopolitical fears and allow Oil price to remain firmer.
• BoC is likely to stand pat but concerns for future moves, mixed feelings for Fed prod Loonie pair buyers.
• US CPI, BoC Governor Macklem’s speech will also be important for clear directions.

USD/CAD holds lower ground near 1.3500, snapping a four-day winning streak, as traders brace for the key data/events amid the Easter Monday holidays in major bourses. That said, the Loonie pair’s latest weakness could be linked to the firmer price of Canada’s main export item, namely WTI crude oil. However, the dovish bias from the Bank of Canada (BoC), versus recently spiked hawkish Fed bets, challenge the pair sellers.

WTI crude oil prices print 0.61% intraday gains near $81.00, after rising in the last three consecutive weeks. The black gold’s latest gains could be linked to the geopolitical concerns surrounding China and Taiwan. Also fueling the energy benchmark is the OPEC+ supply cut and the softer US Dollar.

That said, the US Dollar Index (DXY) dropped in the last three weeks in a row, pressured around 102.00 at the latest.

The fears of higher Fed rates versus no action from the Bank of Canada (BoC) gained momentum after the upbeat US Jobs report, versus no major positives from the Canadian jobs report for March.

As a result, the CME’s FedWatch Tool suggests 69% odds of the 0.25% rate hike in May, versus 55% before the US jobs report.

Talking about the data, Canada’s headline Net Change in Employment rose to 34.7K in March from 21.8K prior, versus 12K market consensus, whereas the Unemployment Rate reprinted 5.0% figure compared to analysts’ estimate of 5.1%. It’s worth noting, however, that the Participation Rate eased to 65.6% during the stated month from 65.7% expected and prior. Further, the Average Hourly Wages eased to 5.2% YoY in March versus 5.4% previous reading.

On the other hand, the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) rose by 236K in March, the lowest since January 2021 (considering the revisions), versus 240K expected and 326K prior. Further, the Unemployment Rate eased to 3.5% versus 3.6% prior while the Labor Force Participation Rate improved to 62.6% from 62.5%. Finally, annual wage inflation, per the Average Hourly Earnings, dropped to 4.2% from 4.6%, versus market forecasts of 4.3%. 

Amid these plays, US stock futures closed positive but the yields remain pressured ahead of the key BoC monetary policy meeting, US inflation and the Fed Minutes. Given the dovish concerns from the BoC and likely hawkish comments in the FOMC Minutes, the USD/CAD may witness further upside unless witnessing any surprises.

Technical analysis

USD/CAD portrays another failure to cross the 100-DMA, around 1.3530 by the press time, which in turn joins the bearish MACD signals and steady RSI to tease the Loonie pair sellers.

• GBP/USD is struggling in expecting its recovery above 1.2430 amid China-Taiwan tensions.
• The US Dollar Index (DXY) is putting efforts into defending its crucial support of 102.00 after a marginal correction.
• GBP/USD is expected to extend its correction to near the lower portion of the Rising Channel chart pattern.

The GBP/USD pair is hovering below 1.2430 after a recovery move from the round-level support of 1.2400 in the early Asian session. Expectations for a corrective move in the Cable look healthy as China-Taiwan tensions are deepening further. On late Sunday, the Taiwan Defence Ministry reported that they spotted 58 Chinese aircrafts, which also includes nine ships. Meanwhile, State Media reported that the Chinese military told about keeping the momentum of drilling around Taiwan Island.

The US Dollar Index (DXY) is putting efforts into defending its crucial support of 102.00 after a marginal correction. It is likely that geopolitical tensions would provide some support to the USD Index. The USD Index is likely to remain in action ahead of the release of the United States Consumer Price Index (CPI) data, which will release on Wednesday. Headline inflation is expected to soften further as oil prices remained weak in March, however, core inflation might accelerate as anticipated.

S&P500 futures are showing some gains in the early Asian session, indicating some strength in equities ahead of earnings season.

On a two-hour scale, GBP/USD is expected to extend its correction to near the lower portion of the Rising Channel chart pattern. The 20-period Exponential Moving Average (EMA) at 1.2436 is restricting upside attempts from the Pound Sterling.

Meanwhile, the Relative Strength Index (RSI) (14) is defending its downside around 40.00. A break below the same would trigger the bearish momentum.

For a downside move, the Cable needs to deliver a breakdown of the Rising Channel pattern below March 23 high at 1.2343, which will expose the asset to the round-level support of 1.2300 followed by March 14 high around 1.2200.

Alternatively, a decisive move above Friday’s high at 1.2453 will drive the asset towards April 04 high at 1.2525. A break above the latter would further drive the Cable toward the round-level resistance at 1.2600.

GBP/USD two-hour chart

• Silver price portrays a bullish chart pattern at the highest level in a year, retreats of late.
• Sustained trading beyond 200-HMA, steady RSI keeps XAG/USD buyers hopeful.
• Sellers stay off the table beyond $24.60, bulls may cross $26.00 on sustained upside beyond $25.00.

Silver price (XAG/USD) prints mild losses near $25.00 as bulls take a breather during a sluggish start of the week, mainly due to the Easter Monday holiday, after four-week uptrend. Even so, the bright metal portrays a “Bull Flag” chart pattern on the hourly play and keeps the buyers hopeful.

Adding strength to the upside bias is the absence of an overbought RSI (14), as well as the metal’s sustained trading past the 200-Hour Moving Average (HMA).

It’s worth noting, however, that the bulls need a successful break of the $25.00 round figure to confirm the bullish chart pattern, which in turn suggests, theoretically, a run-up toward $26.20.

However, April 2022 high near $26.25 and the previous yearly top surrounding $27.00 could challenge the Silver buyers afterward.

On the contrary, the XAG/USD weakness past the stated flag’s lower line, around $24.50 by the press time, defies the bullish chart pattern.

Though, the Silver bears still will have a long road to journey before retaking control as a two-week-old ascending support line and the 200-HMA, respectively near $24.30 and the $24.00 round figure, could challenge the downside moves.

Silver price: Hourly chart

Trend: Further upside expected

• NZD/USD prints mild losses after a volatile week.
• China’s heavy military drills near Taiwan Strait propel geopolitical fears despite Easter Monday holiday.
• RBNZ’s hawkish surprise fails to push back bears amid fresh boost to Fed rate hike concerns from the US NFP.
• US/China inflation numbers, FOMC minutes will be crucial to watch for clear directions.

NZD/USD begins the trading week on a back foot as it drops to 0.6250 amid geopolitical fears emanating from China and Taiwan. Adding strength to the Kiwi pair’s downside move could be the recently firmer hawkish Fed bets. However, the Reserve Bank of New Zealand’s (RBNZ) 0.50% rate hike and cautious mood ahead of this week’s key data/events, as well as the Easter Monday holiday, put a floor under the prices.

Taiwan President Tsai Ing-wen’s US visit triggered the US-China woes as Beijing conducts strong military drills near Taiwan Strait. “China's military simulated precision strikes against Taiwan in a second day of drills around the island on Sunday, with the island's defense ministry reporting multiple air force sorties and that it was monitoring China's missile forces,” reported Reuters.

On the other hand, Friday’s upbeat US employment data renewed hawkish Fed bets. However, the market participants also expect a rate cut in late 2023 and hence pour cold water on the face of the NZD/USD bears. That said, the CME’s FedWatch Tool suggests 69% odds of the 0.25% rate hike in May, versus 55% before the US jobs report.

On Friday, the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) rose by 236K in March, the lowest since January 2021 (considering the revisions), versus 240K expected and 326K prior. Further, the Unemployment Rate eased to 3.5% versus 3.6% prior while the Labor Force Participation Rate improved to 62.6% from 62.5%. Finally, annual wage inflation, per the Average Hourly Earnings, dropped to 4.2% from 4.6%, versus market forecasts of 4.3%. 

It should be noted that the RBNZ’s hawkish surprise and the downbeat US Treasury bond yields, as well as fears of the US recession, weigh on the US Dollar and tease the Kiwi pair buyers ahead of the key catalysts.

Moving forward, the Easter Monday holiday in major markets could restrict NZD/USD moves despite the aforementioned price-negative catalysts. That said, Consumer Price Index (CPI) data from the US and China will join the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes to direct short-term NZD/USD moves. It’s worth noting that any more escalation in the geopolitical fears won’t hesitate to portray the pair’s slump towards the 0.6200 round figure.

Technical analysis

NZD/USD breaks a one-month-old ascending support line, now immediate resistance around 0.6265, but the 21-DMA support of 0.6245 tests the Kiwi pair sellers.

• Gold price has recovered its opening sell-off and has scaled back above the $2,000.00 resistance.
• Rock-bottom US Unemployment Rate has recuperated expectations of a consecutive 25 bps rate hike from the Fed.
• Solidifying expectations of one more rate hike from the Fed pushed US Treasury yields higher.

Gold price (XAU/USD) witnessed an intense selling interest at open but showed a decent recovery amid the presence of responsive buyers at lower levels. The precious metal dropped firmly below the psychological support of $2,000.00 as chances for one more 25 basis points (bps) rate hike have soared significantly but have managed to recuperate losses and have scaled back above the $2,000.00 resistance. The CME Fedwatch tool shows a sudden increase in chances of a 25 bp rate hike by more than 65%.

Rock-bottom Unemployment Rate in the United States economy has recuperated expectations of a consecutive 25 bps rate hike from the Federal Reserve (Fed). The jobless rate landed at 3.5% on Friday, lower than the expectations and the former release of 3.6%. Meanwhile, the US Nonfarm Payrolls (NFP) data remained subdued as the US economy added mildly lower employment in March at 236k than the consensus of 240K.

Analysts at Wells Fargo pointed out this is the type of employee report they believe the Fed wants to see: job growth slowing in an orderly fashion, labor supply expanding, and wage growth that is edging closer to rates that are consistent with the central bank's 2% inflation target. They expected another rate hike by 25 bps in May, probably the last one.

Meanwhile, S&P500 futures have continued positive moves further, shown late Friday, on hopes that the Fed is approaching terminal rate quickly. The US Dollar Index (DXY) has shown a marginal correction but is managing to sustain above 102.00. Solidifying expectations of one more rate hike from the Fed pushed US Treasury yields higher. The yields offered on 10-year US government bonds jumped above 3.41%.

Gold technical analysis

Gold price is auctioning in a Rising Channel chart pattern on an hourly scale in which corrections are considered as buying opportunities by the market participants. The yellow metal is making efforts in keeping itself above the $2,000.00 resistance.

The 20-and 50-period Exponential Moving Averages (EMAs) are on the verge of delivering a bearish crossover of around $2,011.50.

Also, the Relative Strength Index (RSI) (14) is expected to skid below 40.00, which would result in a bearish momentum.

Gold hourly chart

• EUR/USD remains sidelined after three-week uptrend, bulls run out of steam of late.
• US employment data renew hawkish Fed bets but mixed details check Euro bulls.
• ECB remains hawkish despite cautious mood ahead of the key US data/events.
• US-China tension, US inflation and FOMC minutes will be crucial for clear directions, Easter Monday holiday to limit intraday moves.

EUR/USD seesaws around 1.0900 during a sluggish start to the key week amid Easter Holiday. Apart from the holidays, recently mixed concerns about the Federal Reserve’s (Fed) next move, as well as the European Central Bank’s (ECB) rate hike concerns also weigh on the Euro pair.

Hawkish bets on the Fed’s 0.25% rate hike increased after upbeat US employment data for March. However, the market participants also expect a rate cut in late 2023 and hence pour cold water on the face of the Fed hawks, which in turn please the EUR/USD bulls.

That said, the US Bureau of Labor Statistics (BLS) revealed that Nonfarm Payrolls (NFP) rose by 236K in March, the lowest since January 2021 (considering the revisions), versus 240K expected and 326K prior. Further, the Unemployment Rate eased to 3.5% versus 3.6% prior while the Labor Force Participation Rate improved to 62.6% from 62.5%. Finally, annual wage inflation, per the Average Hourly Earnings, dropped to 4.2% from 4.6%, versus market forecasts of 4.3%. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.

The downbeat US data also propels fears of a recession in the world’s largest economy and weigh on the US Dollar, as well as fuels the EUR/USD price. As per the latest research, the Federal Reserve’s (Fed) preferred gauge of economic health backed the recession woes, via bond market clues. Reuters said, “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction.”

At home, upbeat German inflation clues and PMI data, as well as mostly firmer statistics from the Eurozone, allowed the ECB hawks to keep the reins and suggest further rate increases from the region’s central bank, which in turn propel the EUR/USD prices.

On a different page, China’s military drills near Taiwan Strait escalates US-China tension and allow the US Dollar sellers to take a breather after the US Dollar Index (DXY) posted a three-week downtrend.

While the fresh hawkish bets on the Fed and upbeat US data, as well as geopolitical woes, can pause the US Dollar weakness, the EUR/USD bears are far from the table and needs more clues to extend the upward trajectory amid the Easter Monday holidays.

Technical analysis

A 12-day-old rising wedge bearish chart formation, currently around 1.0860 and 1.1000, keeps EUR/USD bears hopeful.

US-China tension escalates after Taiwan President Tsai Ing-wen returned from a brief visit to the United States.

“China's military simulated precision strikes against Taiwan in a second day of drills around the island on Sunday, with the island's defense ministry reporting multiple air force sorties and that it was monitoring China's missile forces,” reported Reuters.

Key details

Market implications

The news should weigh on risk appetite and the AUD/USD prices amid a likely dull day due to the Easter Monday holiday in multiple markets. That said, the Aussie pair remains pressured around a two-week low, at 0.6665 by the press time of early Monday morning in Asia.

• AUD/USD is oscillating around 0.6660 as investors are still digesting the US Employment data.
• S&P500 settled the week with marginal gains as investors were anxious about US NFP data, which portrayed a quiet market mood.
• Chinese annual inflation is expected to soften to 0.1% vs. 1.0%, indicating bleak demand from households.

The AUD/USD pair continuously trading sideways around 0.6660 in the Asian session. The Aussie asset is likely to continue the lackluster performance amid an extended weekend led by Easter Monday celebrations in Australia. While investors are expected to discount sluggish United States Employment data released on Friday.

S&P500 futures settled the week with marginal gains as investors were anxious about US Nonfarm Payrolls (NFP) data, portrayed a quiet market mood. The US Dollar Index (DXY) remained sideways around 102.00 after US NFP-inspired volatility as investors are required to scrutiny the entire US employment gamut for further action.

The US economy added 236K jobs in March, marginally lower than the expectations of 240K and critical lower than the prior release of 326K. The Unemployment Rate trimmed further to 3.5% from the consensus and the former release of 3.6%. Lower additions of fresh payrolls indicate that more rate from the Federal Reserve (Fed) are restricting firms to tap advances for expansion, which is impacting the demand for labor further.

Average Hourly Earnings were trimmed to 4.2% vs. the estimates of 4.3% and the former release of 4.6%. However, on a monthly basis, the labor cost index improved to 0.3% from the prior release of 0.2% but remained in line with expectations, which indicates that higher employment bills could continue to keep inflationary pressures at elevated levels.

Going forward, Chinese Consumer Price Index (CPI) data will be the key highlight. The annual inflation data is expected to soften dramatically to 0.1% from the former release of 1.0%, which indicates bleak demand from households. This might impact the economic outlook of China as the economy is struggling to show stellar recovery despite re-opening of the economy.

It is worth noting that Australia is the leading trading partner of China and lower households demand in China would impact the Australian Dollar.