CFD Markets News and Forecasts — 24-03-2023

• GBP/USD is set to finish the week with gains of around 0.40%.
• Federal Reserve officials remained committed to curbing inflation to its 2% target.
• Mixed economic data in the UK, a headwind for the GBP/USD, despite expectations for a Fed rate cut in 2023.

GBP/USD finished the week on a lower note after it reached 1.234, the high of the week, but retreated as sentiment dampened. On Friday, the GBP/USD is trading at 1.2228, retracing 0.47% at the time of typing.

Fed policymakers ready to combat inflation, UK data paints a gloomy economic scenario

The US equities market prepares to end the week in positive territory despite a renewed round of turbulence. Deutsche Bank stock fell sharply on fears that the German bank could default, as shown by the Credit Default Swaps (CDS) rising 220 basis points. Although it hurt Wall Street as the session opened, investors shrugged off those fears, as they speculated the Federal Reserve (Fed) would cut rates in 2023.

Federal Reserve officials crossed wires in the session. St. Louis Fed President James Bullard noted that rates need to get to the 5.50%-5.75% range, which would require an additional 75 bps of rate hikes after the Fed’s raised rates to the 4.75%-5.00%. Earlier comments from his colleague Raphael Bostic from the Atlanta Fed said that March’s decision was not easy. “There was a lot of debate. This wasn’t a straightforward decision.”

Richmond Fed President Thomas Barkin commented that the situation in the banking sector “felt very stable by the time we got there (to the meeting). So the conditions were right to do monetary policy the way we want to do monetary policy.”

On the data front, the US economic calendar featured the S&P Global PMI improved in March, exceeding expectations and the prior’s month data. The Manufacturing Index stood in the contractionary territory. At the same time, Durable Good Orders plunged by 1% but improved compared to the last month’s reading.

The UK economic docket featured Retail Sales, which beat estimates on an annual and monthly basis, while the S&P Global PMIs were worse than foreseen. The Manufacturing PMI failed to improve, while the Services and Composite PMIs, ticked slightly down.

Catheryn Mann, a member of the Bank of England, said she voted for a 25 bps rate hike compared to a larger one because she saw signs that inflation expectations are falling.

GBP/USD Technical analysis

Given the backdrop, the GBP/USD extended its losses, boosted by a stronger US Dollar. Even though the GBP/USD hit a daily low at 1.2190, buyers could hurdle the 1.2200 mark. It should be said that failure to achieve a daily close above 1.2300 could exacerbate a fall below 1.2200, which could extend to the 20-day EMA around 1.2135. Once cleared, the 200-day EMA would be up for grabs. On the flip side, buyers reclaiming 1.2300 can pave the way to the weekly high of 1.2343.

Worsening market conditions will continue to favor the Japanese Yen, point out analysts at Rabobank. They see that banking sector strains are set to persist.

Banking risks in focus but FX moves contained

“After sustained selling of the US dollar, we are now seeing evidence of a turnaround as fears wider scale banking sector problems pick up. We have highlighted one supportive factor for EUR/USD as being the relative resilience of euro-zone banks compared to the US highlighted by the outperformance of the Euro Stoxx 600 Bank Index which is currently around unchanged on a year-to-date basis compared to more than a 20% drop for the S&P 500 equivalent.”

“Given the plunge in global yields on the back of this ongoing banking sector crisis the yen remains the most consistent performer highlighting the re-emergence of the yen’s more traditional safe-haven characteristics. We expect that to continue.”

“If confidence in European banks continues to deteriorate it seems highly likely that the correction lower in EUR/USD could have further to go. Furthermore, the broader the crisis of confidence becomes, the greater the implications for global growth and hence the higher-beta G10 FX will also suffer and the recent resilience of AUD and NZD could well start to give way.”

“The renewed banking sector risks evident in Europe today underline the potential for liquidity problems in the banking sector morphing into credit problems for sectors of the real economy. A worsening backdrop will continue to benefit the yen which remains the best performing currency in March. While this might not be a repeat of 2008 it may well rhyme in many ways.”
 

Analyst at Rabobank maintain their one and three month forecasts for the EUR/USD pair at 1.06 and 1.05 respectively, but they tweaked their six and 12-month forecast, pushing them slightly higher.

Key Quotes: 

“The greenback's safe haven quality stems from its position as the dominant currency in the global payment system. This means that crisis can trigger USD hoarding behaviour. These should have been assuaged by the Fed's announcement last weekend that it had put in place daily swap line with five other major central banks. These could run to the end of next month. In our view, this action by the Fed was instrumental in allowing EUR/USD to trend higher at the start of the week and break (temporarily) the key 1.08 resistance level. This measure, however, is unlikely to totally offset safe haven demand for the greenback if confidence in banks fall further.”

“In view of prevailing tensions we have not at this time revised our forecast of a dip in EUR/USD to 1.05 on a 3 month view, although we are clearly watching events carefully. However, have raised our 6-month forecast from EUR/USD1.03 to 1.06 which also reflects a relatively firm profile for the USD. While calmer waters in this time frame would lessen safe haven USD demand, in tune with our central view this would facilitate the pricing out of Fed rate cuts which would provide the greenback with support.”
 

Here is what you need to know for next week: 

After a week with the focus on central banks, economic data will be back at the center, surrounded by the ongoing banking crisis. The DXY finished the week lower, but looking stronger, resurfacing even as US yields tumbled, helped by a deterioration in market sentiment. 

A new market season started on March 8 with the Silicon Valley Bank collapse. In the most recent episode, more central banks decided to raise rates showing determination to bring inflation down despite banking jitters. Developments in the banking sector will continue to be critical for sentiment and monetary policy expectations. It has tightened bank credit standards, doing part of the central bank's job. Next week, central bankers will probably stay close to the recent guidance next week. 

On Wednesday, the Federal Reserve (Fed) raised rates by 25 bps as expected, signaling a dovish pace of future hikes. Initially, markets reacted by selling the US Dollar, and Wall Street cheered timidly. That day, markets heard from Fed officials for the first time since the banking system crisis. 

Wall Street finished the week with modest gains, and the VIX dropped sharply. Still, regional bank stocks remain under pressure and with the potential to damage confidence significantly. During the weekend, market participants will stay alert on potential banking news. Also, US Treasury Secretary Janet Yellen could be preparing some surprises. 

Potential movers for next week:

• Regional bank stocks 
• US Treasury Secretary Yellen
• Eurozone inflation numbers 
• US Core PCE

The DXY settled above 103.00 after testing levels under 102.00. The Greenback rebounded despite lower yields, helped by the renewed concerns. Economic data showed activity, at least before the SVC collapse, was not near a recession. US employment data still presents a tight market. Next week's data includes the Core PCE on Friday, a closely watched inflation indicator. 

EUR/USD finished the week higher, pointing lower, and momentum fading quickly. The pair dropped 200 pips from the 1.0930 area to close around 1.0750, still above the 20-week Simple Moving Average. The preliminary PMIs on Friday showed overall positive figures. The preliminary March inflation numbers next week will be critical. European Central Bank officials continued to speak about the need to do more. Expectations about more rate hikes supported the Euro, which was among the top performers. 

GBP/USD ended the week virtually flat around 1.2220, after being unable to hold above 1.2300. The Bank of England (BoE) raised the key rate as expected to 4.25% (7-2 vote). The bank could rise further if inflation does not surprise to the downside in March. Next Friday, Q4 GDP data is due. 

The Japanese Yen benefited from the decline in US yields, outperforming most of its G10 rivals. USD/JPY dropped for the fourth consecutive week, ending above 130.00, an area that seems poised to be tested again over the following sessions. 

USD/CAD reached monthly highs above 1.3800 and pulled back. Next Tuesday, the Canadian government will present the budget. January GDP will be out on Friday. 

AUD/USD's run from monthly lows ended at the daily 200-SMA near 0.6760, and now it is up to the Dollar to decide how low it goes. Australia will report Retail Sales on Tuesday and critical inflation numbers on Wednesday. Those figures could cement the decision of the Reserve Bank of Australia that will have its meeting on April 4. 

The Mexican peso was the biggest gainer among the most traded currencies, making a solid comeback after plunging during the previous two weeks. USD/MXN lost more than 2%, falling below 18.50. The Bank of Mexico will announce its decision next week. It is seen raising rates further but at a smaller pace than in February, when it hiked by 50 bps. Core inflation is finally coming down in Mexico, with the half-month print at 8.15%, down from 8.21%. 

Note to traders: Daylight saving time in Europe. On the morning of Sunday, Europe will turn the clock forward by one hour. 

• The S&P 500 and the Dow Jones edge higher while the Nasdaq 100 remains downward pressured.
• US Treasury bond yields collapsed after the Fed’s decision, as investors expect a rate cut.
• US economic data was mixed, spurred by cumulative tightening by the Fed.

US equities are trading mixed across the board due to a dampened market mood caused by a crisis with Deutsche Bank (DB) being in the spotlight. The shares of the German bank dropped 14%, while its CDS, a form of insurance against its default, skyrocketed 200 bps.

In the mid-North American session, the S&P 500 and the Dow Jones are climbing 0.10% and 0.06%, each at3951.28 and 32119.30, respectively. Contrarily the heavy-tech Nasdaq Composite is down 0.23%, at 11757.02.

S&P Global revealed that business activity in the United States (US) during March improved, above estimates and the prior month’s readings. Nonetheless, the S&P Global Manufacturing PMI was shy of expansion territory, at 49.3, but smashed estimates and February’s data.

Meanwhile, US Durable Good Orders plummeted 1%, beneath forecasts of 0.6% but exceeded the previous month’s 5% decline, reported the US Department of Commerce. Excluding transportation equipment, it remained unchanged. Albeit the report was better than January’s data, the cumulative tightening by the Federal Reserve (Fed) could begin to weigh on businesses, as traders are expecting a hard landing by the Fed.

Sector-wise, the three main drivers of Wall Street are Utilities, Consumer Staples, and Real Estate, each gaining 2.08%, 1.37%, and 1.18%. The laggards are Consumer Discretionary, Technology, and Financials, down 0.79%, 0.45%, and 0.34%.

In the FX space, the US Dollar Index (DXY) found a bid, gains 0.53%, at 103.135, despite falling US Treasury bond yields. The US 10-year Treasury bond yield falls six basis points, down at 3.372%, putting a lid on the greenback gains

Federal Reserve officials were one of the reasons that underpinned the greenback, with Bostic and Bullard saying that the US central bank needs to get inflation under control. Bullard foresees the Federal Funds Rate (FFR) to peak at around 5.50% - 5.75%, meaning policymakers are short three-quarters of percentage points. Atlanta’s Fed President Bostic said there was a “debate” in the latest FOMC meeting about raising rates. HE confirmed that signs that the banking system is solid were the main reason to pull the trigger.

S&P 500 Daily chart

What to watch

• The US Dollar Index advances for two days, forming a “morning star” candle chart pattern.
• Oscillators paint a mixed picture, though RSI could be turning bullish.
• A daily close above 103.26 will pave the DXY’s way to test 104.00

The US Dollar Index (DXY), which tracks a basket of six currencies against the US Dollar (USD), advances 1.58% after hitting a 7-week low of 101.91. At the time of writing, the DXY is trading at 103.12 after hitting a daily low of 102.50.

US Dollar Index Price action

From a daily chart perspective, the DXY is neutrally biased, as it remains above the 2023 low of 100.85. In addition, the US Dollar Index pierced the last higher-high (HH) of 105.63 and printed a YTD high at 105.88. In addition, a candlestick chart pattern, “morning star,” it’s forming, which could pave the way to test the daily Exponential Moving Averages (EMAs) sitting at around 103.782.

For a bullish resumption, the DXY must achieve a daily close above the March 22 high at 103.26. Once done, the DXY could test the confluence of the 20-day EMA and 2017 high at 103.78. If that strong resistance area is broken, the 50-day EMA at 103.97 is up for grabs, ahead of 104.00.

Otherwise, buying weakness could mean that the ongoing leg-up is a correction of a continued downtrend. That said, the US Dollar Index’s first support would be 103.00. A breach of the latter will expose the March 23 swing low at 101.91, followed by the YTD low at 100.85.

Oscillators, like the Relative Strength Index (RSI), are tracking the trend, though it remains bearish. Contrarily, the Rate of Change (RoC) shows that sellers’ momentum is waning, about to turn neutral.

US Dollar Index Daily chart

US Dollar Index Technical levels

St. Louis Federal Reserve President James Bullard said on Friday that the United States remains in a position to see disinflation in 2023. They will see if the Fed may need to react more. He sounded optimistic, by saying the he expected the Fed to be dealing more with the strong economy in the coming months and not worrying as much about financial stresses.

Bullard sees an “80% chance” that financial stress will abate, and the discussion will shift back to inflation. According to him, the other outcome with a lower probability, is a recession. He cautioned that there could be downside risks if financial stress worsens.

The probability of a global crisis from recent stress is low, said Bullard. He mentioned that the Fed will continue to monitor the situation closely and will take appropriate action if necessary.

St. Louis Fed President argued that in response to the strong economy, the terminal rate for this year was raised by 25 basis points to a range of 5% to 5.75%, taking the assumption that financial stress subsides.

Regarding the interest rate path, Bullard said the projections suggest one more rate hike that could be at the next FOMC meting or soon after.

Fed's Bullard: Swift response to bank stress allows monetary policy to focus on inflation

Gold price back at $2,000 after Fed meeting. Economists at Commerzbank expect the yellow metal to see renewed downside pressure as the market will be forced to correct its expectation of a rapid interest rate turnaround again.

Robust Swiss Gold exports to Asia in February

“Currently the market expects key rates in the US to be lowered before year’s end, which has recently lent buoyancy to the Gold price again. However, we believe that the market will be forced to correct its expectation of a rapid interest rate turnaround again. This is likely to put XAU/USD back under pressure.” 

“The fact that the price level has repercussions for physical demand should not be ignored: Swiss Gold exports indicate that demand for Gold in China and India, in February at least, was considerably higher because prices were lower then. China’s Gold imports from Hong Kong should likewise turn out to have been correspondingly robust.”

• USD/MXN drops below $18.60 even though the US Dollar remains strong.
• US economic data was mixed, with Durable Good Orders showing some strains blamed on cumulative tightening by the Fed.
• USD/MX Price Analysis: Trapped within the 50/20-day EMAs.

USD/MXN stays depressed after drawing back-to-back hammers in the daily chart and slides; looking forward to testing the daily low of 18.5160. The USD/MXN fluctuates around 18.54 after hitting a daily high of 18.7968.

USD/MXN fluctuated, as a strong US Dollar, has capped the pair’s fall

Wall Street opened the last trading day of the week with losses. Bank’s riot continues, with Deutsche Bank (DB) Credit Default Swaps (CDS), a form of insurance in the case of a DB default, skyrocketing 220 basis points. Investor’s sentiment turned pessimistic, even though financial market participants estimated rate cuts by the US Federal Reserve (Fed).

Data-wise, the United States (US) economic docket revealed that business activity in March improved, above estimates and the prior’s month readings. Nevertheless, the S&P Global Manufacturing PMI fell short of expansion territory, at 49.3, but smashed estimates and February’s data.

At the same time, US Durable Good Orders plunged 1%, below forecasts of 0.6% but above the previous month’s 5% decline, reported the US Department of Commerce. Excluding transportation equipment, it remained unchanged. Albeit the report was better than January’s data, the cumulative tightening by the Federal Reserve (Fed) could begin to weigh on businesses, as traders are expecting a hard landing by the Fed.

US Treasury bond yields continued to edge lower. The US 18-month to 3-month yield curve deepened further,  -1.28%, meaning that investors are estimating a recession in the US.

The US Dollar Index (DXY) found a bid, gains 0.60%, at 103.190, a reason that capped the USD/MXN earlier losses. Federal Reserve officials were one of the reasons that underpinned the greenback, with Bostic and Bullard saying that the US central bank needs to get inflation under control.

On the Mexican front, economic activity grew 0.6% in January from December, and 4.4% YoY from 2022, as said by INEGI. In the meantime, Banxicos’s deputy Governor Irene Espinosa noted that although inflation data is “good news,” Mexico remains in an uncertain environment. She added that Banxico’s primary concern is core inflation and that the bank would consider the Fed’s decision.

USD/MXN Technical analysis

The USD/MXN continues under heavy stress, although it has recovered some ground. The pair’s jump to its daily high at 18.7968 was short-lived, as prices retreated below the 50-day Exponential Moving Average (EMA) at 18.6677. Oscillators like the Relative Strength Index (RSI) turned flat at bullish territory, while the Rate of Change (RoC) is neutral. A bullish resumption will occur if the USD/MXN reclaims the 50-day EMA. A breach of the latter will expose the March 21 high at 18.8769 and will put into play the 100-day EMA at 18.9590. Conversely, a bearish continuation would happen, with the USD/MXN stumbling below the 18.50 area.

The greenback could be relatively stable in the near term. But an extended period of US Dollar depreciation is fast approaching, wchi should lift EUR/USD to 1.13 by the end of the year, economists at Wells Fargo report.

Eventual ECB easing to be later and more gradual than that of the Fed

“We expect ECB rate hikes will outpace those of the Fed in the near term and, with the Eurozone economy proving quite resilient, we expect eventual ECB easing to be later and more gradual than that of the Fed.”

“After the period of brief greenback stability in early 2023, we think the prospects for the Euro will brighten, and expect the EUR/USD exchange rate to reach 1.13 by the end of this year.”

Bank Of England’s (BoE) Monetary Policy Committee member Catherine Mann said on Friday, that she voted at this week’s meeting for a 25 basis point rate hike instead of a bigger increase, motivated in part by the fact that inflation expectations began to moderate, reflecting that monetary policy is having an effect. 

According to Mann, the decision on interest rates is based on financial conditions. She argued that there is more to come before tight conditions in the United Kingdom. She added that February’s retail sales numbers are pretty robust. 

On Thursday, the BoE raised its key interest rate by 25 basis points to 4.25%. The Monetary Policy Committee voted 7-2 for the decision. Two members (Swati Dhingra and Silvana Tenreyro) voted against it, preferring to maintain the rate at 4%.

Market reaction

GBP/USD is falling on Friday, trading around 1.2250, after hitting earlier levels below 1.2200. 

BoE’s Mann: Inflation expectations are very important to the outlook

Banxico's determined stance in the fight against inflation supports the Peso. However, if the recent market turmoil weighs on the outlook for the US economy, economists at Commerzbank see downside risks for MXN due to Mexico's close ties with the US.

How much support will Banxico provide?

“As soon as inflation slowly approaches its target again, Banxico should have more room for rate cuts. Nevertheless, it will probably continue to secure an attractive real interest rate. By comparison, the Fed's rate cuts threaten to take more of a toll on monetary policy credibility, so we do not see the Peso at a disadvantage against the Dollar due to rate cuts.”

“There are, of course, major risks to our forecast from the recent market turmoil. Banxico does not see major contagion risks thanks to the good capitalization of the Mexican banking sector and intends to continue to focus on the fight against inflation. However, given the close linkages with the US, it would significantly weigh on the MXN outlook if the outlook for the US economy deteriorates.”

Source: Commerzbank Research

Economists at MUFG continue to see a lower USD/JPY as the most likely scenario.

JPY strength will be more than just about the Fed

“The scale of easing now priced for this year (Dec ’23 fed funds future at 4.10%) leaves the US dollar vulnerable and we are likely to see USD/JPY trading down to the YTD lows between 127-128 relatively quickly.”

“The monthly trade data in Japan for the month of February indicated the reversal of that negative terms of trade shock is well under way in Japan. The February import bill for fuel and minerals totalled JPY 2,577bn. The peak total for imports was back in August when natural gas prices peaked with the total import bill at JPY 3,423bn.” 

“Understandably, the Fed and the drop in yields in the US is getting the attention as a key factor in pushing USD/JPY lower but the energy story will certainly add to positive JPY momentum this year.”

Bank Of England’s Monetary Policy Committee member Catherine Mann said on Friday that inflation expectations are very important to the outlook. 

Regarding inflation, Mann said that wholesale energy prices are expected to slow down the Consumer Price Index. She added that the process regarding Brexit is important for food price inflation in the United Kingdom. 

Market reaction

The Pound is rising versus Euro on Friday, but is falling against the US Dollar. GBP/USD trades above 1.2250 after testing earlier levels below 1.2200. 
 

Economists at Wells Fargo expect the Argentine Peso to suffer a substantial depreciation this year.

Explicit Argentine Peso devaluation in Q4-2023

“Argentine authorities allowed for greater Peso depreciation in 2022; however, in order to continue receiving IMF disbursements, the central bank will need to allow for an even greater pace of currency depreciation.”

“Once presidential elections are completed in October, we believe an outsized and intentional Peso devaluation will materialize, and the Argentine Peso will be the worst performing emerging market currency in 2023.”

The USD is trading broadly higher. However, economists at Scotiabank expect the greenback to turn back lower.

Markets start to think about rate cuts in the US

“Broader USD gains may extend somewhat to correct some its steady losses over the past week but there is little getting round its loss of appeal as the Fed rate cycle peak nears – and markets start to think about rate cuts in the US.” 

“Short-term, corrective USD gains driven by risk aversion will give way to more, fundamentally driven losses.”

The Bank of England raised its policy rate by 25 basis points to 4.25%. Economists at Rabobank belive that Bank rate could rise as high as 4.75% and forecast the next 25 bps hike in May.

Another 25 bps hike for the May meeting

“The BoE raised its policy rate by 25 bps to 4.25%. The vote was split 7-2-0, with external members Tenreyro and Dhingra voting for a hold.” 

“It will tighten policy further in May if price pressures persist and credit conditions permit. The shift to a meeting-by-meeting approach is not as dovish as some expected.”

“The Financial Policy Committee has judged that the UK banking system remains resilient, effectively giving the green light to this rate increase.”  

“For now, we hold on to our long-held view that Bank rate could rise as high as 4.75% with the next 25 bps hike in May. This requires that global financial stability risks remain contained.”

• Prices of the WTI adds to Thursday’s losses on Friday.
• Weekly gains appear capped near $72.00 per barrel.
• Driller Baker Hughes will report on the weekly drilling activity later.

Prices of the barrel of the American benchmark for the sweet light crude oil add to Thursday’s pullback and revisit the sub-$67.00 region at the end of the week, or 3-day lows.

WTI weaker on banking turmoil, strong dollar

In fact, banking concerns and rising jitters on a potential contagion continue to weigh on traders’ sentiment and underpin at the same time the daily retracement.

Also playing against the commodity appears the marked bounce in the greenback in combination with recent news that the Biden administration could delay until the next year its restocking of oil inventories.

Later in the session, Baker Hughes will publish its usual weekly report on US oil rig count in the week to March 24.

WTI significant levels

At the moment the barrel of WTI is down 0.94% at $68.81 and a breach of $64.41 (2023 low March 20) would aim for $61.76 (monthly low August 23 2021) and then $61.58 (monthly low May 21 2021). On the upside, the next hurdle is located at $71.63 (weekly high March 23) followed by $76.33 (55-day SMA) and finally $80.90 (monthly high March 7).

While the Yen underperformed during the global monetary tightening phase, in the view of economists at Wells Fargo, the JPY will likely outperform as tightening cycles eventually come to an end and central banks turn to easing.

Japanese Yen strength over time

“We believe the Japanese Yen can experience a strong rebound as bond yields, especially in the United States, eventually come down, and less negative yield spreads support the Japanese currency.”

“During the global tightening phase in which Japan maintained its easy monetary policy stance, the yen came under significant downside pressure. On the flip side, as the global monetary policy cycle turns to easing, we expect the Yen to be a key beneficiary and target a USD/JPY exchange rate of 127.00 by the end of this year.”

• GBP/USD retreats further from a multi-week high set on Thursday amid resurgent USD demand.
• The technical setup still supports prospects for the emergence of some dip-buying.at lower levels.
• A sustained weakness below the 50-day SMA is needed to negate the near-term positive outlook.

The GBP/USD pair comes under intense selling pressure on Friday and extends the overnight retracement slide from the vicinity of mid-1.2300s, or its highest level since February. Spot prices, however, manage to rebound a few pips from the daily low and trade above the 1.2200 mark during the early North American session, still down nearly 0.60% for the day.

A fresh wave of the global risk-aversion trade - amid lingering concerns about a full-blown banking crisis - assists the safe-haven US Dollar (USD) to build on the previous day's solid bounce from a seven-week low. Apart from this, the weaker-than-expected release of UK PMI prints for March weighs on the British Pound and further contributes to the heavily offered tone surrounding the GBP/USD pair.

That said, the Federal Reserve's hints of a pause to interest rate hikes, along with the anti-risk flow, lead to a further steep decline in the US Treasury bond yields. Furthermore, the disappointing US Durable Goods Orders act as a headwind for the USD and lend some support to the GBP/USD pair. Spot prices, meanwhile, showed some resilience below the 1.2200 resistance-turned-support.

The said handle is followed by the 50-day Simple Moving Average (SMA), currently around the 1.2150-1.2145 region, which if broken decisively might prompt some technical selling and pave the way for deeper losses. The GBP/USD pair might then accelerate the fall towards the 1.2100 mark (100-day SMA) before eventually dropping to the next relevant support near the 1.2040 horizontal zone.

On the flip side, any meaningful recovery now seems to confront an immediate hurdle near the 1.2270-1.2275 region. A sustained move beyond has the potential to push the GBP/USD pair back above the 1.2300 round figure, towards resting the multi-week high, around the 1.2340-1.2345 region touched on Thursday. Bulls might then aim to reclaim the 1.2400 mark and the YTD peak around the 1.2445-1.2450 zone.

GBP/USD daily chart

Key levels to watch

Financial market stress, central bank decisions. Economists at Commerzbank expect the US Dollar to benefit more than the Euro from the easing of global financial market stress.

What will happen to the Dollar now?

“The more the financial market stress eases, the sooner FX traders are likely to assume that the tightening of credit conditions will only be moderate. As a consequence, they will have to price in further Fed rate hikes.”

“From now on the Dollar might benefit more from the easing of the stress than the Euro.”

 St. Louis Federal Reserve president James Bullard said on Friday that the response to the bank stress was swift and appropriate, allowing the monetary policy to focus on inflation, as reported by Reuters.

Additional takeaways

"Inflation remains too high, US macro data are stronger than expected."

"Regulators can do more as needed to contain financial stress."

"Not uncommon for some firms to fail to adjust to changing financial conditions."

"Inflation expectations relatively low, a good sign for disinflation this year."

"Silicon valley bank was a very unusual case,hard-pressed to find other banks in a similar situation."

"Markets so far giving a thumbs up to Credit Suisse deal."

"People need to keep in mind that there are many macroprudential tools that can be deployed."

Market reaction

The US Dollar Index continues to trade in positive territory above 103.00 following these comments.

• S&P Global Manufacturing and Services PMIs rose more than expected in February.
• US Dollar Index clings to strong daily gains above 103.00.

The business activity in the US private sector expanded at a strengthening pace in February with the S&P Global's Composite PMI rising to 53.3 from 50.1 in January.

S&P Global Manufacturing PMI recovered to 49.3 from 47.3 in January but remained in the contraction territory. Finally, the Services PMI rose to 53.8 from 50.6, surpassing the market expectation of 50.5 by a wide margin.

Commenting on the data, "March has so far witnessed an encouraging resurgence of economic growth, with the business surveys indicating an acceleration of output to the fastest since May of last year," noted Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Regarding inflation dynamics, "there is also some concern regarding inflation, with the survey’s gauge of selling prices increasing at a faster rate in March despite lower costs feeding through the manufacturing sector," Williamson explained. "The inflationary upturn is now being led by stronger service sector price increases, linked largely to faster wage growth.”

Market reaction

These data don't seem to be having a noticeable impact on the US Dollar's performance against its peers on Friday. As of writing, the US Dollar Index was up 0.6% on the day at 103.20.

• EUR/USD adds to Thursday’s decline and approaches 1.0700.
• A deeper drop could revisit the 100-day SMA near 1.0615.

EUR/USD accelerates losses and sinks well south of 1.0800 the figure at the end of the week.

The corrective move could extend further in the near term and could put the 100-day SMA around 1.0615 back on the traders’ radar. Below the latter emerges the March low at 1.0516 (March 15).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0332.

EUR/USD daily chart

• USD/JPY continues losing ground for the third straight day and drops to a fresh multi-week low.
• A combination of factors strengthens the safe-haven JPY and exerts heavy pressure on the major.
• A strong pickup in the USD demand lends some support and helps limit losses, for the time being.
• The technical setup favours bearish traders and supports prospects for a further depreciating move.

The USD/JPY pair remains under heavy selling pressure for the third successive day and touches its lowest level since February 03, around the 129.65 region on Friday. Spot prices, however, trim a part of the intraday losses and trade just above the 130.00 psychological mark during the early North American session, still down nearly 0.50% for the day.

The Japanese Yen (JPY) draws support from data showing that an important gauge of Japan’s consumer prices rose at its fastest pace since 1982 in February. Apart from this, a fresh wave of the global risk-aversion trade, amid lingering concerns about a full-blown banking crisis and looming recession risks, provides an additional boost to the safe-haven JPY and drags the USD/JPY pair lower.

Furthermore, the narrowing of the US-Japan rate differential, led by the ongoing steep decline in the US Treasury bond yields in the wake of the Federal Reserve's hints of a pause to interest rate hikes, is seen driving flows towards the JPY. That said, a strong broad-based US Dollar (USD) rally lends some support to the USD/JPY pair and helps limit any further losses, at least for the time being.

From a technical perspective, the overnight sustained break and acceptance below the 61.8% Fibonacci retracement level of the January-March rally could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone, which, in turn, supports prospects for a further depreciating move.

Hence, any further recovery move is more likely to attract fresh sellers around the 131.00 round-figure mark. This should cap the USD/JPY pair near the 131.30 region, or the 61.8% Fibo. level. That said, some follow-through buying could trigger a short-covering move and lift spot prices to the 132.00 mark. The momentum could get extended towards the 132.50 area, or the 50% Fibo. level.

On the flip side, the daily swing low, around the 129.65 region, now seems to protect the immediate downside, below which the USD/JPY pair could fall to the 129.00 mark. The next relevant support is pegged near the 128.55-128.50 zone, below which spot prices could slide towards the 128.00 round figure and aim to challenge the YTD low, around the 127.20 region touched in January.

USD/JPY daily chart

Key levels to watch

• Silver outperforms gold on Friday, XAG/XAU ratio at one-month lows. 
• Price hit $22.50 for the first time since early February. 

Silver jumped during the last hour, climbing from $23.16 to $23.52, reaching the highest level since early February. Gold is algo rising, trading at weekly highs slightly above $2,000. 

Since the beginning of the week, XAG/USD has gained 4% and from the March 10 low, almost 20%. Price is testing a relevant technical area and a consolidation above $23.50 could keep the road to more gains clear, even as technical indicators show extreme overbought conditions. 

Friday’s rally in metals takes place amid a deterioration in market sentiment. Wall Street futures trade in negative on renewed bank concerns. At the same time, the decline in US bond yields offers support to the rally in Gold.

However, Silver is outperforming Gold on Friday and also during the week. The ratio peaked early in March and since then it trended lower. It is back at February levels. 

Silver/Gold ratio daily chart 

Technical levels 

European Central Bank President Christine Lagarde told EU leaders on Friday that the Euro area banking sector is resilient with strong capital and liquidity positions, Reuters reported citing EU officials.

Key takeaways

"Recent developments were a reminder how important it has been to continuously improve regulatory standards."

"We need to progress on completing the banking union, further work is also necessary to create truly European capital markets."

"There is no trade-off between price stability and financial stability, ECB has tools to address risks to both."

"ECB is determined to bring back inflation to 2%, will decide on future rates based on incoming data."

"ECB is fully equipped to provide liquidity to euro area financial system, if needed."

Market reaction

EUR/USD showed no immediate reaction to these remarks and was last seen losing 0.8% on the day at 1.0744.

The Dollar has been the big loser since the banking turmoil started. Economists at ING expect the EUR/USD to hit 1.15 by the end of the year.

Combination of lower Fed rate expectations and improved risk sentiment is negative for USD

“There is a possibility that we’ll see a scenario in line with current market conditions, where the US banking situation remains troublesome but doesn’t turn into a fully-fledged systemic crisis, and the Fed sticks to some ambiguous communication until a tighter financial environment hits the economy and forces large cuts.”

“In this scenario, further Dollar depreciation seems inevitable, and if the EU banking sector remains broadly shielded, stickier inflation in the Eurozone should force more hikes by the ECB and ultimately a contraction in the USD-EUR rate differentials.”

“Ultimately, EUR/USD should easily break above 1.10, and be on track to touch 1.15 by year-end.” 

• USD/CAD gains strong positive traction on Friday and draws support from a combination of factors.
• The risk-off impulse boosts the safe-haven USD and lends support amid tumbling Crude Oil prices.
• A steep fall in the US bond yields, the disappointing US Durable Goods Orders might cap the buck.

The USD/CAD pair catches aggressive bids following a brief consolidation on Friday and extends its strong rally heading into the North American session. The momentum lifts spot prices to over a one-week high, closer to the 1.3800 mark, and is sponsored by a combination of factors.

The global risk sentiment took a turn for the worst on the last day of the week amid lingering concerns over a full-blown banking crisis. Apart from this, the rather unimpressive flash PMI prints from the Eurozone and the United Kingdom (UK) revived fears of a deeper economic downturn, which, in turn, tempers investors' appetite for riskier assets. The anti-risk flow lifts demand for the safe-haven US Dollar (USD) and turns out to be a key factor acting as a tailwind for the USD/CAD pair.

Furthermore, worries that a global recession will dent fuel demand triggers a fresh bout of selling around Crude Oil prices and weighs on the commodity-linked Loonie. Apart from this, the softer-than-expected Canadian consumer inflation released on Tuesday reaffirmed expectations that the Bank of Canada (BoC) will refrain from raising interest rates any further. This further seems to undermine the Canadian Dollar and contributes to the USD/CAD pair's strong intraday rally.

With the latest leg up, spot prices now seem to have confirmed a breakout through a one-week-old trading range and seem poised to appreciate further. That said, tumbling US Treasury bond yields, led by the Federal Reserve's hints of a pause to interest rate hikes, could act as a headwind for the Greenback. This, along with the disappointing release of the US Durable Goods Orders data, might hold back bullish traders from placing aggressive bets around the USD/CAD pair.

Technical levels to watch

• DXY picks up further traction and surpasses the 103.00 mark.
• Further bounce could see the transitory 100-day SMA revisited.

DXY leaves behind Thursday’s lows in the sub-102.00 area and retakes the 103.00 mark on quite a convincing note.

The initial up-barrier comes at the temporary 55-day SMA near 103.40, while the continuation of the rebound is expected to meet another provisional resistance at the 100-day SMA at 104.37.

Looking at the broader picture, while below the 200-day SMA, today at 106.60, the outlook for the index is expected to remain negative.

DXY daily chart

• EUR/JPY drops sharply and challenges 139.00 on Friday.
• A move to the YTD low near 137.40 appears on the cards.

EUR/JPY adds to Thursday’s losses and drops markedly well below the key 200-day SMA (141.79) at the end of the week.

In case the selling pressure gathers extra steam, the cross could extedn the decline to the 2023 low at 137.38 (January 3).

In the meantime, extra losses remain in store while the cross trades below the 200-day SMA.

EUR/JPY daily chart

At the beginning of the week, crude oil was cheaper than it was last 15 months ago. Strategists at Commerzbank have lowered their oil price forecast. However, they still expect the oil price to rise in the course of this year.

Oil market to be significantly undersupplied in the second half of the year

“Even if the market turmoil subsides, the higher risk aversion sparked by it is likely to ease only gradually. Together with the fundamental data, which are unlikely to be as supportive, this suggests that the oil price will be lower in the months ahead than we have previously expected.”

“On the other hand, OPEC+ is unlikely to stand by and watch a further decline in the oil price, but rather reduce supply if necessary, which argues against a further decline in the oil price.”

“We are lowering our oil price forecast for mid-year to $80 per barrel (previously $95), which would still be higher than current levels.”

“We are sticking to our general view that the price of oil will rise. If the market stabilizes, the US government can be expected to buy oil to replenish its strategic reserves. In addition, the oil market is likely to be significantly undersupplied in the second half of the year due to a strong increase in demand, especially in China, and stagnating supply. We expect that the oil price will rise to $90 per barrel by the end of the year (previously $100).”

 Atlanta Fed President Raphael Bostic told NPR on Friday that it was not an easy decision to raise the policy rate, as reported by Reuters.

Additional takeaways

"Clear signs banking system is safe and resilient."

"Inflation still too high, Fed needed to remain focused on that."

"Comfortable Fed can navigate banking sector troubles."

"Fed has to get inflation under control."

"Not expecting economy to fall into recession."

Market reaction

These comments don't seem to be having a significant impact on the US Dollar's performance against its rivals. At the time of press, the US Dollar Index was up 0.55% on the day at 103.15.

• Durable Goods Orders in the US declined unexpectedly in February.
• US Dollar Index stays in positive territory above 103.00.

Durable Goods Orders in the US decreased by 1%, or $2.6 billion, in February to $268.4 billion, the US Census Bureau announced on Friday. This reading followed January's declined of 5% (revised from -4.5%) and came in weaker than the market expectation for an increase of 0.6%.

"Excluding transportation, new orders were virtually unchanged," the publication further read. "Excluding defense, new orders decreased 0.5 percent. Transportation equipment, also down three of the last four months, drove the decrease, $2.6 billion or 2.8 percent to $89.4 billion."

Market reaction

The US Dollar Index keeps its footing after this data and was last seen rising 0.6% on the day at 103.20.

The Bank of England (BoE) announced that it raised its policy rate by 25 basis points to 4.25%. The decision barely moved the Pound. Economists at MUFG Bank expect the GBP/USD pair to see further gains.

BoE hiked but the reasoning was less than clear

“Given the MPC guidance in February repeated yesterday that ‘if there were to be evidence of more persistent (inflation) pressures, then further tightening in monetary policy would be required’ the decision to hike is from those perspective difficult to explain.” 

“The BoE did highlight stronger than expected labour demand and due in part to the budget GDP growth was also going to be stronger. But clearly the case for tightening wasn’t compelling but the stronger CPI data overall probably forced the BoE’s hand. We see a good chance now that yesterday’s hike was the last.”

“There was not enough in the details for any abrupt shift in market expectations and there’s been minimal impact on GBP. Hence the positive momentum in GBP/USD could continue and we see scope for further gains to the upside from here given the broader less favourable backdrop for the Dollar.”

EUR losses have extended, with the EUR/USD pair dropping under the 1.08 area. Shaun Osborne, Chief FX Strategist at Scotiabank expect the low 1.07s to offer a solid floor.

Resistance aligns at 1.0825/30

“EUR losses have taken back about half of the past week’s rally and extended a bit more than I expected yesterday when noting the bearish short-term developments on the charts.”

“Look for support to firm up in the low 1.07s (55-day MA at 1.0733, 50% Fib of the EUR rally from the Mar 15th low is 1.0725).”

“Intraday resistance is 1.0825/30.” 

AUD/USD has failed to stay above the 0.6660 support, exposing the pair to further downside, economists at OCBC Bank report. 

Bulls seem to run into fatigue

“Risk sentiment remains fragile over lingering and spill over concerns to European banks. We had earlier cautioned that contagion/worries going outside of US could see risk proxies under pressure.”

“Immediate support at 0.6660 (50% fibo retracement of 2022 low to 2023 high). Break below that exposes the pair to further downside.”

“Next support at 0.6620, 0.6560 levels. Resistance at 0.6680 (21-DMA), 0.6760 (200-DMA).”

CAD slips versus USD and looks prone to more losses, economists at Scotiabank report. 

Firm USD support on moderate dip

“USD/CAD gained strongly from yesterday’s attempted push under 1.3650 support and today’s strength in the USD has taken funds above descending trend resistance off the early Mar high at 1.3725 (now support). A bullish break from what has been in effect an extended consolidation boosts upside risks for USD/CAD in the short run at the very least and puts a retest of 1.3850/60 on the radar. 

“Trend signals are bullishly aligned on the short-term oscillators, implying firm USD support on moderate dips.”

EUR/USD staged a steady bounce after defending 100-DMA at 1.0520 (now at 1.0610) but the move faltered near 1.0910. The pair must hold above this Moving Average to avoid a deeper pullback, economists at Société Générale report.

Uptrend could extend towards 1.1040/1.1080 on a break past 1.0910

“Daily MACD has entered positive territory pointing towards prevalence of upward momentum.”

“If the pair establishes itself above 1.0910, the uptrend could extend towards recent peak of 1.1040/1.1080.”

“Defending the MA at 1.0610 would be crucial for averting a deeper pullback.”

US Durable Goods Orders overview

The US Census Bureau will publish the monthly Durable Goods Orders data for February at 12:30 GMT this Friday. The report is expected to show that headline orders rose by 0.6% during the reported month, which will represent a modest rebound from the 4.5% sharp fall reported in January. Orders excluding transportation items, which tend to have a broader impact, are anticipated to register a 0.2% growth in February as compared to the 0.8% rise recorded in the previous month.

How could it affect EUR/USD?

Ahead of the key macro data, a fresh wave of the global risk-aversion trade assists the safe-haven US Dollar (USD) to gain strong follow-through traction on Friday and build on the previous day's goodish recovery from a seven-week low. This, in turn, is seen as a key factor behind the EUR/USD pair's sharp intraday slide back closer to the 1.0700 mark. A stronger US macro data might force investors to scale back their expectations for an imminent pause of the Federal Reserve's rate-hiking cycle and would be enough to provide an additional boost to the Greenback. 

Conversely, a weaker report will add to worries about a deeper global economic downturn and further take its toll on the global risk sentiment. This, in turn, suggests that the path of least resistance for the USD is to the upside and supports prospects for an extension of the EUR/USD pair's ongoing retracement slide from its highest level since February 03, around the 1.0930 region touched on Thursday.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook for the major and writes: “EUR/USD broke below the ascending regression channel and the Relative Strength Index (RSI) indicator on the four-hour chart declined slightly below 60 after having stayed in overbought territory early Thursday, suggesting that buyers have moved to the sidelines.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the downside, 1.0820 (Fibonacci 23.6% retracement of the latest uptrend, 20-period Simple Moving Average (SMA)) aligns as immediate support. In case the pair falls below that level and starts using it as resistance, the downward correction could extend toward 1.0760 (Fibonacci 38.2% retracement) and 1.0720 (50-period SMA).”

“First resistance is located at 1.0850 (static level) ahead 1.0900 (psychological level, static level) and 1.0930 (multi-week high set on Thursday),” Eren adds further.

Key Notes

 •  EUR/USD Forecast: Euro could extend correction if 1.0820 support fails

 •  EUR/USD comes under heavy pressure and breaches 1.0800

 •  EUR/USD: 1.1000 can be tested quite soon – ING

About US durable goods orders

The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. Generally speaking, a high reading is bullish for the USD.

Sterling has not escaped the corrective rebound in the USD. Cable could fall to the 1.2075/1.2125 range on a break under the 1.22 level, economists at Scotiabank report.

Loss of support at 1.2260 confers a soft look on the GBP outlook in the short run

“Short-term pressure on the GBP is moderating around the 1.22 line – minor pivot support on the intraday chart. Loss of support at 1.2260 (minor resistance intraday now ) confers a soft look on the GBP outlook in the short run, however.”

“Weakness below the 1.22 point will tip the balance of risks towards a deeper drop to the 1.2075/1.2125 range.”

We saw a Dollar rebound yesterday, but that may not last long, economists at ING report.

Yellen is the new Powell

“The most obvious symptom of how the Fed has lost its grip on the market is US Treasury secretary Janet Yellen ‘stealing’ Fed Chair Jerome Powell’s spotlight as a market driver. This happened blatantly on Wednesday when a dovish Fed hike was out-shadowed by Yellen’s backtracking on a ‘blanket’ bank deposit insurance. Yesterday, she offered some reassurance to markets in that sense, saying: ‘Certainly, we would be prepared to take additional actions if warranted’.”

“Markets seriously struggle to see the US small bank troubles being resolved without substantial support from the government. Ultimately, this continues to endorse our baseline bearish bias on the Dollar, as a situation that neither develops into a fully-fledged systemic crisis (which would be USD positive) nor significantly improves on the US regional banking side which should keep markets betting on Fed easing later this year.”

“At the moment, there are around 90 bps of cuts priced in, starting in July, and the unclear Fed communication is doing very little to reliably push back against those.”

The continuation of the downward bias in USD/CNH should meet tough contention around 6.8000 for the time being.

Key Quotes

24-hour view: “Yesterday, USD dropped to 6.8108 in Asian trade before rebounding to trade sideways for the rest of the sessions. USD appears to have moved into a consolidation phase and it is likely to trade in a range of 6.8150 and 6.8500 today.”

Next 1-3 weeks: “We have expected a weaker USD for more than a week. As USD struggled to extend its weakness, in our most recent narrative from 21 Mar (spot at 6.8800), we stated that USD ‘has to break and stay below 6.8550 in the next couple of days or it is unlikely to weaken further’. USD dropped below 6.8550 on Wednesday (22 Mar) and yesterday, it dropped further to 6.8108. While the price actions suggest USD could weaken further, any decline is expected to face strong support at 6.8000. The downside risk is intact as long as it stays below 6.8710 (‘strong resistance’ level previously at 6.9100).”

• AUD/USD comes under heavy selling pressure on Friday amid resurgent USD demand.
• Reviving recession fears weigh on investors’ sentiment and boost the safe-haven buck.
• Traders now look to the US Durable Goods Orders and flash PMIs for a fresh impetus.

The AUD/USD pair attracts fresh sellers on Friday and extends the previous day's rejection slide from over a two-week peak, around the 0.6755-0.6760 region, which coincides with a technically significant 200-day Simple Moving Average (SMA). The intraday downfall drags spot prices to over a one-week high, around the 0.6635 area during the first half of the European session and is sponsored by resurgent US Dollar (USD) demand.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, builds on the previous day's solid bounce from a seven-week low and gains strong follow-through traction amid a sharp fall in the equity markets. The disappointing release of manufacturing PMIs from the Eurozone and the UK revived worries about looming recession risks. This, in turn, takes its toll on the global risk sentiment, which forces investors to take refuge in traditional safe-haven assets, including the Greenback.

This comes on the back of data released earlier this Friday, which indicated renewed contraction in Australia's private sector business activity in February and drives flows away from the perceived riskier Aussie. In fact, the gauge for the manufacturing sector dropped to 48.7 in March from the 50.7 previous, while Services PMI came in at 48.2 during the reported month as compared to 50.7 in February. Furthermore, the Composite PMI also dropped to 48.1 in March from February's 50.6 final print.

This, along with the Reserve Bank of Australia's (RBA) dovish signal, indicating that a pause in the rate-hiking cycle may be on the cards next month, exerts additional downward pressure on the AUD/USD pair. It, however, remains to be seen if the USD bulls can maintain their dominant position amid the Fed's less hawkish outlook on Wednesday. The US central bank raised interest rates by 25 bps, as expected, though sounded cautious about the outlook in the wake of the recent turmoil in the banking sector.

This leads to a further decline in the US Treasury bond yields and could act as a headwind for the Greenback, which should help limit losses for the AUD/USD pair, at least for the time being. Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and flash PMI prints for March. This, along with the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the pair heading into the weekend.

Technical levels to watch

European Central Bank (ECB) policymaker Joachim Nagel argued on Friday that the ECB's current interest level was not high in comparison to rates of inflation in the Eurozone, as reported by Reuters.

"Wage developments are likely to prolong the prevailing period of high inflation rates," Nagel said in a lecture in Edinburgh. "In other words: Inflation will become more persistent."

"It will be necessary to raise policy rates to sufficiently restrictive levels in order to bring inflation back down to 2% in a timely manner," Nagel further added.

Market reaction

EUR/USD failed to capitalize on these hawkish comments and it was last seen losing 0.9% on the day at 1.0733.

The Bank of England (BoE) raised its key interest rate by 25 basis points. BoE has done a good job, in the opinion of Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.

BoE did not give even the slightest hint of a less hawkish approach

“The BoE has done a good job. I do not mean its monetary policy, but its communication policy. Despite its small rate step of only 25 bps it did not create the impression that its determination to fight inflation has weakened. And that is why yesterday’s BoE decision was neutral for Sterling – contrary to my expectations.”

“Contrary to the Fed, the British central bankers did not give even the slightest hint of a less hawkish approach. That is why the rate cut was not GBP negative.”

For the second time this week on Thursday, Gold price climbed above $2,000. Economists at ANZ Bank note that the yellow metal sees increasing demand on speculation about a possible pause in rate hikes by the Federal Reserve.

Gold finds support from increased interest in haven assets amid ongoing banking crisis

“The metal has one of the strongest relationships with the greenback and is highly sensitive to interest rate moves. A potential pause in interest rate hikes by the Fed is seeing investors increase their allocation to the precious metal.”

“Gold is also finding some support from increased interest in haven assets amid the ongoing banking crisis.”

“An increase in net long positions by speculators has been driven by both new longs and short covering. The inflows into gold-backed ETFs have risen sharply in recent weeks.”

• GBP/USD meets with aggressive supply on Friday and is pressured by a combination of factors.
• The risk-off impulse boosts the safe-haven USD and triggers the initial leg of the intraday slide.
• The disappointing release of the UK PMI weighs on the GBP and contributes to the downfall.

The GBP/USD pair comes under heavy selling pressure on the last day of the week and retreats further from its highest level since early February, around the 1.2340-1.2345 region touched on Thursday. The selling bias remains unabated through the first half of the European session and drags spot prices back closer to the 1.2200 mark in the last hour.

A fresh wave of the global risk-aversion trade - as depicted by a sharp intraday fall in the equity markets - assists the US Dollar (USD) to gain strong follow-through traction on Friday and build on the previous day's goodish rebound from a seven-week low. This, in turn, is seen as a key factor weighing heavily on the GBP/USD pair. The British Pound is further weighed down by the Bank of England Governor Andrew Bailey's dovish remarks and the disappointing release of the flash UK PMI prints for March.

In an interview with BBC on Friday, Bailey noted that there is evidence of encouraging progress on inflation and that companies should bear in mind that BoE forecasts inflation will fall. Furthermore, the S&P Global/CIPS UK Manufacturing PMI contracted further to 48.0 in March versus the 49.8 expected and the previous month's final reading of 49.3. Adding to this, the Preliminary UK Services Business Activity Index for March dropped to 52.8 from 53.5 in February and consensus estimates for a reading of 53.0.

With the latest leg down, the GBP/USD pair has now reversed a major part of its gains recorded over the past two sessions and has now moved well within the striking distance of the weekly low. Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and the flash PMI prints for March. This, along with the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the major.

Technical levels to watch

The Turkish central bank (CBT) surprised in the hawkish direction in some theoretical sense – the FX market was unimpressed, economists at Commerzbank report.

Approaching crucial elections

“Many observers had expected CBT to lower its benchmark rate by 50 bps yesterday. Hence, the hold decision was theoretically a hawkish surprise.”

“Still, several commentators think that a rate cut next month remains likely. Perhaps this is why the hold decision by CBT had no noticeable impact on USD/TRY.”

“We are approaching crucial elections: our base-case may be that Erdogan will hold on to the presidency, but polls suggest that he faces a genuine threat. The outlook for rates is therefore highly ‘bifurcating’ under the two competing scenarios, hence the market is justified in taking no strong position at this time.”

“Of course, all this is not to deny that the Lira’s inert response could be primarily because the currency has become increasingly disconnected from international markets as more and more capital controls have been imposed.”

• EUR/USD adds to Thursday’s losses below the 1.0800 mark.
• Flash Manufacturing PMIs in Germany and EMU disappoint in March.
• US Durable Goods Orders, advanced PMIs next on tap across the pond.

Further selling pressure now drags EUR/USD back below the 1.0800 yardstick, or 2-day lows, at the end of the week.

EUR/USD weaker post-PMIs

EUR/USD extends the pessimism in the second half of the week and retreats from recent monthly peaks north of 1.0900 the figure on the back of the moderate pick-up in the demand for the greenback, while the mixed prints from preliminary PMIs in the euro bloc also collaborate with the corrective daily decline.

On the latter, while the Services sector in the euro area remains healthy, the Manufacturing sector still struggles to find a firmer foot after preliminary readings showed the Manufacturing PMI in Germany and the broader Euroland are expected to have eased to 44.4 (from 46.3) and 47.1 (from 48.5), respectively, during March.

Later in the US data space, Durable Goods Orders for the month of February are due seconded by flash PMIs and the speech by St. Louis Fed J.Bullard.

What to look for around EUR

EUR/USD gathers further downside traction and breaks below the 1.0800 mark on the back of some profit taking mood, the dollar’s recovery and disheartening results from the domestic calendar.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB in a context still dominated by elevated inflation, although amidst dwindling recession risks for the time being.

Key events in the euro area this week: European Council Meeting, EMU, Germany Flash PMIs (Friday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is retreating 0.53% at 1.0769 and faces immediate support at 1.0732 (55-day SMA) followed by 1.0614 (100-day SMA) and finally 1.0516 (monthly low March 15). On the upside, a break above 1.0929 (monthly high March 23) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level).

• UK Manufacturing PMI contracts to 48.0 in March, a negative surprise.
• Services PMI in the UK comes in at 52.8 in March, a big miss.
• GBP/USD remains in the red near 1.2250 on disappointing UK PMIs.

more to come ...

Further decline in USD/JPY should meet initial and firm support at 130.15 ahead of 129.80, according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “Yesterday, USD dropped to a low of 130.31. The low is not far above a major support level of 130.15. While downward momentum has waned somewhat, there is potential for USD to break 130.15 today. The next support at 129.80 is unlikely to come under threat. Resistance is at 131.00, a breach of 131.40 would indicate that the weakness in USD has stabilized.”

Next 1-3 weeks: “In our most recent update from Wednesday (22 Mar, spot at 132.50), we stated that the recent USD weakness has ended. Our call was premature as USD continues to drop as it fell to a low of 130.31 yesterday. Despite the decline, short-term conditions remain severely oversold. However, there is room for USD to weaken further though there are a couple of rather solid support levels at 130.15 and 129.80. On the upside, a breach of 132.50 would suggest USD is not weakening further.”

Open interest in natural gas futures markets resumed the uptrend and rose marginally by 349 contracts on Thursday, according to preliminary readings from CME Group. On the other hand, volume dropped for the second session in a row, this time by around 96.5K contracts.

Natural Gas: Another visit to $2.00 seems just around the corner

Natural gas prices dropped for the second consecutive day on Thursday. The downtick was in tandem with a small increase in open interest, exposing the continuation of the multi-week retracement for the time being. That said, the next target of note still at the $2.00 region per MMBtu.

• NZD/USD comes under renewed selling pressure on Friday amid the ongoing USD recovery.
• A fresh leg down in the equity markets benefits the buck and weighs on the risk-sensitive Kiwi.
• The Fed’s less hawkish stance, sliding US bond yields could cap any further gains for the USD.

The NZD/USD pair extends the overnight pullback from the vicinity of the 0.6300 mark, or its highest level since February 16 and witness some follow-through selling on the last day of the week. The downward trajectory picks up pace during the first half of the European session and drags spot prices to a fresh daily low, closer to the 0.6200 round figure in the last hour.

The US Dollar (USD) is gaining positive traction for the second straight day on Friday and recovering further from a seven-week low touched the previous day, which, in turn, is seen weighing on the NZD/USD pair. As investors digest the Federal Reserve's less hawkish outlook, a fresh leg down in the equity markets drives some haven flow towards the Greenback and exerts pressure on the risk-sensitive Kiwi.

Against the backdrop of worries about a full-blown banking crisis, the disappointing release of the flash German Manufacturing PMI for March revives fears of a deeper global economic downturn. This, in turn, takes its toll on the global risk sentiment and boosts demand for traditional safe-haven assets, including the buck. That said, the Fed's hints of a pause to interest rate hikes could cap gains for the USD.

It is worth recalling that the US central bank, as was widely anticipated, raised interest rates by 25 bps on Wednesday, though sounded cautious in the wake of the recent turmoil in the banking sector. Furthermore, the Fed lowered its median forecast for real GDP growth projections for 2023 and 2024. This leads to a further decline in the US Treasury bond yields and should act as a headwind for the Greenback.

This, in turn, warrants some caution before positioning for an intraday depreciating move for the NZD/USD pair. Even from a technical perspective, the recent two-way range bound price action witnessed over the past two weeks or so also points to indecision over the next leg of a directional move. That said, repeated failures to find acceptance above the 200-day Simple Moving Average (SMA) favour bearish traders.

Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and flash PMI prints later during the early North American session. This, along with the US bond yields, might influence the USD and provide some impetus to the NZD/USD pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities on the last day of the week.

Technical levels to watch

The Hungarian Forint and the Czech Koruna has strengthened this week. Economists at ING expect this trend to continue in the coming days.

Ready to rally further

“Our bullish view on the Hungarian Forint and the Czech Koruna is materialising, benefiting all week from higher EUR/USD, reduced risk aversion and record-low gas prices.”

“We expect this trend to continue in the coming days and especially next week when the National Bank of Hungary and the Czech National Bank are both scheduled to hold meetings. Both central banks should confirm stable rates and a hawkish tone and push back against the dovish market pricing coming from the global story. In our view, this should extend the rally in the Forint and the Koruna.”

• Eurozone Manufacturing PMI arrives at 47.1 in March vs. 49.0 expected.
• Bloc’s Services PMI climbs to 55.6 in March vs. 52.5 expected.
• EUR/USD holds lower ground near 1.0775 on the mixed Eurozone PMIs.

The Eurozone manufacturing sector contraction deepened in March, the latest manufacturing activity survey from S&P Global research showed on Friday.

The Eurozone Manufacturing Purchasing Managers Index (PMI) arrived at 47.1 in March vs. 49.0 expected and 48.5 previous. The index reached a four-month low.

The bloc’s Services PMI stood at 55.6 in March vs. 52.5 estimates and February’s 52.7, hitting a 10-month high.

The S&P Global Eurozone PMI Composite jumped to 54.1 in March vs. 51.9 estimated and 52.0 last. The measure recorded a new 10-month high.

Comments from Chris Williamson, Chief Business Economist at S&P Global

“The eurozone economy is showing fresh signs of life as we enter spring, with business activity growing at its fastest rate for ten months in March.”

“The survey is consistent with GDP growth of 0.3% in the first quarter, accelerating to an equivalent rate of 0.5% in March alone.”

FX implications

EUR/USD remains pressured near 1.0775 following the release of the mixed Eurozone PMIs. The spot is losing 0.50% on the day.

• Gold price bulls come alive and push XAU/USD back above the $2,000 mark.
• US Dollar and Treasury yields fall to a new low, supporting Gold’s comeback. 
• Central banks to increase their Gold reserves due to geopolitical concerns, says report.

XAU/USD price has broken back up above the $2,000 level after dip-buying in the $1,960 vicinity on Thursday led to the start of a new leg higher for the precious metal. Falling Treasury yields and a weaker US Dollar supported Gold’s uptrend. The release of Durable Goods Orders and PMI data later on Friday could dictate the metal’s next move.  

US Dollar sinks to new monthly low before recovery

Markets tick over with no one major theme driving price action. The Dollar Index (DXY) has recovered from new monthly lows set on Thursday in the 101.90s, forming a bullish hammer candlestick on the daily chart suggestive of a reversal after March’s sharp decline. Without a strong bullish confirmation day to back it up, however, it’s still too early to say. If the US Dollar does start to reverse higher, however, it will be a negative factor for XAU/USD.

The next data release to impact the US Dollar is likely to be Durable Goods Orders on Friday, at 12:30 GMT, followed by the US Manufacturing and Services PMI at 13:45 GMT. The Federal Reserve’s James Bullard is also scheduled to speak at 13:30 GMT, and his views on inflation and the future trajectory of rates may also impact prices.

Central banks diversify into Gold

Central banks in parts of the world not aligned to the West are ‘de-Dollarising’ due to geopolitical polarization and diversifying into Gold instead, according to a recent report by French bank Société Générale. 

“The longer the Russia-Ukraine conflict endures, the faster countries not aligned with the West will be willing to isolate themselves from the USD. This will encourage central banks to continue their strong Gold purchases,” says the report. 

“The central banks of non-aligned countries should continue to de-Dollarise their portfolios and keep buying Gold (6% of our allocation, unchanged) which, at a later stage, will be backed by lower real yields,” Soc Gen adds.

Gold gently pulls back after breaking above key $2,000 level

XAU/USD trades at $1,988 at the time of writing. It is in an uptrend on a medium and short-term basis, so bullish bets are favored. On Thursday it breached above the key $2,000 psychological mark for the first time since Monday when markets went bananas over the demise of Credit Suisse. Overnight it has undergone a gentle pullback and may now be said to be in what traders call the ‘buy zone’. 

Gold price: 4-hour Chart.

The Relative Strength Index (RSI) momentum indicator is supporting the current recovery climate and rising more or less in line with price, showing no bearish divergence. 

A break above Thursday’s high of $2,003 would help provide confirmation of the next move up to the next resistance cap at Monday’s $2,009 highs where a confluence of technical levels presents a tough ceiling. A decisive break and close above $2,010 would be the breakthrough that is really necessary to invigorate bulls to continue the uptrend to new heights.

The SNB now see inflation as more broad-based and cannot rule out further increases in the policy rate. However, economists at Commerzbank continue to see upside pressure in EUR/CHF.

CHF outlook remains unchanged following SNB decision

“What is mainly relevant for the Franc for now is that the SNB sees further need to act as regards inflation. However, we do not assume that the rate hikes will be more aggressive than those of the ECB so that we continue to see upside pressure in EUR/CHF.”

“Of course, it is worth bearing in mind that the SNB once again confirmed its willingness to intervene on the FX market, which is likely to slow EUR/CHF’s upward move.” 

“The inflation data is likely to be decisive when it comes to determining how high the risk for FX market interventions actually is. The higher inflation is, the more cautious traders are likely to become regarding higher EUR/CHF levels.”

• USD/JPY remains under heavy selling pressure for the third straight day on Friday.
• Expectations for a hawkish shift by the BoJ boost the JPY and drag the pair lower.
• Some follow-through USD buying could lend support and help limit further losses.

The USD/JPY pair extends this week's rejection slide from the 133.00 mark and continues drifting lower for the third successive day on Friday. Spot prices drop to the lowest level since February 10 during the first half of the European session, with bears now looking to extend the downward trajectory further below the 130.00 psychological mark.

The Japanese Yen (JPY) strengthens across the board in reaction to the domestic data, showing that an important gauge of Japan’s consumer prices rose at its fastest pace since 1982 in February. In fact, Japan's core-core CPI, which strips out energy and food prices but includes alcoholic beverages, accelerated to 3.5% in February - marking the fastest year-on-year increase in 41 years. This boosts expectations that the Bank of Japan (BoJ) will tweak its bond yield control policy in the near term, which, in turn, benefits the domestic currency and continues to exert downward pressure on the USD/JPY pair.

Bearish traders further take cues from a further decline in the US Treasury bond yields, led by the Federal Reserve's signal that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector. In fact, the yield on the benchmark 10-year US government bond and the rate-sensitive two-year Treasury note languish near a six-month low touched earlier this week. This results in a further narrowing of the US-Japan rate differential, which is seen as another factor that drives flows towards the JPY and contributes to the heavily offered tone surrounding the USD/JPY pair.

The US Dollar (USD), on the other hand, is gaining some follow-through traction for the second successive day and building on the overnight goodish rebound from a seven-week low. This, in turn, is holding back bearish traders from placing fresh bets around the USD/JPY pair and helping limit the downside, at least for the time being. Nevertheless, spot prices remain on track to register losses for the fourth straight week and the aforementioned fundamental backdrop supports prospects for an extension of the recent rejection slide from the 200-day Simple Moving Average (SMA).

Market participants now look forward to the US economic docket, featuring the release of the Durable Goods Orders data and the flash PMI prints for March later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities on the last day of the week.

Technical levels to watch

In an interview with BBC on Friday, Bank of England (BoE) Governor Andrew Bailey said that “There is evidence of encouraging progress on inflation, we have to be vigilant.”

Additional quotes

“I'm very relieved that inflation is no longer rising like it was last year. “

“Companies should bear in mind that BoE forecasts inflation will fall.”

“I do not have evidence that companies are putting prices up more than necessary.”

“Risk of recession this year has gone down quite a lot.”

“Pretty strong likelihood we will avoid recession this year.”

Market reaction

GBP/USD is unable to take advantage of the upbeat remarks from the BoE Chief amid expectations of a rate hike pause in May. The pair is losing 0.35% on the day to trade at 1.2240, as of writing. Markets await the UK PMIs for fresh impetus.

Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group suggest AUD/USD needs to break above 0.6760 to allow for the continuation of the uptrend in the short term.

Key Quotes

24-hour view: “Yesterday, AUD rose to 0.6756 before pulling back to close the day the little changed at 0.6684 (-0.01%). The price actions appear to be part of a consolidation phase and today, AUD is likely to trade in a range of 0.6655/0.6720.”

Next 1-3 weeks: “Two days ago (22 Mar, spot at 0.6700), we stated that the rapid loss in momentum has diminished the odds for AUD to strengthen. There is no change in our view. From here, AUD must break and hold above 0.6760, or the chances of it advancing further will rapidly diminish. On the downside, a break of 0.6640 (no change in 'strong support' level) indicates that the AUD is more likely to trade in a broad consolidation range rather than strengthening.”

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for the third session in a row on Thursday, this time by around 6.3K contracts. Volume, instead, kept the downtrend unchanged and shrank by around 2.7K contracts.

WTI could revisit the 2023 low near $64.00

Prices of the WTI approached the $72.00 mark per barrel on Thursday before ending the session with modest losses below $70.00. the negative price action was accompanied by rising open interest, which is supportive of the view that further decline lies ahead for the commodity in the very near term. That said, the next support of note emerges at the 2023 low near the $64.00 mark (March 20).

• German Manufacturing PMI arrives at 44.4 in March vs. 47.0 expected.
• Services PMI in Germany jumps to 53.9 in March vs. 51.0 expected.
• EUR/USD keeps losses below 1.0800 on mixed German PMIs.

The German manufacturing sector activity continues to worsen in March despite falling inflationary pressures, the preliminary manufacturing activity report from S&P Global/BME research showed this Friday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in at 44.4 this month vs. 47.0 expected and 46.3 prior. The index dropped to a new two-month low.

Meanwhile, Services PMI jumped from 50.9 in February to 53.9 in March as against the 51.0 consensus forecast. The PMI reached ten-month highs.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 52.6 in March vs. 51.0 expected and February’s 50.7. The gauge recorded its highest level in ten months.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“The German economy took another small step in the right direction in March, according to latest flash PMI data.”

“Business activity increased for a second straight month and the rate of growth picked up, although it remained only modest overall due to continued weakness in manufacturing.”

FX implications

EUR/USD is keeping its downside momentum intact at around 1.0785 on the mixed German data. 

GBP/USD fluctuates below 1.2300 after the Bank of England (BoE) hiked the policy rate by 25 bps yesterday. Economists at ING expect the pair to test 1.2420 and 1.2500 levels.

BoE hiked but gave very little guidance

“The BoE hiked by 25 bps yesterday. We only got a statement this time and it appears quite clear that the MPC has tried to keep all options open. We strongly suspected the BoE would refrain from offering any real bit of guidance to markets and that would have meant that the impact on the Pound would have been very short-lived. This indeed appears to be the case.”

“We think that a May pause is likely despite the recent rise in inflation: with around 30 bps of tightening in the price, there is room for a repricing lower to favour a modestly higher EUR/GBP.”

“Looking at Cable, the BoE does not appear to be much of a factor, and our view for Dollar downside risks means that the key 1.2420 and 1.2500 levels can be tested quite soon.”

A potential move to the 1.2400 region in GBP/USD seems to have lost some traction as of late, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “GBP eked out a fresh 3-week high of 1.2341 yesterday before easing off to close at 1.2285 (+0.13%). Upward pressure has eased and GBP is unlikely to strengthen further. Today, GBP is more likely to trade in a range, expected to be between 1.2230 and 1.2330.”

Next 1-3 weeks: “We have expected GBP to advance since the start of the week. In our most recent update from two days (22 Mar, spot at 1.2220), we stated that ‘the chance of rising to 1.2400 has diminished’. Yesterday, GBP rose to 1.2341 and then pulled back to close at 1.2285 (+0.13%). While GBP strength is still intact, short-term upward momentum is beginning to wane, and this combined with overbought conditions suggests 1.2400 may be out of reach this time around. However, only a breach of 1.2190 (‘strong support’ level previously at 1.2140) would indicate that GBP is not strengthening further.”

• Silver consolidates the previous day’s strong move up to its highest level since February.
• The technical setup favours bullish traders and supports prospects for additional gains.
• Any pullback below the 61.8% Fibo. is likely to attract fresh buyers and remain limited.

Silver is seen consolidating its recent strong gains to the highest level since February 03 touched the previous day and seesaws between tepid gains/minor losses through the early part of the European session on Friday. The white metal currently trades just above the $23.00 mark and seems poised to prolong the upward trajectory witnessed over the past two weeks or so, from the YTD low touched earlier this month.

This week's sustained break and acceptance above the 61.8% Fibonacci retracement level of the recent pullback from a multi-month peak add credence to the constructive outlook. Moreover, technical indicators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This further favours bullish traders and supports prospects for an extension of the appreciating move.

Hence, a subsequent move up beyond the $24.00 round figure, towards retesting the multi-month peak around the $24.65 region touched in February, looks like a distinct possibility. Some follow-through buying should pave the way for additional gains and allow the XAG/USD to reclaim the $25.00 psychological mark for the first time since April 2022. The rally could get extended to the next relevant hurdle near the $25.30-$25.35 zone.

On the flip side, dips below the $23.00 mark might now find some support near the 61.8% Fibo. resistance breakpoint, around the $21.80 region. Any subsequent slide is more likely to attract fresh buyers around the $22.50 horizontal zone, which should help limit the downside for the XAG/USD near the $22.20 area, or the 50% Fibo. level. This is followed by the $22.00 mark, which if broken decisively could set the stage for deeper losses.

Silver daily chart

Key levels to watch

EUR/USD pulled back after breaking above 1.0900. However, economists at ING expect the pair to test the 1.1000 level.

Focus will be on PMI readings in the Eurozone today

“Expectations are for a stabilisation in the survey around February’s numbers, and barring huge surprises, the releases may not have a major market impact given how macro fundamentals are playing second fiddle to financial market stress at the moment.”

“We think that 1.1000 can be tested quite soon as the Dollar bias should stay mostly bearish and European currencies are backed by hawkish central banks and a quieter banking environment.”

• The index alternates gains with losses around 102.60.
• Decent support emerges around the 102.00 mark so far.
• Durable Goods Orders, Flash PMIs next on tap later in the day.

The greenback, when tracked by the USD Index (DXY), trades in a flattish fashion around 102.60 at the end of the week.

USD Index now looks at data

The index seems to have met some firm contention around the 102.00 neighbourhood – or multi-week lows – so far this week, as market participants continue to digest Wednesday’s dovish hike by the Federal Reserve and the dovish tilt at Powell’s press conference.

In the meantime, speculation of a pause in the Fed’s hiking cycle continues to run high and underpins the current bearish sentiment around the dollar, while easing banking jitters also prop up the risk complex and represent another source of weakness for the buck.

Later in the NA session, Durable Goods Orders for the month of February are due seconded by advanced Manufacturing/Services PMIs and the speech by St. Louis Fed J.Bullard (2025 voter, hawk).

What to look for around USD

The index remains well under pressure, although it manages to put further distance from recent lows in the sub-102.00 region on Friday.

So far, speculation of a potential Fed’s pivot in the short-term horizon should keep weighing on the dollar, although the still elevated inflation, the resilience of the US economy and the hawkish narrative from Fed speakers are all seen playing against that view for the time being.

Key events in the US this week: Durable Goods Orders, Advanced PMIs (Friday).

Eminent issues on the back boiler: Rising conviction of a soft landing of the US economy. Persistent narrative for a Fed’s tighter-for-longer stance. Terminal rates near 5.5%? Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.03% at 102.55 and the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next resistance emerges at 103.88 (55-day SMA) followed by 104.37 (100-day SMA) and then 105.88 (2023 high March 8).

The US Dollar is markedly weaker after the March FOMC meeting. Economists at HSBC believe the near-term USD path is likely to remain choppy.

Uncertainty remains high, data and banking sector developments are key

“The potential USD upside of a 25 bps hike was offset by the unchanged median interest rate projection for 2023.” 

“The Fed does not foresee policy easing this year, while markets are contemplating cuts. Resolution of this gap between the markets and the Fed will hinge not just on the data but also on banking sector developments. Until there is clarity, the USD may remain trapped yet choppy, albeit at a weaker level than before this March FOMC meeting.” 

“Ultimately, we expect the USD to resume its weakening trend.”

• USD/CAD oscillates in a narrow trading band and is influenced by a combination of forces.
• An uptick in Oil prices underpins the Loonie and caps the upside amid subdued USD demand.
• Traders look forward to important macro data from the US and Canada for a fresh impetus.

The USD/CAD pair struggles to capitalize on the previous day's goodish rebound from the 1.3630 area, or over a two-week low and oscillates in a narrow trading band through the early European session on Friday. The pair is currently placed just above the 1.3700 mark, though a combination of factors keeps a lid on any meaningful upside.

Crude Oil prices regain positive traction amid fears that rising tensions in the Middle East could disrupt supply, especially after a US air strike on Iran-backed groups. This, in turn, underpins the commodity-linked Loonie, which, along with subdued US Dollar (USD) price action, acts as a headwind for the USD/CAD pair. The Federal Reserve's hint of a pause to interest rate hikes fails to assist the Greenback to build on the overnight recovery move from its lowest level since February 03.

It is worth recalling that the US central bank raised interest rates by 25 bps on Wednesday, as was widely anticipated, though sounded cautious on the outlook in the wake of the recent turmoil in the banking sector. This comes on the back of the recent sudden collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank. The Fed also lowered its median forecast for real GDP growth projections for 2023 and 2024, which keeps the US Treasury bond yields and the USD depressed.

Apart from this, a generally positive tone around the equity markets is seen as another factor weighing on the safe-haven buck. That said, growing market concerns that slowing economic growth will dent fuel demand should cap the upside for Oil prices. This, along with expectations that the Bank of Canada (BoC) refrain from raising interest rates any further, bolstered by the softer-than-expected Canadian consumer inflation released on Tuesday, should lend support to the USD/CAD pair.

From a technical perspective, the two-way price moves within a familiar range witnessed since the beginning of the current week point to indecision among traders over the near-term trajectory. Furthermore, the aforementioned mixed fundamental backdrop warrants some caution before placing aggressive directional bets around the USD/CAD pair. Investors also seem reluctant ahead of important macro data from the US and Canada, due later during the early North American session.

Friday's US economic docket features the release of Durable Goods Orders and the flash PMI prints, which, along with the US bond yields and the broader risk sentiment, will influence the USD demand. Traders will further take cues from Canadian monthly Retail Sales figures. Apart from this, Oil price dynamics should provide a fresh impetus to the USD/CAD pair and produce short-term opportunities on the last day of the week.

Technical levels to watch

Considering advanced prints from CME Group for gold futures markets, open interest increased by around 11.2K contracts on Thursday, reversing two consecutive daily pullbacks. Volume followed suit and went up by around 33.4K contracts after three daily drops in a row.

Gold needs to close above $2000 to allow for further upside

Gold prices extended the rebound on Thursday and surpassed once again the key $2000 mark per ounce troy, albeit closing below it. The uptick was amidst rising open interest and volume and hints at the likelihood that further upside is in store for the yellow metal in the very near term.

Here is what you need to know on Friday, March 24:

The US Dollar seems to have found its footing late Thursday following a pullback witnessed in Wall Street's main indexes, Early Friday, the US Dollar Index stays relatively quiet ahead of February Durable Goods Orders and S&P Global's preliminary Manufacturing and Services PMI surveys for March. S&P Global will also release the PMI surveys for Germany, the UK and the Eurozone on Friday. Canadian economic docket will feature Retail Sales for January.

Following the sharp decline witnessed on Wednesday, the benchmark 10-year US Treasury bond yield fluctuated below 3.5% on Thursday and closed the day virtually unchanged. Early Friday, the 10-year yield edges lower toward 3.4%. Durable Goods Orders in the US are forecast to rise by 0.6% in February following January's 4.5% decrease.

During the Asian trading hours, a spokesperson for China’s Ministry of Commerce spokesperson said China does not seek to engineer a trade surplus with the US. Meanwhile, Reuters reported that the Beijing office of Mintz Group, a US corporate due diligence firm, was raided by authorities and five Chinese staff were detained. Nevertheless, US stock index futures trade modestly higher on the day.

The data from Japan showed early Friday that the National Consumer Price Index declined to 3.3% on a yearly basis in February from 4.3% in January. This reading came in much lower than the market expectation of 4.1%. USD/JPY, however, is having a difficult time gathering bullish momentum and was last seen trading in negative territory at around 130.50.

GBP/USD fluctuates below 1.2300 in the European morning. The UK's Office for National Statistics reported on Friday that Retail Sales in February rose by 1.2%, compared to the market expectation for an increase of 0.2%, but failed to provide a boost to Pound Sterling. On Thursday, the Bank of England (BOE) announced that it raised its policy rate by 25 basis points to 4.25%.

After having reached its highest level since early February above 1.0900 on Thursday, EUR/USD reversed its direction and ended up closing the day in the red below 1.0850. The pair stays relatively quiet at around 1.0830 early Friday. The PMI surveys from the Euro area are expected to point to a modest expansion in the private sector's business activity in early March.

AUD/USD moves up and down in a tight channel below 0.6700 on Friday. The data from Australia revealed that S&P Global Composite PMI declined to 48.1% in early March from 50.6 in February.

For the second time this week on Thursday, Gold price climbed above $2,000. XAU/USD seems to have gone into a consolidation phase on Friday and was last seen trading modestly lower on the day at around $1,890.

Bitcoin gained nearly 4% on Thursday and erased all of Wednesday's gains. BTC/USD was last seen moving sideways near $28,300. Ethereum rose 4.5% on Thursday and reclaimed $1,800 before stabilizing slightly above that level early Friday. 

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In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, EUR/USD could move into a consolidative phase in the near term.

Key Quotes

24-hour view: “EUR rose to a 7-week high of 1.0929 yesterday before pulling back sharply to close lower by 0.23% (1.0830). The sharp pullback amid overbought conditions and waning momentum suggests EUR has likely entered a consolidation phase. Today, EUR is likely to trade sideways a range of 1.0800/1.0900.”

Next 1-3 weeks: “Our most recent narrative was from Wednesday (22 Mar, spot at 1.0770) wherein we highlighted that ‘upward momentum is beginning to improve but EUR has to break and stay above 1.0800 before a sustained rise is likely’. EUR easily surpassed 1.0800 and yesterday, it rose to 1.0929 before closing lower for the first time in five days (1.0830, -0.23%). Short-term conditions are severely overbought and this could lead to a few days of consolidation first. As long as 1.0740 is not breached, there is potential for EUR to advance further, though the next resistance at 1.0980 could be out of reach this time around.”

• The UK Retail Sales came in at 1.2% MoM in February, an upside surprise.
• Core Retail Sales for the UK rose by 1.5% MoM in February.
• The Cable keeps its range below 1.2300 on the upbeat UK data.

The UK Retail Sales arrived at 1.2% over the month in February vs. 0.2% expected and 0.9% previous. The Core Retail Sales, stripping the auto motor fuel sales, rose by 1.5% MoM vs. 0.1% expected and 0.9% previous.

On an annualized basis, the UK Retail Sales dropped 3.5% in February versus -4.7% expected and -5.2% prior while the Core Retail Sales decreased 3.3% in the reported month versus -4.7% expectations and -5.4% previous. 

Main points (via ONS)

FX implications

GBP/USD is keeping its cautious momentum intact below 1.2300 despite the upbeat UK Retail Sales data. The spot was last seen trading at 1.2275, down 0.07% on the day.

• AUD/USD ignores the previous day’s bearish candlestick to pare weekly losses.
• Repeated failures to cross 200-DMA, steady RSI tease sellers.
• Previous resistance line from early February acts as the last defense of Aussie pair buyers.

AUD/USD picks up bids to refresh intraday high near 0.6690 during early Friday morning. In doing so, the Aussie pair consolidates the weekly losses while bouncing off a two-week-old ascending support line.

As the quote’s latest rebound gains support from the bullish MACD signals, further upside towards the 200-DMA hurdle surrounding 0.6760 can’t be ruled out.

However, Thursday’s “Gravestone Doji” candlestick joins steady RSI (14) to challenge the AUD/USD buyers afterward.

In a case where the Aussie pair remains firmer past 0.6760, the December 2022 peak surrounding 0.6890, quickly followed by the 0.6900 threshold, could challenge the AUD/USD bulls before giving them control.

On the contrary, a downside break of the immediate fortnight-long support line, close to 0.6660 at the latest, isn’t an open invitation to the bears as multiple levels marked in the last four months around 0.6640-30, can challenge the sellers.

It’s worth noting that a downward-sloping previous resistance line from February 02, now support around 0.6575, acts as the last defense of the AUD/USD pair buyers, a break of which could drag the quote towards 2022 bottom surrounding 0.6160.

Overall, AUD/USD remains on the bear’s radar unless providing a clear upside break of 0.6900.

AUD/USD: Daily chart

Trend: Limited recovery expected

Gold price is trading listlessly so far this Friday, as bulls take a breather after the recent blistering rally. Daily technical setup suggests more gains for XAU/USD after a bull flag breakout, FXStreet’s Dhwani Mehta reports.

Bullish daily technical setup

“Gold price finally confirmed a bull flag breakout after closing Thursday above the falling trendline resistance at $1,975. The doors, therefore, remain open for a test of the yearly high at $2,010 should Gold bulls yield a sustained break of the $2,000 barrier.”

“On the other side, any corrective downside in the Gold price will meet initial support at the $1,980 round level, below which the bull flag resistance-turned-support at $1,967 will be tested. The last line of defense for Gold buyers is seen at the $1,950 demand area.”

See – Gold Price Forecast: XAU/USD on course to retest its $2,070/2075 record highs – Credit Suisse

• Gold price remains mildly offered while snapping two-day uptrend.
• Sluggish markets allow XAU/USD bulls to take a breather ahead the key US data.
• Fed concerns, banking turmoil keeps Gold buyers hopeful.
• XAU/USD bulls need downbeat US PMI, Durable Goods Orders to cross $2,015 key hurdle.

Gold price (XAU/USD) renews its intraday low around $1,987 during the first loss-making day in three amid early Friday morning in Europe. In doing so, the XAU/USD traces downbeat US Treasury bond yields amid a sluggish end of an active week.

That said, the dovish concerns surrounding the Federal Reserve’s (Fed) next move, as well as the downbeat yields, challenge the Gold price traders even as banking fears join hopes of upbeat data and market consolidation to weigh on XAU/USD prices of late.

Fed’s heavy lending amid the banking rout flags fears of a ballooning Fed balance sheet, which in turn renews hawkish calls for the US central bank’s next moves and lures the Gold bears near the multi-day high.

However, the mixed US data and the latest Fed statement appear to challenge the policy hawks. Also challenging the US Dollar could be the comments from key market players like DoubleLine’s Gundlach who recently reiterated his dovish bias for the US central banks.

Elsewhere, comments from US Treasury Secretary Janet Yellen and the Chair of the Basel Committee on Banking Supervision, portraying the market’s fears of banking fallouts, also weigh on the market’s mood and challenge the XAU/USD buyers. However, the recent retreat in the market’s consolidation allows the Gold buyers to consolidate recent gains ahead of the key data/events.

While portraying the mood, US 10-year and two-year Treasury bond yields remain depressed at around 3.38% and 3.78% respectively by the press time whereas the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Among the important US data are the first readings of the US S&P Global PMIs for March and Durable Goods Orders for February.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Gold price technical analysis

Gold price fades bounce off one-week-old horizontal support as the previous support line from early March pushes back XAU/USD bulls amid the RSI retreat.

However, the bullish MACD signals and the precious metal’s hesitance in welcoming bears, as shown by the 100-SMA successful ride above the 200-SMA, keep the Gold buyers hopeful.

That said, the previous monthly high near $1,960 acts as immediate support for the XAU/USD bears to watch during the quote’s further weakness ahead of the aforementioned horizontal level surrounding $1,935.

Following that, the Gold sellers can aim for the last defenses of buyers, namely 100-SMA and 200-SMA, respectively near $1,898 and $1,869 by the press time.

Alternatively, the $2,000 round figure may act as an immediate upside hurdle for the Gold price.

Though, a convergence of an upward-sloping trend line from January 26 and a two-week-old previous support line, around $2,015, appears a tough nut to crack for the Gold buyers.

Should the quote rises past $2,015, the odds of witnessing a rally towards the previous yearly top surrounding $2,070 can’t be ruled out.

Gold price: Four-hour chart

Trend: Pullback expected

• NZD/USD picks up bids to trim the first daily loss in three.
• Mixed sentiment, light calendar in Asia-Pacific allow Kiwi bears to take a breather.
• Yields stay depressed as banking woes, Fed’s dovish hike propel demand for bonds.
• First readings of US PMI, Durable Goods Orders should be eyed to predict the one last shot of volatile week.

NZD/USD trims intraday losses around 0.6240 during early Friday morning as market sentiment dwindles during the first loss-making day in three.

The Kiwi pair’s latest rebound could be linked to the dovish concerns surrounding the Federal Reserve’s (Fed) next move, as well as the downbeat yields. That said, the Fed’s heavy lending amid the banking rout flags fears of a ballooning Fed balance sheet, which in turn renews hawkish calls for the US central bank’s next moves. However, the mixed US data and the latest Fed statement appear to challenge the policy hawks. Also challenging the US Dollar could be the comments from key market players like DoubleLine’s Gundlach who recently reiterated his dovish bias for the US central banks.

Elsewhere, comments from US Treasury Secretary Janet Yellen and the Chair of the Basel Committee on Banking Supervision, portraying the market’s fears of banking fallouts, also weigh on the market’s mood and challenge the NZD/USD buyers. However, the recent retreat in the yields keeps the pair buyers hopeful.

In this regard, the Financial Times (FT) recently mentioned said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system. On the other hand, US Treasury Secretary Janet Yellen said on Thursday, “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'.

It’s worth noting that the mixed US data also challenge the NZD/USD prices. That said, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

While portraying the mood, the US 10-year and two-year Treasury bond yields remain depressed at around 3.38% and 3.78% respectively by the press time whereas the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Moving on, NZD/USD pair traders should pay attention to the market sentiment, as well as to the US Treasury bond yields, for clear directions. Also important to watch will be the first readings of the US S&P Global PMIs for March and Durable Goods Orders for February.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Technical analysis

NZD/USD appears lackluster inside a 100-pip area between the 21-DMA and 50-DMA, respectively near 0.6200 and 0.6300.

• GBP/USD is looking to recapture the 1.2300 resistance as the USD index has lost its upside momentum.
• Federal Reserve would continue to weigh on US inflation by keeping rates higher for a longer period.
• Bank of England would hike rates further if evidence claims persistent inflation.
• GBP/USD has slipped out of the Rising Channel but has not weakened yet.

GBP/USD has attempted a recovery after dropping to near 1.2260 in the early European session. The recovery move in Cable is backed by a loss of upside momentum in the US Dollar Index (DXY). The Cable remained topsy-turvy after the interest rate decision by the Bank of England (BoE).

The Pound Sterling was heavily volatile on Thursday after Bank of England Governor Andrew Bailey delivered a promise of rapid inflation softening from the second quarter with 25 basis points (bps) interest rate hike and dovish interest rate guidance.

The USD Index is demonstrating exhaustion after a decent rally to near 102.68. The mighty US Dollar is sensing the heat as investors are anticipating that the United States inflation has entered into an Armageddon, and qualitative and quantitative tools against Consumer Price Index (CPI) would be extremely sharpened.

S&P500 futures have generated mild gains in the Asian session after a solid recovery on Thursday as investors have cheered signs of policy-tightening termination by the Federal Reserve (Fed) amid banking woes. Two-year US Treasury yields that closely follow the US equities benchmark have dropped below.  3.8%. Also, 10-year yields have dropped below 3.39%, which indicates a sheer improvement in the demand for US government bonds.

Also, commentary from US Treasury Secretary Janet Yellen for widening the insurance blanket for deposits has infused some confidence among market participants. The US Secretary Yellen cited that the government is ‘prepared for additional deposits actions if warranted’.

Major central banks are saying no to further rate hikes

The street has started making long-term bearish bets for the US Dollar as Federal Reserve chair Jerome Powell delivered signs of concluding the year-long rate-hiking spree to avoid any further mess in the banking crisis. Also, rates have reached a point where room for further escalation is less. Like the Federal Reserve, other central banks are also eyeing a pause in the rate-hiking cycle such as the Bank of England, and the Reserve Bank of Australia (RBA). Above all, the Bank of Canada (BoC) has already paused its policy-tightening cycle, citing that current monetary policy is restrictive enough to tame price pressures. So, it would not be justified to corner the US Dollar for concluding the tightening spell.

US Inflation to be hammered by Fed rates and banks' credit tightening

The US inflation has been in a declining trend for the past few months as the Federal Reserve has pushed rates significantly to 4.75-5.00% after eight consecutive rate hikes. Room for further rate hikes looks small as Federal Reserve Powell has confirmed only one rate hike for now but a big no to consideration of rate cuts this year. Therefore, higher rates for a longer period by the Federal Reserve would continue to weigh on inflationary pressures.

Apart from that, US banks are likely to be more precautionary while disbursing loans to households and businesses, which would impact the overall demand, inflation, and the scale of economic activities.

Bank of England would consider more hikes if inflation remains persistent

Bank of England Bailey went for an eleventh consecutive rate hike on Thursday despite global banking shakedown. Out of the seven-member team, Monetary Policy Committee (MPC) members Swati Dhingra and Silvana Tenreyro voted for an unchanged monetary policy while others favored a 25bp rate hike.

About the surprise jump in February’s inflation, the Bank of England said that the surprise jump in the price index was the outcome of volatile clothing prices, which could prove less persistent. The central bank is very much confident that inflation will start decelerating rapidly from the second quarter. However, the labor shortage and higher food prices might continue to keep inflation at elevated levels.

Analysts at Danske Bank consider that both growth and domestic inflation have surprised to the upside and given BoE’s message, they pencil in an additional 25 bps hike in May 2023.

On Friday, a decent action is expected from the Cable as preliminary S&P Global PMI (March) figures for the US and the UK will be released. The Manufacturing PMI is expected to trim to 47.0 from the former release of 47.3. And, Service PMI might soften to 50.5 from the prior release of 50.6.

As per the consensus, UK Manufacturing PMI would improve to 49.8 from the former release of 49.3. While Services PMI will drop to 53.0 vs. the prior figure of 53.5.

GBP/USD technical outlook

GBP/USD is oscillating in a narrow range of 1.2262-1.2336 on an hourly scale after failing to extend recovery further. The Cable is slipped out of the Rising Channel chart pattern but has not weakened yet as the 50-period Exponential Moving Average (EMA) at 1.2278 is still supporting the Pound Sterling.

Meanwhile, the Relative Strength Index (RSI) (14) has found a cushion near 40.00.

FX option expiries for Mar 24 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0675-80 627m
• 1.0700-10 1.4b
• 1.0800 1.6b
• 1.0850 539m
• 1.0875 509m
• 1.0890-10 656m

- USD/JPY: USD amounts                     

• 130.00 830m
• 131.00 592m
• 132.95-00 1.3b

- AUD/USD: AUD amounts  

• 0.6700 669m

- USD/CAD: USD amounts       

• 1.3600-05 606m
• 1.3620-30 1.1b

- EUR/GBP: EUR amounts        

• 0.8900 635m

• Natural Gas snaps two-day downtrend but struggles to extend corrective bounce.
• Convergence of 21-EMA, three-week-old descending resistance line prods buyers.
• Multiple supports from late February restrict immediate downside.
• Sluggish oscillators suggest a continuation of downward grind.

Natural Gas Price (XNG/USD) portrays a corrective bounce from the short-term key support while snapping a two-day losing streak around $2.31 heading into Friday’s European session. In doing so, the energy benchmark bounces off a five-wee-long horizontal support area. Even so, XNG/USD remains pressured for the third consecutive week.

It’s worth observing that Natural Gas’s latest rebound lacks support from the MACD and RSI as both the oscillators portray a lack of momentum, which in turn increases the odds of the commodity’s further weakness.

However, a clear downside break of the $2.30-28 support area, encompassing multiple levels marked since February 19, restricts the short-term downside of the Natural Gas price.

Should the quote breaks the $2.28 support, the odds of witnessing a slump toward the monthly low of $2.13, also the lowest level since August 2020, can’t be ruled out.

In a case where the XNG/USD remains bearish past $2.13, the $2.00 will be crucial to watch as a break which could make the quite vulnerable to testing the mid-2020 lows surrounding $1.53.

On the flip side, a convergence of the 21-bar Exponential Moving Average (EMA) joins a downward-sloping trend line from March 05, to highlight $2.37 as the short-term key upside hurdle.

Also acting as important resistance for the Natural Gas price is $2.50 and the 200-EMA level surrounding $2.68.

Overall, Natural Gas price remains bearish but short-term grinding can’t be ruled out.

Natural Gas: Four-hour chart

Trend: Further downside expected

• Asian stocks are facing the heat as investors turn anxious ahead of global PMIs data.
• The US banking fiasco has triggered economic fears as US banks would tighten credit conditions.
• Significant softening of Japan’s inflation could attract monetary stimulus from the government.

Markets in the Asian domain are showing roots of caution as investors are shifting their focus toward the release of the global Purchasing Managers Index (PMIs). Anxiety ahead of global PMI figures has joined potential banking woes, which has forced investors to make distance with Asian equities. S&P500 futures have turned choppy after a significant recovery on Thursday as investors are worried about the likely tightening of credit conditions by the United States banks after a shakedown.

Federal Reserve (Fed) chair Jerome Powell confirmed in his statement that US banks are likely to be more precautionary while disbursing loans to households and businesses, which would impact the overall demand, inflation, and the scale of economic activities. Also, outflows of funds to developing economies could scale lower.

At the press time, Japan’s Nikkei225 dropped 0.34%, ChinaA50 slipped 0.27%, Hang Seng eased 0.18%, and Nifty50 remained sideways.

Japanese stocks failed to show an action despite rising expectations of more stimulus from the administration after the sheer softening of the National Consumer Price Index (CPI). Headline CPI has dropped significantly to 3.3% from the consensus of 4.1% and the former release of 4.3%. The core inflation that strips off oil and food prices scaled higher to 3.5% from the estimates of 3.4% and the prior print of 3.3%.

A scrutiny of Japan’s inflation data indicates that the recent decline in oil prices has battered the headline figure. And higher core CPI could be the outcome of efforts made by the Japanese government to accelerate wages.

Meanwhile, China’s Ministry of Commerce has urged to the US to remove trade restrictions citing that the former is not seeking to engineer a trade surplus with the latter.

On the oil front, oil prices have rebounded firmly after dropping to near $69.00 as the street is anticipating a rally in commodities led by weakness in the US Dollar. Investors believe that a consideration of a pause in the policy-tightening process by the Fed would push the US Dollar into a negative trajectory for a longer period.

• USD/CHF takes offers to reverse early-day rebound, fades bounce off eight-day low.
• SNB stays ready for more rate hikes after 0.50% lift, as expected.
• Fed bets struggle to regain hawkish bias amid banking sector debacle.
• US statistics may offer an active day ahead, yields eyed too.

USD/CHF renews its intraday low near 0.9160 as it portrays the four-day losing streak during early Friday ahead of the key US data. In doing so, the Swiss Franc (CHF) pair justifies hawkish bias surrounding the Swiss National Bank (SNB) versus the dovish bets on the Federal Reserve’s (Fed) next move amid a sluggish end to the volatile week.

SNB raised its benchmark sight deposit interest rate by 50 basis points (bps) from 1.0% to 1.50% in March, on Thursday, as widely expected. With this, the SNB raises rates for the fourth straight meeting, with markets now expecting the final hike to come in June.

Following the interest rate announcements, SNB Chairman Thomas Jordan said that further rate rises cannot be ruled out to ensure price stability. The policymaker also said that taking a risk on a Credit Suisse bankruptcy would have been irresponsible while adding, “Measures taken by the federal government, FINMA and SNB have put a halt to the crisis.”

SNB governing board member Andrea Maechler also spoke on Thursday while saying, “Tension on the financial markets has markedly increased following the collapse of Silicon Valley Bank.”

Elsewhere, the Fed’s heavy lending amid the banking rout flags fears of a ballooning Fed balance sheet, which in turn renews hawkish calls for the US central bank’s next moves. However, the mixed US data and the latest Fed statement appear to challenge the policy hawks. Also challenging the US Dollar could be the comments from key market players like DoubleLine’s Gundlach who recently reiterated his dovish bias for the US central banks.

It’s worth noting that comments from US Treasury Secretary Janet Yellen and the Chair of the Basel Committee on Banking Supervision also weigh on the market’s mood and challenge the USD/CHF bears. However, the recent retreat in the yields keeps the pair sellers hopeful.

The Financial Times (FT) recently mentioned said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system. On the other hand, US Treasury Secretary Janet Yellen said on Thursday, “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'.

That said, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

Against this backdrop, the US 10-year and two-year Treasury bond yields remain depressed around 3.38% and 3.78% respectively by the press time whereas the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Looking ahead, the first readings of the US S&P Global PMIs for March and Durable Goods Orders for February will be crucial for the USD/CHF pair traders to watch for clear directions.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Technical analysis

Oversold RSI (14) challenges USD/CHF bears approaching a seven-week-old ascending support line near 0.9130. Recovery moves, however, remain elusive unless the quote stays successfully beyond the 0.9200 threshold.

• USD/INR is oscillating in a 10-pip range as investors await US Durable Goods Orders and preliminary PMI data.
• Lack of follow-up buying in the S&P500 futures after a confident recovery move has stemmed clouds of uncertainty.
• The Indian government has started assessing the performance of state-run lenders and PSUs after the global banking debacle.

The USD/INR pair is displaying topsy-turvy moves in a narrow range of 82.20-82.30 in the Asian session. The asset has a positive opening on Friday as the US Dollar Index (DXY) rebounded firmly after dropping to near 102.00 in Thursday’s session. The USD Index has extended its recovery to near 102.68 as other central banks are also saying no to further rate hikes and are looking to assess the impact of current monetary policy.

S&P500 futures are showing choppy moves in the Asian session. The lack of follow-up buying in the 500-US stocks basket futures after a confident recovery move on Thursday has stemmed clouds of uncertainty. Two-year US Treasury yields that closely follow the US equities benchmark look vulnerable above 3.8%.

Going forward, the release of the United States Durable Goods Orders (Feb) data will be a key trigger for the mighty USD Index. As per the consensus, the economic data will expand by 0.6% against a contraction of 4.5% released earlier. The economic indicator shows forward demand for Durable Goods and an increment in the same could renew fears of policy-tightening by the Federal Reserve (Fed).

Apart from that, preliminary US S&P Global PMI (March) data will be keenly watched. The Manufacturing PMI is expected to trim to 47.0 from the former release of 47.3. And, Service PMI might soften to 50.5 from the prior release of 50.6.

On the Indian Rupee front, Prime Minister Modi-led-government has initiated finding out any signs of banking shakedown after escalating global banking fiasco. Finance Minister Nirmala Sitharaman has ordered for the assessment of state-run lenders and public sector banks (PSUs) about their performance and assessment of capital requirements.

• EUR/USD remains pressured after reversing from seven-week high, traces dicey markets.
• Comparatively more hawkish ECB talks than Fed, mixed data keep Euro buyers hopeful.
• Failure to cross key technical hurdle, fears of strong rules for financial markets tease bears.
• Preliminary PMIs for Germany, Europe and the US will be important to watch for fresh impulse.

EUR/USD depicts sluggish markets on early Friday as it stays defensive near 1.0830-20 after reversing from a seven-week high the previous day, printing mild losses of late.

It’s worth noting that the Euro pair reverses from the multi-day high on Thursday as the Treasury bond yields paused the further downside while the US data also came in mostly impressive. Adding strength to the pullback moves was the quote’s inability to cross an important horizontal resistance around 1.0930-35. It should be noted, however, that the mixed concerns about the US Federal Reserve’s (Fed) next move and the European Central Bank (ECB) official’s hawkish comments probed bears of late.

That said, the fears of a ballooning Fed balance sheet renew hawkish calls for the US central banks and join the global banking turmoil to weigh on the sentiment and allow the US Dollar to lick its wounds near the seven-week low. However, the mixed US data and the Fed statements allowed key market players like DoubleLine’s Gundlach and Goldman Sachs to reiterate their dovish bias for the US central banks.

On the other hand, European Central Bank (ECB) Governing Council member Madis Muller said that inflation is a bigger problem than the rise in borrowing costs. The policymaker also added that the ECB should likely raise rates by a little. Further, ECB policymaker Klaas Knot said that the ECB is unlikely to be done with rate hikes and added that he still thinks that they need to raise the policy rate in May.

Talking about data, the preliminary readings of Eurozone Consumer Confidence for March dropped to -19.2 versus -18.3 expected and -19.1 prior. On the other hand, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

Amid these plays, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time. While portraying the mood, the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Looking ahead, preliminary readings of Germany, Europe and the US PMIs for March will join the US Durable Goods Orders for February to entertain the EUR/USD pair traders.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Technical analysis

EUR/USD marked the first daily loss in six on Thursday as it failed to cross the two-month-old horizontal resistance area surrounding 1.0930-35. The following pullback also broke an upward-sloping support line from Monday and allowed intraday sellers to aim for the area comprising an upward-sloping support line from March 15 and the mid-month high, around 1.0765-60.

Economists at Goldman Sachs bring out their new call on the US Federal Reserve (Fed), following Wednesday’s dovish outcome.

Key quotes

"The FOMC raised the funds rate by 25bp to 4.75-5%, against our expectation of a pause, but projected a weak economic outlook for the rest of 2023 and a more cautious path for the funds rate than Chair Powell had indicated was likely before the recent banking turmoil.”

"We have left our forecast for the peak funds rate unchanged at 5.25-5.5% and now expect additional 25bp rate hikes in May and June.”

“Our baseline forecast is 25bp above the FOMC's forecast of 5-5.25%, and our weighted-average path for the funds rate is above market pricing.”

China’s Ministry of Commerce spokesperson said on Friday, China does not seek to engineer a trade surplus with the US and views its trading relationship as determined by multiple factors such as different economic structures, the international division of labor, and US export controls to China.

 The spokesperson said that China called on the US to remove trade restrictions on China, which is beneficial to both sides.

The spokesperson said forcing the sale of TikTok would undermine the confidence of foreign investors in the US and should be opposed.

Market reaction

At the time of writing, AUD/USD is off the lows but remains on the offers near 0.6675 amid a broad US Dollar.

• Gold price is aiming to settle above $2,000 on a daily and weekly basis for the first time since March.
• Overall weak USD to the banking crisis and consideration of policy-tightening termination by central banks has supported Gold bulls.
• The only catalyst barricading the Gold rally is the recovery move by the USD Index.

Gold price (XAU/USD) is eyeing a weekly settlement above the psychological resistance of $2,000.00. The precious metal is likely to attempt a close above $2,000.00 for the third time on a daily basis this week as strength in the yellow metal is backed by multiple factors. From the overall weak US Dollar Index (DXY) to the potential banking crisis, and consideration of policy-tightening termination from the Federal Reserve (Fed), the Bank of England (BoE), and the Reserve Bank of Australia (RBA), all economic indicators are fueling strength in the Gold bulls.

S&P500 futures are trying to settle their feet after a few volatile sessions as US Treasury Secretary Janet Yellen has stated that the government is ‘prepared for additional deposits actions if warranted’. Widening insurance blanket for deposits has infused some confidence among market participants. The attempted recovery by the US Dollar Index (DXY) is the only factor, which is barricading the Gold price from the continuation of its upside journey.

Meanwhile, US Treasury yields have been battered after signals of pausing the rate-hike cycle by the Federal Reserve (Fed). Softer US treasury yields have improved the appeal for Gold as safe-haven.

Gold Price: Key levels to watch

The Technical Confluence Detector is demonstrating that Gold bulls are defending the critical support at $1,990.00 where the previous week's high and daily 38.2% Fibonacci retracement coincides.

A decisive move above $2,005.04, where the daily high and upper Bollinger Band (4H) coincides, would strengthen Gold bulls further, which will drive them toward Monthly second resistance pivot at $2020.

In an alternate scenario, the downside will be triggered if the Gold price skids below $1,960.00, which is the confluence of the previous month's high and weekly 23.6% Fibonacci retracement. A confident move below the aforementioned support would drag it towards $1,950.00, which is daily Support 2 gauged by the Pivot table.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• GBP/USD holds lower grounds near intraday bottom after reversing from seven-week high.
• Fears of tough banking regulations, Fed’s efforts to tame ballooning balance sheet weigh on sentiment.
• Fed’s dovish hike and downbeat yields join hawkish bias surrounding BoE, Brexit optimism to keep buyers hopeful.
• UK Retail Sales, PMIs for US/Britain could offer an active day ahead.

GBP/USD pares weekly gains at a nearly two-month high as bulls run out of steam amid mixed risk catalysts and anxiety ahead of the top-tier UK/US data on Friday. With this, the Cable pair retreats from a seven-week high to print the first daily loss in three, down 0.16% intraday as it flirts with the daily lo near 1.2260.

While the US Federal Reserve’s (Fed) dovish hike joined downbeat yields to previously propel the Cable buyers, fresh fears surrounding banking sector fallouts and hopes of longer tighter monetary policy from the Fed seem to have teased the GBP/USD sellers of late. It should be noted, however, that the downbeat US Treasury bond yields and mixed US data keep the pair buyers hopeful as they wait for key statistics.

Fears of a ballooning Fed balance sheet renew hawkish calls for the US central banks and join the global banking turmoil to weigh on the sentiment and allow the US Dollar to lick its wounds near the seven-week low. That said, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time. While portraying the mood, the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Also contributing to the GBP/USD weakness are comments from US Treasury Secretary Janet Yellen and Chair of the Basel Committee on Banking Supervision, Pablo Hernández de Cos. 

Financial Times (FT) recently mentioned said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system. On the other hand, US Treasury Secretary Janet Yellen said on Thursday, “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'.

On a different page, US second-tier data has been impressive of late and keeps the Fed hawks hopeful despite the latest disappointment from the US central bank. On the other hand, Bank of England (BoE) stays ready for further rate hikes should inflation stays high, which in turn joins the Brexit optimism to keep GBP/USD firmer.

Looking ahead, UK Retail Sales for February and preliminary readings of the UK and US PMIs for March will join the US Durable Goods Orders for February to entertain the Cable pair traders. However, major attention should be given to the banking headlines and Fed/BoE bets for clear directions. Additionally important will be a signing of the Brexit deal over the Northern Ireland Protocol (NIP) as UK Foreign Secretary James Cleverly and the European Commission’s President Maros Sefcovic will chair a meeting to discuss how to formally adopt the new arrangements.

Technical analysis

Although a 10-month-old resistance line, around 1.2345 by the press time, restricts immediate GBP/USD upside amid overbought RSI, sellers need validation from a 12-day-old ascending trend line of near 1.2250.

• AUD/USD holds lower ground after snapping two-day downtrend.
• Australia PMIs came in softer for March and weigh on the Aussie pair amid downbeat sentiment.
• Mixed concerns about Fed’s next move keeps AUD/USD on the dicey floor ahead of multiple US statistics.

AUD/USD prints the first daily loss in three around 0.6670 while bracing for the weekly loss during early Friday. In doing so, the Aussie pair justifies its risk barometer status, as well as downbeat activity data at home.

Earlier in the day, preliminary readings of Australia’s S&P Global PMIs for March dropped into the contraction figure of under 50.00 while slipping beneath the market forecasts and prior readings. That said, the Manufacturing gauge slid to 48.7 versus 50.3 expected and 50.7 prior while Services PMI declined to 48.2 from 50.7 previous readings and 49.7 market forecasts. With this, the Composite PMI dropped to 48.1 compared to 50.6 prior.

Elsewhere, the fears of a ballooning Fed balance sheet renew hawkish calls for the US central banks and join the global banking turmoil to weigh on the sentiment and allow the US Dollar to lick its wounds near the seven-week low. That said, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time. While portraying the mood, the S&P 500 Futures struggle to copy Wall Street’s positive moves.

Apart from the Fed bets, comments from US Treasury Secretary Janet Yellen and Chair of the Basel Committee on Banking Supervision also weigh on the market’s mood and favor the AUD/USD sellers.

On Thursday, US Treasury Secretary Janet Yellen said, “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. On the other hand, the Financial Times (FT) said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system.

Talking about the data, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

To sum up, AUD/USD justifies the market’s lack of clarity, as well as a cautious mood ahead of a busy calendar.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Technical analysis

A daily closing below a two-wee-old ascending support line, around 0.6655 by the press time, becomes necessary for the AUD/USD bears to keep the reins.

• USD/MXN retreats from intraday high, braces for the first weekly loss in three.
• Mixed US, Mexican data challenge traders but downbeat yields keep bears hopeful.
• Banking crisis, Fed bets tease buyers amid sluggish session.
• Busy calendar can entertain momentum traders during the one last shot of a volatile week.

USD/MXN stays defensive near 18.58-59 during early Friday, following a retreat from the intraday high during a sluggish session. Even so, the Mexican Peso pair remains well-set for the first weekly loss in three amid the broad US Dollar, despite the latest rebound in the greenback.

It’s worth noting that the fears of a ballooning Fed balance sheet renew hawkish calls for the US central banks and join the global banking turmoil to weigh on the sentiment and allow the US Dollar to lick its wounds near the seven-week low. That said, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time.

Apart from the Fed bets, comments from US Treasury Secretary Janet Yellen and Chair of the Basel Committee on Banking Supervision also weigh on the market’s mood and probe the USD/MXN bears.

“China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. “Strong actions have been taken to ensure deposits are safe,” said US Treasury Secretary Yellen. Elsewhere, the Financial Times (FT) said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system.

On Thursday, Mexico’s 1st half-month Inflation for March dropped to 0.15% from 0.28% expected and 0.3% prior while the Core Inflation reading matched 0.30% forecasts versus 0.35% previous readings. However, the Retail Sales grew notably, with 5.3% YoY versus 3.0% expected and 2.5% prior, for March and helps the Mexican Peso (MXN) to remain firmer.

On the other hand, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

Looking ahead, preliminary readings of the US S&P Global PMIs for March and the Durable Goods Orders for February will be crucial for the USD/MXN traders to watch. However, major attention should be given to the banking headlines and Fed bets for clear directions.

Technical analysis

Despite repeated bounces off the 18.50 horizontal support, the USD/MXN bears remain hopeful unless the quote offers a daily closing beyond the 50-DMA hurdle of 18.60.

• USD/JPY prints three-day losing streak to refresh multi-day low, bounces off daily low at the latest.
• Sustained trading below 50-DMA, bearish MACD signals favor sellers.
• Yen pair’s recovery remains elusive below five-week-long horizontal resistance.

USD/JPY licks its wounds near 130.60, after refreshing a 1.5-month low, during a three-day downtrend on early Friday. In doing so, the Yen pair sellers attack the support line stretched from early January while extending the mid-week pullback from the 50-DMA.

In addition to the pair’s inability to cross the 50-DMA, around 132.60 by the press time, the bearish MACD signals also weigh on the quote and suggest the downside break of the immediate support line, close to 130.50 at the latest.

Following that, the 130.00 round figure and multiple levels marked in February near 129.30, as well as near 128.00, could test the USD/JPY bears before directing them to the yearly low of 127.21.

It’s worth noting, however, that the Yen pair’s sustained weakness past 127.21, could make it vulnerable to testing the 61.8% Fibonacci Expansion (FE) of its moves between October 2022 and March 2023, near 122.50.

Alternatively, USD/JPY recovery can initially aim for the 50-DMA hurdle of 132.60. However, a horizontal area comprising multiple tops marked since February 17, close to 135.20, appears a tough nut to crack for the bulls afterward.

In a case where the Yen pair remains firmer past 135.20, the odds of witnessing a fresh monthly high, currently around 137.90, can’t be ruled out.

USD/JPY: Daily chart

Trend: Further downside expected

• EUR/CHF has delivered a break below 0.9934 as the SNB left room open for more rates after a 50 bps rate hike.
• The cross has breakdown the higher lows structure after challenging March 21 low at 0.9926.
• A bear cross, represented by the 20-and 50-period EMAs at 0.9954, indicates more weakness ahead.

The EUR/CHF pair has retreated after a short-lived recovery to near 0.9934 in the Asian session. The asset witnessed a steep fall on Thursday after the Swiss National Bank (SNB) hiked rates by 50 basis points (bps) to 1.50% despite fears of financial instability propelled by the demise of Credit Suisse.

After hiking the interest rate, SNB Chairman Thomas J. Jordan cited “We are raising rates to counter the renewed increase in inflationary pressure. The guidance on interest rates from SNB Jordan was also hawkish as the central bank is ready to raise rates further to ensure price stability.

On the Eurozone front, investors will keep an eye on preliminary S&P Global PMI (March) figures. As per the consensus, the Manufacturing PMI is seen at 49.0, higher than the prior release of 48.5. While the Services PMI might decline to 52.5 from the former release of 52.7.

EUR/CHF has breakdown the higher lows structure after challenging March 21 low at 0.9926 on an hourly scale. The downside bias for the cross was built after a negative bearish divergence, which showed exhaustion in the upside momentum. It is worth noting that the Relative Strength Index (RSI) (14) formed a lower high while the asset was continuously forming higher highs.

A bear cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 0.9954, indicates more weakness ahead.

The RSI (14) has also slipped into the bearish range of 20.00-40.00, which indicates that the bearish momentum is active.

More losses would be discovered if the cross slips below March 23 low at 0.9920, which will drag the asset toward March 15 high at 0.9883 followed by the round-level support at 0.9800.

On the flip side, a decisive break above March 20 high at 0.9966 will drive the cross toward the psychological resistance at 1.0000 followed by March 02 high at 1.0042.

EUR/CHF hourly chart

• NZD/USD is weakening and bears are in control.
• NZD/USD bears are eyeing key trendline supports and structures. 

NZD/USD is down on the day and heading toward key trendline support. At the time of writing, NZD/USD is trading at 0.6234 having traveled between a low of 0.6230 and a high of 0.6254. The following illustrates the series of breaks in structure and the prospects of a downside correction. 

NZD/USD daily chart

The price has been slicing through various levels of structure over the course of the year and 0.6064 is eyed on a break of the dynamic trendline support. 

NZD/USD H1 chart

From an hourly perspective, 0.6220 and 0.6200 are key structures should the bears manage to keep control below what will be considered as counter-trendline resistance. 

• WTI remains pressured after reversing from one-week high, eyes the first weekly gain in three.
• Mild risk-aversion join a pause in US Dollar, Treasury bond yields to weigh on WTI crude oil
• Comments suggesting hardships for the US policymakers to refill reserves also weigh on the black gold.

WTI crude oil extends the previous day’s U-turn from one-week high to refresh intraday low near $69.15 during early Friday.

In doing so, the black gold justifies the market’s fears of economic crisis, emanating from the bank fallouts, as well as the hopes of more rate hikes from the US Federal Reserve (Fed). It’s worth noting that comments from US Energy Secretary Jennifer Granholm failed to impress the black gold buyers despite suggesting more US buying to refill the reserves.

US Energy Secretary Granholm said, “It could take years to refill oil reserve,” while signaling the readiness for more crude release from the Strategic Petroleum Reserve (SPR).

Elsewhere, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time. a shift in the market’s mood, amid increasing fears of banking rout and Fed rate hikes, seems to also allow the WTI bears to keep the reins.

Further, a collapse in the banking shares and chatters that the Fed’s emergency lending to the banks has ballooned the balance sheet, renewing fears of more Fed rate hikes, which in turn favored the Oil prices. Reuters said, “Federal Reserve emergency lending to banks, which hit record levels the last week, remained high in the latest week, amid continued large-scale extensions of credit to the financial system, which now includes official foreign borrowing.” The news also mentioned that borrowing from the Fed caused the size of its overall balance sheet to move to $8.8 trillion from $8.7 trillion the prior week.

Elsewhere, mixed US data and comments from US Treasury Secretary Janet Yellen also weighed on the WTI prices. “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. “Strong actions have been taken to ensure deposits are safe,” said US Treasury Secretary Yellen.

Talking about the data, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

Moving on, the first readings of activity numbers from the US, Europe and the UK for March will be crucial for the WTI crude oil traders for clear directions. Should the PMIs appear upbeat the Oil price may regain the upside momentum while a negative surprise could weigh on the energy benchmark.

Technical analysis

Unless crossing an upward-sloping resistance line from March 16, around $71.80 at the latest, the WTI crude oil bears are all set to retest the 100-Hour Moving Average (HMA) level surrounding $68.65.

• EUR/USD is declining towards 1.0800 as USD Index has extended its recovery further.
• S&P500 futures recovered after the promise of insurance on additional deposits by US Treasury Secretary Yellen.
• Going forward, the release of the preliminary S&P Global Eurozone/US PMIs (March) will be keenly watched.

The EUR/USD pair is displaying a back-and-forth action around 1.0830 in the Tokyo session. The major currency pair is expected to continue its downside momentum toward the round-level support of 1.0800. The downside bias for shared currency pair is strengthening as the US Dollar Index (DXY) has shown a significant recovery.

S&P500 futures remain silent after a recovery move on Thursday backed by the promise of insurance on additional deposits by US Treasury Secretary Janet Yellen, which restored the confidence of investors, portraying some optimism in US equities. The US Dollar Index (DXY) has extended its recovery to near 102.70 as other western central banks are also following the footprints of the Federal Reserve (Fed).

On Wednesday, at the monetary policy meeting, Fed chair Jerome Powell delivered signs of concluding the year-long rate hiking spree to avoid any further mess in the banking crisis. Also, rates have reached to a point where room for further escalation is less. Like the Fed, other central banks are also eyeing a pause in the rate-hiking cycle such as the Bank of England (BoE), and the Reserve Bank of Australia (RBA). Therefore, the USD Index has shown a recovery move due to its safe-haven appeal.

Meanwhile, the demand for US government bonds has extended further as investors have cheered that the Fed is pausing rate hikes sooner. Higher demand for US bonds has trimmed the return offered on 10-year US Treasury yields below 3.4%.

Going forward, the release of the preliminary S&P Global Eurozone/US PMIs (March) will be keenly watched. Mixed performance is expected from both economies.

On the Eurozone front, unlike other economies, bigger rate hikes are still preferred as the European Central Bank (ECB) has still more room left. Also, the core inflation is extremely stubborn due to high wage pressures. ECB policymaker Klaas Knot said that the ECB is unlikely to be done with rate hikes and added that they still think that they need to raise the policy rate in May.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.8374 vs. the prior close of 6.8286.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• USD/CAD remains indecisive following Fed meeting and mixed pressures on both currencies.
• Key resistance and support levels are seen at 1.3739 and 1.3555, respectively.
• RSI indicates the potential for both upside and downside movements.

USD/CAD has remained in a consolidative phase since the Federal Reserve (Fed) meeting on Wednesday, as the pair has yet to find any clear directional cues.

Since the Fed signaled a pause, the pair remains indecisive. Downside pressure for the greenback comes from the Fed's dovish rate decision on Wednesday and ongoing liquidity injections. On the other hand, the loonie is also under pressure as the Bank of Canada (BoC) paused, and falling oil prices weigh on it.

The first line of resistance is seen at the 1.3739 mark, which is also Wednesday's high. A successful break above the resistance will pave the way toward the March high at the 1.3860 mark.

Downside price momentum is likely to be supported by the 21-day moving average, which is currently pegged around the current price level at 1.3716. A successful break below will pave the way toward the previous day's low at 1.3642. The last line of support is seen at 1.3555, which also coincides with the 50-day moving average.

The Relative Strength Index (RSI) is signaling a flat 50 level, opening the room for both upside and downside possibilities.

Friday’s calendar is due for US Durable Goods Orders for February and S&P Global Purchasing Manager Index (PMI) for Mach. Canada will release its Retail Sales data for January. 

USD/CAD: Daily chart

• GBP/JPY prints three-day downtrend on breaking one-week-old ascending trend line.
• Clear U-turn from the key EMA confluence, downbeat oscillators favor sellers.
• Bears approach 10-week-old upward-sloping support line but further downside appears elusive.

GBP/JPY takes offers to refresh the intraday low near 160.30 during early Friday, extending the previous two-day fall towards short-term key support.

In doing so, the cross-currency pair justifies the previous day’s downside break of a one-week-old support line, now immediate resistance near 161.25. Adding strength to the bearish bias is the quote’s reversal from a convergence of the 100-bar Exponential Moving Average (EMA) and the 200-EMA, around 161.70-80 at the latest.

It’s worth mentioning that the bearish MACD signals and an absence of oversold RSI (14) also keep the GBP/JPY sellers hopeful of witnessing the pair’s further downside.

As a result, an ascending support line from January 13, close to 159.20 by the press time, gains the major attention of the pair bears.

Following that, the monthly low of 159.56 may act as a validation point for the GBP/JPY pair’s slump toward the February low of 156.73.

On the contrary, an upside break of the support-turned-resistance line of around 161.25 will need validation from the aforementioned EMA confluence of 161.70-80 to recall the GBP/JPY buyers.

Even so, a one-month-long descending resistance line surrounding 163.00 appears crucial for the bulls to cross to retake control.

GBP/JPY: Four-hour chart

Trend: Further downside expected

• GBP/USD bulls stalling ahead of longer-term resistance.
• GBP/USD hangs over key 1.2250 structure that guards a significant bearish correction.

GBP/USD is under pressure as the US Dollar corrects. Since the prior analysis,  the Federal Reserve has driven markets to reconsider their US Dollar forecasts. However, there are prospects of a deep correction that would be expected to cap the Pound´s advance. 

DXY H4 chart

The bulls are moving in from support. 

GBP/USD technical analysis

GBP/USD is moving in on the longer-term chart´s head shoulders neckline:

GBP/USD H1 chart

However, as the greenback firms, there is the risk of a break in the structure around 1.2250 which will open risks of a significant bearish correction for the foreseeable future. 

• USD/CHF has climbed above 0.9170 as USD Index has paired the majority of losses faced after the Fed’s dovish guidance.
• Bearish bets on USD Index based on Fed’s dovish guidance have little significance as major central banks are reaching saturation.
• SNB went for a bigger rate hike despite the financial instability inspired by the demise of Credit Suisse.

The USD/CHF pair has climbed above the 0.9170 resistance in the Asian session. The Swiss franc asset has been backed by a solid recovery in the US Dollar Index (DXY). The USD Index has paired the majority of losses despite the Federal Reserve (Fed) being close to concluding its policy-tightening spell and only one rate hike is left in the basket.

Bearish bets built on the USD Index were mainly the outcome of dovish interest rate guidance by Fed chair Jerome Powell while delivering the monetary policy statement on Thursday. Investors ignored a big no to consideration of rate cuts in 2023 but cheered the change of language from ‘ongoing increases are appropriate’ to ‘some additional hikes might be appropriate’.

Along with the Fed, other central banks are also reaching to their terminal rate as the Reserve Bank of Australia (RBA) has considered a pause to the rate-hiking spree from its April meeting. Also, the Bank of England (BoE) cited on Thursday that more tightening will be required if there will be evidence of persistent inflation. The BoE came with this commentary after pushing its rates by 25 basis points (bps) to 4.25%.

Adding to that, the Bank of Canada (BoC) has already paused its rate-hiking cycle. As a majority of central banks are reaching a point of saturation then significant bearish bets on USD Index based on Fed’s dovish guidance have little significance.

On the Swiss Franc front, the Swiss National Bank (SNB) pushed rates by 50 basis points (bps) to 1.50%. SNB Chairman Thomas J. Jordan went for a bigger rate hike despite the financial instability inspired by the demise of Credit Suisse. The move was to weigh heaving on Swiss inflation, which has gone beyond the control of the SNB.

• Gold price struggles to extend two-day rebound as ascending resistance line from August 2022 prods bulls.
• Fresh concerns about banking crisis, Federal Reserve moves allow United States Treasury bond yields, US Dollar to lick their wounds.
• US preliminary PMIs, Durable Goods Orders will be important for Gold traders to watch for fresh impulse.

Gold price (XAU/USD) struggles to extend the two-day rebound from the 10-DMA as it seesaws around $1,993-94 during early Friday, following the retreat from an upward-sloping resistance line from the last August. In doing so, the XAU/USD tracks the latest consolidation of the US Dollar and United States Treasury bond yields ahead of a busy calendar.

Gold price rise amid market’s consolidation

Gold price remains sidelined as bulls fade upside momentum amid a pause in the United States Treasury bond yields and the US Dollar amid mixed catalysts surrounding and US data and fears of Federal Reserve’s (Fed) rate hikes. That said, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day while the US 10-year and two-year Treasury bond yields seesaw around 3.41% and 3.82% respectively by the press time.

US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

It should be noted that a collapse in the banking shares and chatters that the Fed’s emergency lending to the banks has ballooned the balance sheet, renewing fears of more Fed rate hikes, which in turn allowed the Gold price to pare recent gains. Also favoring the XAU/USD’s pause in further upside could be the mixed US data.

Reuters said, “Federal Reserve emergency lending to banks, which hit record levels the last week, remained high in the latest week, amid continued large-scale extensions of credit to the financial system, which now includes official foreign borrowing.” The news also mentioned that borrowing from the Fed caused the size of its overall balance sheet to move to $8.8 trillion from $8.7 trillion the prior week.

Furthermore, the US Treasury Secretary’s testimony in front of the House Appropriations Financial Services Subcommittee probed the market’s previous risk-on mood and allowed the Gold buyers to take a breather. US Treasury Secretary Yellen said, “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. “Strong actions have been taken to ensure deposits are safe.”

Busy calendar to entertain XAU/USD traders

Although the Gold price recently paused its north-run, the commodity remains firmer for the fourth consecutive week as traders brace for the preliminary readings of the United States S&P Global PMIs for March and the Durable Goods Orders for February. That said, the first readings of activity numbers from Europe and the UK, as well as the Retail Sales from Canada and Britain will also decorate the calendar and can keep the XAU/USD traders busy. It’s worth mentioning that the global central bankers, ex-Fed, remain hawkish and hence firmer data can allow the Gold price to pare recent gains, amid fears of more rate hikes.

Also read: S&P Global PMIs Preview: EU and US figures to shed light on economic progress

Gold price technical analysis

Gold’s pullback from a seven-month-old ascending resistance line couldn’t last long as the 10-Day Moving Average, around $1,938 by the press time, triggered the metal’s fresh run-up towards the aforementioned resistance line, close to the $2,000 round figure.

It’s worth noting that the Year-To-Date (YTD) high marked earlier in the week around $2,010 act as the last defense of the Gold bears before highlighting the previous yearly top surrounding $2,070.

On the contrary, February’s top surrounding $1,960 and the 10-DMA level of near $1,938 can restrict short-term XAU/USD downside ahead of directing the Gold sellers toward the $1,900 threshold.

Should the Gold price remains bearish past $1,900, the 38.2% Fibonacci retracement level of its upside from September 2022 to February 2023 advances, near $1,856, precedes the 100-DMA key support of $1,837 to limit the metal’s further upside.

On a different page, the Moving Average Convergence and Divergence (MACD) indicator prints bullish signals and supports the Gold buyers but the Relative Strength Index (RSI) line, placed at 14, nears the overbought territory and suggests limited room towards the north.

To sum up, the Gold price is likely to grind higher and can stay on the bull’s radar unless breaking the 100-DMA support.

Gold price: Daily chart

Trend: Further upside expected

• AUD/NZD is facing barricades around 1.0700 on weaker-than-projected preliminary Australian PMI data.
• Preliminary Manufacturing and Services PMI have contracted to 48.7 and 48.2 respectively.
• New Zealand’s growth rate is expected to hit badly as the consequences of the flood situation will be reflected ahead.

The AUD/NZD pair is struggling to recapture the round-level resistance of 1.0700 in the Asian session. The release of the downbeat preliminary Australian S&P Global PMI data has impacted the Australian Dollar. The Manufacturing PMI has landed at 48.7, lower than the consensus of 50.3 and the former release of 50.5. Also, the Services PMI has dropped significantly to 48.2 from the expectations of 49.9 and the prior print of 50.7.

It looks like higher rates from the Reserve Bank of Australia (RBA) have trimmed the scale of economic activities dramatically. Households with lower funds are struggling to offset the inflated prices of goods and services, which have forced producers to operate with less capacity. Lower output signifies weak retail demand that might result in inflation softening and will delight RBA policymakers.

Investors should be aware that the RBA has already pushed its Official Cash Rate (OCR) to 3.60%. RBA policymakers have started considering a pause in its Quantitative tightening program from April to assess the impact of current monetary policy.

Next week, monthly Australia’s Retail Sales (Feb) data will be keenly watched, which is expected to expand by 0.4% lower than the former expansion of 1.9%. The least expansion in retail demand would bolster hopes for further deceleration in the Australian Consumer Price Index (CPI) ahead.

Meanwhile, the New Zealand Dollar is expected to remain on tenterhooks as New Zealand’s growth rate is expected to hit badly due to the flood situation. The NZ economy would require plenty of time to attain full recovery. The economy is still worried about elevated inflation, which is impacting households dramatically. More rate hikes are expected from the Reserve Bank of New Zealand (RBNZ) to bring down inflation meaningfully.

• AUD/USD bulls look to the  38.2% Fibonacci of the prior bearish leg and then 0.6725 which guards a continuation higher.
• Bears are in the market and eye a move deeper into support. 

AUD/USD is under pressure below a key 0.6720 area and the focus is on the downside for the immediate future. The following illustrates the bias and the prospects of a deeper move into support:

The bias is bullish while being on the back side of the prior bearish trend although there is an emphasis on the downside for the meanwhile on the lower time frames:

Zoomed in, we can see that AUD/USD has left an M-formation on the 4-hour chart. Currently, a correction into the neckline would meet a 38.2% Fibonacci of the prior bearish leg. Either way, while below here, the bias is to the downside for a deeper test into the support area. 0.6725 is an upside resistance that guards a continuation higher subsequent of the bullish breakout. 

• Silver prices retreats from seven-week high, portrays a bearish chart formation.
• Overbought RSI, sluggish MACD signals add strength to downside bias.
• Key SMAs can test the XAG/USD sellers; bulls need validation from $23.60.

Silver price (XAG/USD) drops to $23.00 as it snaps a two-day winning streak while reversing from the highest levels since early February on Friday. In doing so, the bright metal prints a one-week-old rising wedge bearish chart formation and lures the sellers due to the pattern’s positioning at the multi-day top.

Adding strength to the downside bias could be the sluggish MACD signals and the overbought conditions of the RSI (14) line.

As a result, the XAG/USD is likely to decline further toward the 61.8% Fibonacci retracement level of the metal’s fall during the February-March period, around $22.80.

However, the quote’s further declines hinge on its ability to break the stated wedge’s lower line, around $22.60 at the latest.

Following that, the 50-SMA and 200-SMA can entertain the XAG/USD sellers around $22.30 and $21.55 during the theoretical south-run towards the early March swing high surrounding $21.30.

Alternatively, recovery moves need to cross the $23.20 hurdle to defy the bearish chart formation.

Even so, multiple hurdles marked around $23.60 can prod the Silver buyers before directing them to the previous monthly high surrounding $24.65.

Overall, Silver price is likely to witness a pullback but the road towards the south appears limited.

Silver: Four-hour chart

Trend: Further downside expected

• AUD/JPY mirrors risk mode amid global financial instability.
• Australia's March Flash PMI results indicate a sustained economic slowdown.
• Inflation uncertainty persists in Japan despite easing price indicators.

The risk-sensitive AUD/JPY currency pair mirrors the current risk mode, as the Australian dollar weakens following the release of the S&P Global Preliminary Purchasing Manager Index (PMI) for March. The composite PMI dropped to 48.1 from the previous 50.6, while the manufacturing PMI fell to 48.7 from 50.5, and the service PMI declined to 48.2 from 50.7.

The March Flash PMI results indicate a sustained economic slowdown into 2023. Despite easing price indicators, uncertainty regarding inflation persists due to high service industry input prices and labor costs. As the Reserve Bank of Australia (RBA) prepares for its April meeting, strong employment figures and ongoing inflation uncertainty may result in a closely contested decision on whether to pause the tightening cycle amid global financial instability.

Japan's Consumer Price Index (CPI) for February showed a YoY rate of 3.3%, compared to the expected 4.1% and the previous 4.1%. Excluding food and energy, the index came in at 3.5%, against the expected 3.4% and the previous 3.2%. The slowdown in headline CPI can be attributed to government subsidies for gas and electricity bills aimed at mitigating rising living costs. However, many economists argue that broader price pressures within the economy remain strong, potentially leading the Bank of Japan (BoJ) to phase out or abandon its yield curve control policy soon. Although the Core figure still looks sticky. 

In addition to Japan's CPI, the country's flash PMI data will be released on Friday. The AUD/JPY pair's movement is likely to be influenced by risk sentiment, as uncertainty arises from the potential impact of the banking crisis on US credit conditions in the coming months. This uncertainty could subsequently affect economic activity and inflation. Federal Reserve Chair Jerome Powell acknowledged this uncertainty on Wednesday, stating, "We simply don't know."

Levels to watch