Forex-novosti i prognoze od 17-03-2023

On Wednesday, the Federal Reserve will announce its decision on monetary policy. Analysts at Danske Bank see the Fed raising rates by 25 basis points despite recent turmoil amid banking sector jitters. 

Fed cannot afford to stop tightening monetary policy

“This week, the ECB emphasized that there is no trade-off between inflation and financial stability risks, and we expect Fed to deliver a similar message next week. The new Bank Term Funding Program, allowing banks to tap liquidity from the Fed against collateral valued at par, provided banks with USD11.9 billion during its first three days of use.”

“So far, short-term real rates and broader financial conditions have remained relatively stable. Our in-house 'growth tax' measure is at modestly restrictive territory, as the tightening in credit and equity components has compensated for the lower yields and mortgage rates. This suits Fed well as long as macro data remains strong, and for the time being, we like our call of a 25bp rate hike next week and a terminal rate at 5.00-5.25% in May. Hence, we see modest upside risks to short-term rates from current levels.”
 

Next Thursday, the Bank of England (BoE) will announce its decision on monetary policy. A 25 basis point rate hike to 4.25% is expected. Analysts at Rabobank also see a quarter-point rate increase and warn that such scenario is not fully priced in the interest market, “which indicate that the chance of a hold has increased following the collapse of SVB.”

Fear, uncertainty and doubt

“The 2007-2008 financial crisis taught us that even small failures can lead to significant problems. While SVB's poor liquidity risk management was the underlying cause of its downfall, the shift from a 'lower for longer' to a 'higher, possibly for longer' interest rate regime acted as the trigger. This raises the question of whether other financial institutions could eventually face a similar situation, fuelling the infamous trio of fear, uncertainty and doubt.”

“We would therefore expect the hiking cycle to continue at a more moderate pace of 25bp at next week’s meeting. That would lift Bank rate to 4.25%. With external members Tenreyro and Dhingra surely not voting for an increase, five out of seven remaining policy makers would have to vote for such a hike. Indeed, it wouldn’t even come as a surprise if we’d see a three-waysplit, with Tenreyro and/or Dhingra even voting for a cut.”
 

• Gold price surged on Friday, extending weekly gains to over $100. 
• New context of lower yields and banking jitters boost gold’s demand. 
• XAU/USD eye best week in years. 

Gold price moved further to the upside during the American sessions, breaking above $1,980. Late on Friday, XAU/USD stands at $1,982 the highest level since April 2022 and on its way to the third-highest weekly close on record.

From the level it had a week ago, the yellow metal is up by 6.3%. A sharp reversal in Treasury yields is driving the rally in Gold price. Bonds are having the week in years. Financial turmoil weighed on monetary policy expectations and the economic outlook.

Next week the Federal Reserve will announce its decision. A 25 basis point rate hike is expected. A few days ago analysts were asking 25 or 50 after US inflation and employment data. The new scenario includes the odds of a pause at the upcoming meeting. Things have changed dramatically, triggering an impressive rally in XAU/USD. 

Seen Gold price above $2,000 next week looks likely. Even when price moves consistently to the upside, it makes sharp corrections. In the current context, traders should take extra caution. 

Technical levels 

Here is what you need to know for next week

Wall Street indexes ended higher a volatile week as traders sail in rough waters. The Nasdaq gained more than 4%, on a bumpy trip. The VIX moderated, rising around 2% over the week, but is up 25% from the level it had a months ago. Banking concerns again dominated price action across financial markets. European and Asian indices closed with weekly losses. 

What it started a week ago with the Silicon Valley Bank (SVB), continued with Signature Bank, Credit Suisse (that stays on the lookout) and the First Republic Bank. Financial market turbulences will remain centre-stage over the next days. 

Next Wednesday, the Fed will likely raise interest rates by 25 bps, despite market tensions. If the US central stays on hold afraid of the current context, it could trigger a shock in markets that could offset the positive news of a pause of the tightening cycle. The clues about the future will be watched closely. China on Monday is seen leaving rates unchanged. 

US Treasuries had the biggest weekly gains in years. Yields across the globe collapse as investors fly to quality amid rising odds of interest rate cuts before year-end. The Japanese Yen was the main winner among currencies of this context. USD/JPY lost almost 300 pips. 

The US Dollar Index (DXY) posted the lowest weekly close in five weeks. The deterioration in market sentiment did not boost the Greenback enough. If systemic risk fears start to dominate price action the DXY could make a strong comeback. 

The European Central Bank (ECB) raised interest rates by 50 basis points as expected and dropped forward guidance. Economic data is being overshadowed by current developments; however, next week’s PMIs will gather attention. French President Emmanuel Macron will face a non-confidence vote next week. The banking crisis weighed on the Euro. EUR/GBP posted the lowest close since mid-January. EUR/USD ended the week flat looking at the 1.0700 area, after holding above critical 1.0500. 
Better-than-expected economic data from the UK offered support to the Pound. GBP/USD had the best weekly performance since mid-January, rising toward 1.2200. Next week, Bank of England’s Monetary Policy Committee will met. Market participants expect a final 25 basis points rate hike.

The Swiss franc was hit by the banking chaos, that included the Credit Suisse. The situation forced the Swiss National Bank (SNB) to take action. The SNB will announce its monetary policy decision on Thursday. February’s inflation in Switzerland surprised on the upside, but the current turmoil could keep the SNB away from another hike. Again USD/CHF rebounded sharply from near 0.9000, to the 20-week Simple Moving Average. EUR/CHF rose from four-week lows past 0.9900. 

USD/CAD finished the week lower around 1.3700 but far from the bottom. Next week, the key report from the Canadian economy will be February’s Consumer Price Index (CPI) on Tuesday. The kiwi was among the biggest gainers despite weak New Zealand Q4 GDP data. The

AUD/USD had the best week in months, helped by a weaker US Dollar and also by upbeat Australian employment data.

Gold is another major winner rising more than a hundred dollar during the week, approaching $2,000. The yellow metal is also benefiting from risk aversion and the reversal in bond yields. 

Bitcoin keeps moving north and is back above $26,500 after rising more than 20% during the week. 

It was a wild week for emerging market currencies. USD/MXN jumped for the second week in a row. The pair erased a 10% YTD loss but failed to hold above 19.00. 
 

• Financial turmoil weighs on investors’ mood and drags black gold lower.
• WTI bounced modestly after posting a fresh 2023 low of $65.22 a barrel.

The barrel of West Texas Intermediate fell to $65.22 on Friday, its lowest since November 2022. It currently trades at around $67.30 a barrel, breaking lower amid financial turmoil weighing on the market mood.

The banking crisis triggered by Silicon Valley Bank (SVB) and Signature Bank last week escalated, with Credit Suisse under siege after its top shareholder ruled out providing financial assistance to the company. Stock markets collapsed despite authorities’ efforts to ensure the banking sector was strong enough to bare with the situation.

Nevertheless, concerns remained after SVB  officially announced its bankruptcy on Friday, while yet another bank came under scrutiny, First Republic. European and US indexes trade in the red and are poised to finish the week in negative territory.

WTI, in the meantime, is down for a fifth consecutive day, with daily technical readings hinting at continued declines ahead. Once below the aforementioned low, the slump could extend to $62.41, December 2021 monthly low. A break below the latter will likely attract speculative buying, with $60.00 acting as a major psychological barrier. The black gold is currently finding sellers at around $70.00, with gains above the level unlikely to prosper. 

• USD/CAD still down for the week and pointing to the upside.
• US Dollar mixed on Friday between lower US yields and risk aversion.
• Key events for next week: Canada CPI (Tuesday) and FOMC meeting (Wednesday).

The USD/CAD printed a fresh daily high on Friday at 1.3772, amid a weaker Loonie and a mixed Greenback. After moving away from the bottom, the pair is about to post a small weekly loss.

The bad and the ugly

Data released on Friday showed the Canadian Industrial Product Price Index dropped 0.8%, a surprise considering market expectations of a 1.6% increase. The Raw Material Price Index fell 0.4%, below the estimate 0%. The economic figures did not help the Loonie, that is among the worst performers on Friday.

Next week, the key report from the Canadian economy will be February’s Consumer Price Index (CPI) on Tuesday. It is expected to show an increase of 0.4% MoM, and the annual rate slowing from 5.9% in January to 5.5%.

The US Dollar is mixed on Friday, attempting a recovery as stocks in Wall Street deepen losses. US yields are down by 4% on average, with the 10-year at 3.41%, slightly above March lows.

Markets remain anxious with the banking turmoil and next week is the FOMC meeting. The consensus is still for a 25bps rate hike but the end of the tightening cycle is seen sooner than previously thought. The change in expectations weighed on the Greenback.

Higher lows, lower highs

The USD/CAD has been making higher lows and lower highs during the last sessions. On Friday, it reversed from a two-day low at 1.3676 and jumped to 1.3763. The short-term direction is not clear.

The pair remains above the 20-day Simple Moving Average (1.3655) and also above the 1.3660/70 key support area. While above that two supports, the outlook looks constructive for the USD/CAD.

USD/CAD 4-hour chart

Technical levels

Repricing of the Fed’s terminal rate will drive the Gold price in the short-term. Economists at ANZ Bank expect the Fed to pause its interest rate hiking cycle this year. This should lower the USD and leave US real yields intact, then lifting XAU/USD in the second half of 2023.

A weakening greenback will be a key tailwind for Gold prices

“Improving fundamentals across other major economies could limit the greenback’s upside. Our DXY forecast trajectory remains unchanged, and has the index falling to 98 by end of the year. This will be a tailwind for the Gold market.”

“We believe recalibration of market expectations around the FFR could keep gold prices volatile in the short-term. Nevertheless, we still expect the Fed to pause and for yields to trend lower towards year-end, which should support Gold prices in H2 2023.”

“We see last year’s monetary tightening starting to show up in slowing economic growth later this year. This could have a dual impact: slowing economic growth could trigger monetary policy easing, and Gold could attract haven flows.”

• GBP/USD continues to trade in positive territory at around 1.2150.
• US Dollar stays on the back foot after UoM Consumer Sentiment Survey.
• The pair remains on track to post weekly gains.

GBP/USD declined toward 1.2100 during the European trading hours but regained its traction amid renewed US Dollar (USD) weakness. The pair seems to have stabilized at around 1.2150 in the American session and remains on track to end the week in positive territory.

Plunging US yields weigh on USD

Despite the negative shift witnessed in risk sentiment, the USD is having a difficult time finding demand ahead of the weekend. The benchmark 10-year US Treasury bond yield is down nearly 5% on the day at around 3.4%, forcing the US Dollar Index (DXY) to stay in the red near 104.00.

The data published by the University of Michigan (UoM) revealed on Friday that the Consumer Confidence Index declined to 63.4 in early March from 67 in February. More importantly, "year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021," UoM Surveys of Consumers Director, Joanne Hsu, said.

Ahead of next week's critical Federal Reserve policy meeting, this report seems to be causing investors to reassess their positions. According to the CME Group FedWatch Tool, the probability of a 25 basis points Fed rate hike next week currently stands at 68%, down from nearly 80% earlier in the day.

Technical levels to watch for

In a risk-averse environment, the Canadian Dollar is likely to find it difficult to hold its ground against the US Dollar, in the opinion of economists at Commerzbank.

Limited CAD recovery potential against the USD

“The jitters on the financial markets led to increased risk aversion recently. In such an environment, it is difficult for the Canadian Dollar to hold its ground against the USD.”

“We have adjusted our forecasts, but continue to see limited CAD recovery potential in the medium term.”

Source: Commerzbank Research

The economic outlook has just become more uncertain. Economists at Wells Fargo expect the US Dollar to stay strong in the short term. Nevertheless, the greenback is set to weaken later this year.

Fed to cut rates in late 2023

“Given resilient growth and further monetary tightening in early 2023, we see a brief period of USD strength for now.”

“However, our longer-term outlook remains for gradual US Dollar depreciation later this year, as the US falls into recession and the Fed cuts rates in late 2023.”

Gold price rose further on Friday reaching the highest level in eleven months, rising above $1,960/oz. XAU/USD is rising by more than $40, adding to weekly gains.

Risk aversion amid the banking crisis and lower US Treasury bond yields continue to boost the demand for the yellow metal. Since March 9, XAU/USD has risen more than $150 or 8%.

The rally gained speed last Friday, following the Nonfarm Payroll report and then accelerated following the collapse of Silicon Valley Bank (SVB). The ongoing turmoil softened central banks tightening expectations, pushing government bond yields lower.

Gold at $2,000 now looks like an achievable goal in the short term. Prior to the mark, a strong resistance area is seen around the $1,980 zone.

Is the credibility of the Federal Reserve and the ECB suffering? Analysts at Natixis have looked at different measurements of expected inflation, in the short and medium and long term, to analyse changes in central bank credibility.

How can central bank credibility be measured?

“If central bank credibility is affected by the recent inflation episode, medium and long-term expected inflation is increased.”

We see a slight increase in all medium and long-term inflation expectations (3-year, 5-year and 10-year) of 50 to 100 basis points. So there is a slight loss of central bank credibility associated with their weak response to inflation in 2021-2022-2023.” 

• EUR/USD gives away part of the initial bull run to 1.0670.
• EMU Final Inflation Rate rose 8.5% YoY in February.
• US advanced Consumer Sentiment worsens to 63.4 in March.

EUR/USD maintains the bid bias well in place around the 1.0640 region at the end of the week. Despite the bounce in the last couple of sessions, the pair’s weekly performance falls into the negative territory.

EUR/USD: Weekly upside appears capped around 1.0760

The recovery in the risk complex – mainly on the back of alleviated concerns surrounding the banking system on both sides of the ocean – keeps the buying pressure unchanged around EUR/USD, which adds to Thursday’s advance past 1.0600 the figure at the end of the week.

On the USD-side of the equation, the knee-jerk in the buck comes amidst the resumption of the downtrend in US and German yields, all following the 50 bps rate hike by the ECB on Thursday and conviction of a 25 bps rate raise at the Fed’s gathering on March 22.

Data wise in the euro area, final inflation figures showed the CPI rose 8.5% in the year to February and 5.6% when it came to the Core inflation.

In the US, Industrial Production came flat on a monthly basis in February and contracted 0.2% vs. the same month of 2022. In addition, Manufacturing Production expanded 0.1% MoM and contacted 1.0% over the last twelve months. Finally, the CB Leading Index dropped 0.3% MoM during last month and the advanced Michigan Consumer Sentiment is expected to have deflated to 63.4 in March.

What to look for around EUR

EUR/USD manages to leave behind some of the recent weakness and retakes the 1.0600 hurdle and above at the end of the week. The rebound seen so far in the second half of the week faltered near 1.0670.

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.

Key events in the euro area this week: EMU Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. 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 advancing 0.20% at 1.0629 and the breakout of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the other hand, the next support emerges at 1.0516 (monthly low March 15) seconded by 1.0481 (2023 low January 6) and finally 1.0324 (200-day SMA).

Gold is profiting from the market turmoil. But if the Fed sees an additional need for action to combat inflation, Gold is likely to shed some of its latest gains again, economists at Commerzbank report.

Market should once again start betting on rate cuts in H2

“The market now only expects the Fed to hike rates to 5% by May, after which rate cuts are envisaged until the end of the year. That said, we believe that the Fed will raise interest rates to 5.5% by mid-year and will only start lowering them again next year. This could trigger another fall in the Gold price towards the $1,800 mark in the second quarter, followed by a rise to $1,950 by year’s end.” 

“After all, the market should once again start betting on rate cuts in the second half of the year. The week that is now drawing to a close has demonstrated how much the Gold price can profit from this.”

• UoM Consumer Confidence Index declined in March's flash estimate.
• US Dollar Index stays in negative territory but holds above 104.00.

Consumer sentiment in the US weakened in early March with the University of Michigan's (UoM) Consumer Confidence Index declining to 63.4 from 67 in February. This reading came in worse than the market expectation of 67.

"Year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, but remain well above the 2.3-3.0% range seen in the two years prior to the pandemic," the publication further read. "Long-run inflation expectations edged down to 2.8%, falling below the narrow 2.9-3.1% range for only the second time in the last 20 months."

Surveys of Consumers Director Joanne Hsu "with ongoing turbulence in the financial sector and uncertainty over the Fed’s possible policy response, inflation expectations are likely to be volatile in the months ahead."

Market reaction

The US Dollar Index edged lower with the initial reaction and was last seen losing 0.35% on the day at 104.10.

• NZD/USD climbs back closer to the weekly high, though struggles to capitalize on the move.
• The risk-off mood seems to cap the risk-sensitive Kiwi near the 0.6250-0.6260 confluence.
• A break back below the 0.6100 mark will shift the near-term bias back in favour of bears.

The NZD/USD pair builds on the previous day's goodish rebound from the 0.6140-0.6135 area and gains strong follow-through traction for the second successive day on Friday. The pair maintains its bid tone through the early North American session, albeit seems to struggle to capitalize on the move and remains below the 0.6260-0.6270 confluence hurdle, or the weekly high.

The said barrier comprises the 200-day Exponential Moving Average (EMA) and the 38.2% Fibonacci retracement level of the February-March downfall. Given that oscillators on the daily chart have just started gaining positive traction, a sustained move beyond will be seen as a fresh trigger for bullish traders and set the stage for an extension of the NZD/USD pair's recent recovery from the YTD low touched last week.

The subsequent move-up could then allow spot prices to reclaim the 0.6300 round-figure mark, which coincides with the 50% Fibo. level. The momentum could get extended further and lift the NZD/USD pair towards the 61.8% Fibo. level, around the 0.6360 region, en route to the next relevant hurdle just ahead of the 0.6400 round-figure mark.

A fresh wave of the global risk-aversion trade, however, holds back bulls from placing aggressive bets around the risk-sensitive Kiwi and capping the NZD/USD pair. Nevertheless, the technical setup supports prospects for some meaningful upside. Hence, any pullback towards the 0.6200 round-figure mark, or the 23.6% Fibo. level might still be seen as a buying opportunity and is more likely to remain limited, at least for now.

That said, a convincing break below the latter might negate the positive outlook and shift the near-term bias back in favour of bearish traders. The NZD/USD pair might then accelerate the fall towards the 0.6135-0.6125 intermediate support before eventually dropping to the 0.6100 mark. Some follow-through selling below the 0.6085 area, or the YTD low, could make spot prices vulnerable to challenge the 0.6000 psychological mark.

NZD/USD daily chart

Key levels to watch

USD loses ground as risk appetite rebounds. But the greenback is unlikely to fall significantly, in the view of economists at Scotiabank.

Investors are embracing risk and feeling a bit more confident

“Improving risk appetite and focus on peak Fed policy represent headwinds for the USD broadly; intraday patterns reflect this, with the USD down against all its major currency peers on the session.”

“Losses for the big Dollar seem unlikely to extend significantly until investors get a sense of the Fed policy outlook at next week’s FOMC decision, however.”

• Japanese Yen gains momentum as US Yields and Wall Street futures drop. 
• US Industrial Production stagnates in February against expectations of a 0.2% increase. 
• USD/JPY heads for the third weekly loss in a row, and to the lowest daily close in a month. 

The USD/JPY dropped further as Treasury Bond printed fresh highs, falling to as low as 131.99. The 132.00 area is a critical support for the US Dollar. 

Optimism fades, yen emerges

US yields are falling on Friday. The US 10-year yield dropped to 3.45% while the 2-year yield stands at 4.06%, down 2.40%, for the day. The decline in yields takes place as US stocks opened lower as markets remain anxious. 

Data released in the US showed Industrial Production rose 0% in February against expectations of a 0.2% increase. January’s numbers were revised higher from 0% to 0.3%. Capacity Utilization remains at 78%. Later on Friday, the University of Michigan will release its Consumer Sentiment report.

Lower yields and a decline in stocks in boosting the Japanese Yen across the board. USD/JPY lost more than a hundred pips during the last three hours. The pair fell from above 133.00 to 131.99.

As of writing, USD/JPY trades at 132.30, under pressure and looking at the 132.00 mark. A consolidation below would point to further weakness. The next strong barrier is seen at 130.60. 

Technical levels

• Gold price regains strong positive traction on Friday and rallies to its highest level since February.
• Fears of a global banking crisis weigh on investors’ sentiment and lift the safe-haven XAU/USD.
• Bets for a less hawkish Fed, tumbling US bond yields, a weaker USD provide an additional boost.

Gold price catches fresh bids following the previous day's directionless price action and builds on its intraday positive move through the early North American session. The XAU/USD spikes to a fresh six-week high, around the $1,946 region, in the last hour and remains on track to register its biggest weekly gain since mid-November.

A fresh wave of the global risk-aversion trade - as depicted by renewed selling around the equity markets - boosts demand for traditional safe-haven assets and benefits Gold price. Despite multi-billion-dollar lifelines for troubled banks in the United States (US) and Europe, investors are still trying to determine whether the risk of a full-blown global banking crisis has been tamed and remain concerned about the widespread contagion. Adding to this, looming recession risks take a toll on the risk sentiment and drive haven flows towards the precious metal.

Furthermore, a steep decline in the US Treasury bond yields is seen as another factor that benefits the non-yielding Gold price and remains supportive of the strong intraday rally. The anti-risk flow, along with rising bets for a smaller 25 basis points (bps) rate hike at the upcoming Federal Open Market Committee (FOMC) meeting on March 21-22, drag the US bond yields lower. Investors now seem convinced that the Fed will adopt a less hawkish stance in the wake of last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank.

Meanwhile, diminishing odds for more aggressive policy tightening by the US central bank, along with tumbling US bond yields, keep the US Dollar (USD) depressed for the second straight day. A weaker Greenback provides an additional boost to the US Dollar-denominated Gold price, taking along some short-term trading stops near the previous weekly/monthly high around the $1,937 area. This might have already set the stage for a further near-term appreciating move towards the $1,959-$1,960 region, or the multi-month top touched in February.

Technical levels to watch

• Industrial Production in the US remained unchanged on a monthly basis in February.
• US Dollar Index stays in negative territory slightly above 104.00.

Industrial Production in the US unchanged in February following January's 0.3% (revised from 0%) expansion, the US Federal Reserve reported on Friday. This reading came in weaker than the market expectation for an increase of 0.2%.

The Fed noted that manufacturing output edged up 0.1% in the same period and said Capacity Utilization remained steady at 78.0%.

Market reaction

The US Dollar Index stays on the back foot after this report and was last seen losing 0.23% on the day at 104.20.

The Canadian Dollar underperforms despite risk appetite recovery. Economists at Scotiabank expect the Loonie to struggle to post gains.

Choppy range trading between 1.35-1.38 for now

“The improvement in risk appetite is a modest tailwind for the CAD versus the USD while US-Canada yield spreads across the curve are less onerous for the CAD following this week’s turmoil, they remain a drag.”

“Compelling reasons to push the CAD higher are scant and that likely means more, choppy range trading between 1.35-1.38 for now.”

• AUD/USD continues with its struggle to find acceptance above the 0.6700 mark on Friday.
• The risk-off mood revives demand for the safe-haven USD and caps the risk-sensitive Aussie.
• Expectations for a less hawkish Fed act as a headwind for the buck and lend some support.

The AUD/USD pair trims a part of its intraday gains to a nearly two-week high and retreats below the 0.6700 round-figure mark heading into the North American session on Friday.

A fresh leg down in the equity markets helps the safe-haven US Dollar to bounce off the daily low and acts as a headwind for the risk-sensitive Australian Dollar. Despite multi-billion-dollar lifelines for troubled banks in the US and Europe, investors remain worried about widespread contagion and the possibility of a full-blown global banking crisis. This, along with looming recession fears, takes its toll on the global risk sentiment and drives some haven flows towards the Greenback.

That said, declining US Treasury bond yields continue to weigh on the USD and remain supportive of the intraday bid tone surrounding the AUD/USD pair. Against the backdrop of the global flight to safety, expectations that the Fed will adopt a less hawkish stance amid the worsening economic conditions drag the US bond yields lower. In fact, the markets are now pricing in a greater chance of a smaller 25 bps rate hike at the upcoming FOMC policy meeting on March 21-22.

This comes on the back of last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - and warrants some caution for the USD bulls. Traders, however, might prefer to move to the sidelines ahead of next week's key central bank event risk. In the meantime, the Reserve Bank of Australia's (RBA) recent dovish shift, signalling that it might be nearing the end of its rate-hiking cycle, might continue to cap the upside for the AUD/USD pair, at least for the time being.

Next on tap is the release of the Michigan US Consumer Sentiment Index. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the AUD/USD pair. Nevertheless, spot prices manage to hold in the positive territory for the second successive day and remain on track to end the week on a positive note, reversing a major part of last week's losses to its lowest level since November 2022.

Technical levels to watch

The Indian Rupee has been stable since the start of the year. INR will continue to be supported by strong growth and hawkish RBI, economists at Commerzbank report.

RBI to hike rates

“We expect USD weakness, solid growth, and tight monetary policy to lead to a stable to slightly lower USD/INR by the end of the year.”

“USD/INR has held within a narrow range since the start of the year, between the 80.50-82.50 range. We project a slightly lower USD/INR by year-end to 81.50.”

Source: Commerzbank Research

• EUR/USD extends the rebound north of 1.0600 on Friday.
• The next up-barrier emerges at the March top near 1.0760.

EUR/USD gathers extra pace and climbs to 2-day highs near 1.0670 following Thursday’s positive price action.

If the recovery gathers impulse, then the pair could confront the March high at 1.0759 (March 15) - which remains underpinned by the proximity of the 55-day SMA – prior to the weekly peak at 1.0804 (February 14).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0324.

EUR/USD daily chart

EUR/USD edges off earlier highs above the 1.0650 area. Economists at Scotiabank expect the world's most popular currency pair to tick down.

Risks tilted towards a push to the mid/upper 1.04s

“At this point, gains look corrective ahead of another push lower (weaker EUR intraday below 1.06).”

“Trend momentum signals are leaning bearish on the short-term (intraday and daily) studies, which should limit the EUR’s ability to rally for now.”

“We spot support at 1.0510/15.” 

“Risks are tilted towards a push to the mid/upper 1.04s.” 

• DXY remains under pressure and adds to Thursday’s losses.
• There is decent contention around the March lows near 103.50.

DXY keeps the bearish tone well and sound in the second half of the week.

Further loss of momentum could prompt the dollar to revisit the area of recent lows near 103.50, which appears propped up by the temporary 55-day SMA. South from here, the index could challenge the weekly low at 102.58 (February 14).

Looking at the broader picture, while below the 200-day SMA (106.64), the outlook for the greenback is expected to remain negative.

DXY daily chart

• EUR/JPY comes under pressure and fades Thursday’s advance.
• Extra weakness remains on the cards below the 200-day SMA.

EUR/JPY resumes the downside and returns to the sub-141.00 region at the end of the week.

The cross looks side-lined in the second half of the week in the lower end of the weekly range. Occasional bullish attempts should initially clear the provisional 100-day SMA near 142.80 to allow for a test of the 2023 high at 145.56 (March 2).

In the meantime, extra losses remain on the cards while the cross trades below the 200-day SMA. If losses accelerate, then a potential visit to the March low at 139.11 (March 16) should start emerging on the horizon.

EUR/JPY daily chart

Economist at UOB Group Enrico Tanuwidjaja reviews the latest trade balance figures in Indonesia.

Key Takeaways

“Trade surplus in Feb widened to a high of USD5.5bn from USD3.9bn in Jan on the back of imports’ contraction of 4.3% y/y (vs. consensus of a 9.1% gain and a reversal of Jan’s +1.3%) and growth in exports of 4.5% despite a marked slowdown from 16.4% in Jan.”

“Oil & gas (OG) exports’ growth slowed to slightly less than 20% y/y viz. a whopping 65.1% in Jan, driven mainly by slowdown in mineral fuel exports but offset by respectable gains in machinery and electrical equipment exports. Non-OG exports’ growth also slowed to 3.8% y/y in Feb vs. 14% growth in Feb.”

“Meanwhile, OG imports contracted by 17.1% y/y in Feb, a marked turnaround from Jan’s growth of 30.4% while the non-OG imports contracted at a lesser pace of 1.6% in Feb vs. Jan’s contraction of 2.8%.”

EUR/USD preserves its recovery momentum. Economists at Wells Fargo expect the shared currency to gain ground against the US Dollar amid further European Central Bank tightening.

ECB's Deposit Rate to peak at 3.50% by June this year

“We expect a further 25 basis points rate hike in May followed by a final 25 bps rate hike in June, which would see the ECB's Deposit Rate for the current cycle peak at 3.50%. In that context, market pricing, which currently implies a peak policy rate of around 3.09%, appears light to us.”

“Our more forceful outlook for ECB policy is an important factor supporting our outlook for medium term strength in the Euro versus the US Dollar.”

• USD/CAD recovers early lost ground amid a modest USD recovery from the daily low.
• Fears of a full-blown banking crisis drive some haven flows and benefit the Greenback.
• An intraday move up in Oil prices could underpin the Loonie and cap any further gains.

The USD/CAD pair attracts some dip-buying near the 1.3680-1.3675 region on Friday and has now reversed a major part of its intraday losses. The pair climbs back above the 1.3700 round-figure mark during the mid-European session, though the intraday uptick lacks bullish conviction.

Crude Oil prices regain positive traction on the last day of the week and move away from a 15-month low touched on Thursday amid hopes for a strong recovery in Chinese fuel demand. This, in turn, is seen underpinning the commodity-linked Loonie and acting as a headwind for the USD/CAD pair amid a modest US Dollar weakness. Expectations that the Fed will adopt a less aggressive hawkish stance in the wake of worsening economic conditions weigh on the USD.

Last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - forced investors to scale back bets for more aggressive policy tightening by the US central bank. In fact, the markets are now pricing in a greater chance of a smaller 25 bps lift-off at the upcoming FOMC monetary policy meeting on March 21-22. This is evident from a fresh leg down in the US Treasury bond yields and turns out to be a key factor exerting downward pressure on the buck.

That said, a generally weaker risk tone drives some haven flows towards the Greenback and assists the USD/CAD pair to reverse the early lost ground. Despite multi-billion-dollar lifelines for troubled banks in the US and Europe, investors remain worried about widespread contagion and the possibility of a full-blown global banking crisis. This, along with looming recession fears, takes its toll on the global risk sentiment and benefits traditional safe-haven currencies.

Furthermore, the fact that the Bank of Canada (BoC) became the first major central bank to pause its rate-hiking cycle last week could undermine the Canadian Dollar. This, in turn, suggests that the path of least resistance for the USD/CAD pair is to the upside and supports prospects for a move back towards reclaiming the 1.3800 mark. Traders now look to the release of the Michigan US Consumer Sentiment Index to grab short-term opportunities heading into the weekend.

Technical levels to watch

76 of 82 economists polled by Reuters said that they expect the US Federal Reserve (Fed) to raise its policy rate by 25 basis points to the range of 4.75-5% following the March FOMC meeting. 5 economists expected the US central bank to hold its key rate unchanged while one saw a rate cut.

Moreover, the majority of participants noted that they see the fed funds rate reaching 5-5.25% in the second quarter.

Market reaction

This headline doesn't seem to be having a significant impact on the US Dollar's performance against its major rivals. As of writing, the US Dollar Index was down 0.22% on the day at 104.20.

US Dollar struggles to find demand. Economists at MUFG Bank expect the greenback to remain under pressure if the Federal Reserve hikes by 25 basis points next week.

A 25 bps hike next week is priced at about an 80% probability

“Essentially, we have had close to a $300 bn expansion of the Fed’s balance sheet in a week and that could see the Fed wanting to pursue continued rate hikes if conditions into the meeting next week allow. 

“A 25 bps hike next week is priced at about an 80% probability. We see that as reasonable at this juncture and if no further episodes of bank stress emerge that probability will drift higher into the meeting next week. In circumstances of that scenario, we would expect the Dollar to remain on a weaker footing given that a hike would in our view probably be the last.”

• A combination of factors prompts fresh selling around the USD/JPY pair on Friday.
• Expectations for a less hawkish Fed and sliding US bond yields weigh on the buck.
• Banking crisis woes benefit the safe-haven JPY and contribute to the intraday slide.
• The BoJ’s dovish outlook could cap gains for the JPY and lend support to the major.

The USD/JPY pair fails to capitalize on the previous day's solid recovery of over 200 pips from its lowest level since February 14 and comes under some renewed selling pressure on Friday. The pair, however, manages to rebound a few pips from the daily low touched during the early European session and now trades above the 133.00 mark, still down nearly 0.40% for the day.

Growing acceptance that the Federal Reserve will adopt a less hawkish stance at its upcoming meeting on March 21-22 exerts fresh downward pressure on the US Dollar, which, in turn, is seen weighing on the USD/JPY pair. In fact, the markets are now pricing in a greater chance of a smaller 25 bps lift-off in the wake of last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank. This leads to a fresh leg down in the US Treasury bond yields and continues to undermine the Greenback.

Apart from this, the global flight to safety benefits the Japanese Yen (JPY) and further contributes to the offered tone around the USD/JPY pair. Despite multi-billion-dollar lifelines for troubled banks in the US and Europe, investors are still trying to determine whether the risk of a full-blown global banking crisis has been tamed and remain concerned about widespread contagion. This, along with looming recession fears, takes its toll on the risk sentiment, which is evident from a softer tone around the equity markets.

That said, a more dovish stance adopted by the Bank of Japan (BoJ) should keep a lid on any further gains for the JPY and help limit losses for the USD/JPY pair, at least for the time being. In fact, the outgoing BoJ Governor Haruhiko Kuroda said earlier this Friday that there is room to cut interest rates further into negative territory from the current -0.1%. This, in turn, warrants some caution for aggressive bearish traders and positioning for an extension of the recent downward trajectory witnessed over the past two weeks or so.

Market participants now look forward to the release of the Michigan US Consumer Sentiment Index, due later during the early North American session, for short-term trading opportunities. The focus, however, will remain glued to the outcome of the highly-anticipated FOMC monetary policy meeting, scheduled to be announced next Wednesday. Nevertheless, the USD/JPY pair remains on track to register a third successive week of losses and should continue to take cues from the broader sentiment surrounding the Greenback.

Technical levels to watch

Brent Crude Oil has drifted towards 2020 high of $71. Next potential objectives are located at $65/63, economists at Société Générale report.

50-DMA at $83 should cap upside

“Brent has given a break below the sideways consolidation since December denoting resumption in downtrend.”

“Daily MACD is at a higher level as compared to previous lows. However, it is anchored within negative territory denoting lack of upward momentum.” 

“Signals of a large bounce are not yet visible; the 50-DMA at $83 should cap upside.”

“Next potential objectives are located at $65/63, the 61.8% retracement of the whole up move during 2020 and 2022.”

The prospects for the continuation of the decline in USD/CNH seems to have lost momentum as of late according to UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

24-hour view: “We highlighted yesterday that ‘while the underlying tone has firmed somewhat, the price movements still appear to be consolidative’ and we expected USD to trade between 6.8750 and 6.9100. Our view for consolidation was not wrong, even though USD traded in a narrower range than expected (6.8885/6.9135). Further consolidation appears likely, expected to be between 6.8850 and 6.9100.”

Next 1-3 weeks: There is not much to add to our update from yesterday (16 Mar, spot at 6.8920). As highlighted, while the downside risk has decreased, only a break of 6.9300 (no change in ‘strong resistance’ level) would indicate that USD is not weakening further. Looking ahead, support level is at 6.8350.”

Considering advanced prints from CME Group for natural gas futures markets, open interest rose by around 6.2K contracts on Thursday after two consecutive daily pullbacks. On the opposite direction, volume kept the choppiness well in place and went down by around 54.8K contracts.

Natural Gas: Upside capped by $3.00 so far

Thursday’s small uptick in prices of the natural gas was amidst rising open interest and a moderate retracement in volume. Against that, the continuation of the consolidative phase is expected to remain unchanged for the time being, with occasional bullish attempts still limited by the $3.00 mark per MMBtu.

There is still some chances that USD/JPY could weaken further in the near term, comment UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

24-hour view: “We highlighted yesterday that the outlook is mixed and we expected USD to trade in a choppy manner between 132.30 and 134.30. We did not anticipate the sharp drop to 131.71 and the strong bounce from the low (USD closed higher by 0.24% at 133.72). The outlook remains mixed and today, we expect USD to trade in a broad range between 132.50 and 134.50.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (16 Mar, spot at 133.40) where while there is scope for USD to weaken further, the major support at 131.50 is unlikely to come into view so soon. Note that USD dropped briefly to 131.71 in early NY trade before rebounding strongly. Overall, only a breach of 135.10 (no change in ‘strong resistance’) would indicate that 131.50 is not coming into view.’

• GBP/USD gains positive traction for the second straight day, though lacks follow-through.
• Bets for less aggressive Fed rate hikes weigh heavily on the USD and remain supportive.
• Banking crisis woes, expectations that the BoE will pause its rate-hiking cycles cap gains.

The GBP/USD pair builds on the previous day's strong move up and scales higher for the second successive day on Friday. The pair, however, retreats a few pips from the daily peak touched during the early part of the European session and is currently placed around the 1.2135-1.2130 region, still up over 0.20% for the day.

Expectations that the Federal Reserve will adopt a less hawkish stance in the wake of worsening economic conditions exert heavy downward pressure on the US Dollar, which, in turn, lends support to the GBP/USD pair. Last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - forced investors to scale back bets for more aggressive policy tightening by the US central bank. In fact, the markets are now pricing in a nearly 90% chance of a smaller 25 bps lift-off the upcoming FOMC meeting on March 21-22, which, along with signs of stability in the financial markets, weigh on the safe-haven Greenback.

Multi-billion-dollar lifelines for troubled banks in the US and Europe ease fears about widespread contagion. This, in turn, boosts investors' confidence, which is evident from a modest recovery in the equity markets. That said, persistent worries about a full-blown global banking crisis keep a lid on the optimism. Furthermore, the Bank of England's (BoE) quarterly survey showed that the median UK public's expectations for inflation for the coming year dropped sharply in February. This reaffirms bets that the Bank of England (BoE) will pause its rate-hiking cycle next week and contributes to capping the GBP/USD pair.

Market participants now look to the release of the Michigan US Consumer Sentiment Index for short-term opportunities later during the early North American session on Friday. The focus, however, will remain on the key central bank event risks next week - the outcome of the highly-anticipated FOMC policy meeting, scheduled to be announced next Wednesday, followed by the BoE policy meeting on Thursday. Nevertheless, the GBP/USD pair seems poised to register modest weekly gains and remains at the mercy of the USD price dynamics.

Technical levels to watch

CME Group’s flash data for crude oil futures markets noted traders increased their open interest positions for the second day in a row on Thursday, this time by nearly 14K contracts. On the other hand, volume trimmed part of the previous marked build and dropped by around 724.8K contracts.

WTI appears supported near $65.00

Prices of the WTI charted an irresolute session amidst marginal gains, all after bottoming out near the $65.00 mark once again on Thursday. The move was on the back of rising open interest, which suggests the probability of a bounce in the very near term. So far, the commodity appears well underpinned around the $65.00 region per barrel.

• EUR/USD revisits the 1.0660/70 band on Friday
• The greenback extends the corrective decline amidst risk-on mood.
• EMU Final inflation figures next of note in the euro docket.

The optimism around the European currency – and the risk complex in general – remains well and sound on Friday and now lifts EUR/USD to the 1.0665/70 band, or 2-day highs at the end of the week.

EUR/USD stronger on USD-selling, risk appetite improvement

EUR/USD advances for the second session in a row and keeps the upbeat tone well in place in the second half of the week against the backdrop of a firmer recovery in the appetite for the risk-associated assets.

Indeed, recent positive news surrounding the US and European banking sectors helped mitigate concerns over a potential banking crisis, putting to rest at the same time bouts of risk aversion.

Following Thursday’s hike by the ECB, Board member Simkus suggested that the terminal rate has not been reached yet, while his colleague Villeroy noted that inflation in the euro area should be around 3% at some point by year end.

Later in the domestic calendar comes the final inflation figures in the Euroland, whereas Industrial Production, Manufacturing Production, the CB Leading Index and the preliminary Michigan Consumer Sentiment are all due across the Atlantic.

What to look for around EUR

EUR/USD manages to leave behind some of the recent weakness and retakes the 1.0600 hurdle and above at the end of the week.

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.

Key events in the euro area this week: EMU Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. 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 advancing 0.36% at 1.0646 and the breakout of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the other hand, the next support emerges at 1.0516 (monthly low March 15) seconded by 1.0481 (2023 low January 6) and finally 1.0324 (200-day SMA).

The Swiss National Bank’s (SNB) decision is due on Thursday. In any case, the Franc is unlikely to weaken significantly, economists at Commerzbank report.

Not an easy decision for the SNB next week

“We will have to wait and see whether the situation on the markets might ease over the course of the next week anyway. If that was to be the case the SNB might be able to follow suit and hike the key rate like the ECB.”

“After the CHF was able to benefit from its role as a safe haven at the start of the week this unsurprisingly changed when the focus turned onto Switzerland itself. The Franc’s depreciation potential is limited though as the SNB signalled clearly that it wants to avoid a significant weakening of the CHF due to high inflation rates and that if necessary, it would be prepared to intervene again.”

The quarterly survey conducted by the Bank of England (BoE)/ Ipsos showed on Friday that the median UK public's expectations for inflation for the coming year dropped sharply in February.

Key takeaways

Market reaction

The Pound Sterling is hit by the BOE survey findings, as GBP/USD is paring back gains to trade at 1.2135, as of writing. The pair is still up 0.23% on the day.

• Silver regains positive traction on Friday, though remains in a multi-day-old trading range.
• Acceptance above the $21.65-$21.70 confluence supports prospects for additional gains.
• A convincing break below the $21.00 mark is needed to negate the near-term positive bias.

Silver attracts fresh buying on the last day of the week and maintains its bid tone through the first half of the European session, though struggles to capitalize on the move beyond the $22.00 round-figure mark.

From a technical perspective, the two-way price moves in a familiar range witnessed over the past few sessions constitute the formation of a rectangle. Against the backdrop of the recent strong recovery from sub-$20.00 levels, or a four-month low touched last week, this might still be categorized as a bullish consolidation phase. Furthermore, acceptance above the $21.65-$21.70 confluence adds credence to the positive outlook and supports prospects for a further near-term appreciating move for the XAG/USD.

The aforementioned area comprises the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibonacci retracement level of the downfall from the $24.65 area, or a multi-month peak touched in February. This should now act as a strong base for the XAG/USD and help limit the immediate downside. That said, some follow-through selling, leading to a break below the trading range support near the mid-$21.00s, might negate the positive outlook and pave the way for a slide towards the $21.00 mark.

The latter coincides with the 23.6% Fibo. level, which if broken decisively will shift the near-term bias back in favour of bearish traders. The XAG/USD might then turn vulnerable to accelerate the slide towards the $20.55-$20.50 intermediate support en route to the $20.00 psychological mark. The downward trajectory could get extended further and drag spot prices to the next relevant support near the $19.60 region. The white metal could eventually drop to the $19.00 mark for the first time since early November 2022.

On the flip side, momentum back above the $22.00 round figure might confront stiff resistance near the $22.25-$22.35 region, marking the 50% Fibo. level and the overnight swing high. The subsequent move up could push the XAG/USD beyond the $22.55-$22.60 supply zone, towards testing the 61.8% Fibo. level, just ahead of the $23.00 mark. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and should pave the way for a meaningful upside for the white metal in the near term.

Silver 4-hour chart

Key levels to watch

The People’s Bank of China (PBOC) announced on Friday that it cut banks’ Reserve Requirement Ratio (RRR) by 25 basis points (bps), effective from March 27.

Additional takeaways

Market reaction

AUD/USD is finding support just above the 0.6700 level on the PBOC rate cut announcement. The pair stalled its retreat from 0.6725, now adding 0.80% on the day.

Willem Sels, Global Chief Investment Officer, HSBC Global Private Banking and Wealth, addresses market fears. In his view, once markets grow more comfortable that a credit or banking crisis will be averted, equities should rebound.

Risk appetite should recover

“We think the current market turmoil is a consequence of rate volatility triggered by SVB, but not a harbinger of a credit crisis or a banking crisis.”

“Investors should not be panic but remain invested with a sharp focus on quality across asset classes.” 

“Investment grade has seen positive returns since the start of the turmoil. Equities should rebound once markets grow more comfortable that a credit or banking crisis will be averted.”

European Central Bank (ECB) policymaker Peter Kazimir said on Friday that “I don't think we are at the finish line.”

Additional comments

“Need to continue with rate hikes.”

“But no need to speculate about the May decision.”

“Core inflation is sticky and upside risks to inflation are dominating.”

Market reaction

The Euro fails to benefit from the hawkish commentary from the ECB policymakers, having stalled its advance at 1.0670. At the time of writing, the pair is trading at 1.0657, still 0.51% higher on the day.

• AUD/USD scales higher for the second straight day and climbs to a nearly two-week high.
• Expectations for a less hawkish Fed weigh heavily on the USD and lend support to the pair.
• Fears of a full-blown global banking crisis and the RBA’s dovish shift could cap the upside.

The AUD/USD pair gains strong follow-through traction for the second successive day on Friday and climbs to a nearly two-week high during the first half of the European session. The pair currently trades just above the 0.6700 round-figure mark and is drawing support from a combination of factors.

Multi-billion-dollar lifelines for troubled banks in the US and Europe ease fears about widespread contagion, which, in turn, boosts investors' confidence. This is evident from a modest recovery in the equity markets, which undermines the safe-haven US Dollar and benefits the risk-sensitive Aussie. Apart from this, expectations that the Federal Reserve will adopt a less hawkish stance in the wake of worsening economic conditions weigh on the buck and provide a goodish lift to the AUD/USD pair.

Last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - forced investors to scale back their bets for more aggressive interest rate hikes by the Fed. In fact, the markets are now pricing in a nearly 90% chance of a smaller 25 bps lift-off at the upcoming FOMC meeting on March 21-22. This leads to a modest downtick in the US Treasury bond yields, which is seen as another factor dragging the USD lower and contributing to the strong bid tone surrounding the AUD/USD pair.

Investors, however, remain worried about the possibility of a full-blown global banking crisis. This, along with looming recession risks, should keep a lid on any optimism in the markets and cap the upside for the AUD/USD pair. Furthermore, the Reserve Bank of Australia's (RBA) recent dovish shift, signalling that it might be nearing the end of its rate-hiking cycle, warrants some caution for aggressive bullish traders and before positioning for any meaningful near-term appreciating move for the major.

Nevertheless, the AUD/USD pair remains on track to end the week on a positive note and reverse a major part of last week's losses to its lowest level since November 2022. Market participants now look to the release of the Michigan US Consumer Sentiment Index for short-term opportunities later during the early North American session on Friday. The focus, however, will remain on the outcome of the highly-anticipated FOMC policy meeting, scheduled to be announced next Wednesday.

Technical levels to watch

The Bank of England takes its rate decision next Thursday. Economists at Commerzbank expect a hesitant BoE to weigh on the British Pound.

The situation for Sterling remains difficult

“Even if the BoE takes a 25 basis points rate step next week it is likely to still seem hesitant. This would apply even more so if inflation data were to surprise on the upside.”

“We stick to our view and expect Sterling to principally trend weaker against the Euro over the coming months.”

Japan’s top currency diplomat Masato Kanda said on Friday that the government and Bank of Japan (BoJ) must take seamless response to market moves.

Additional comments

European Central Bank (ECB) Governing Council Gediminas Šimkus said on Friday, “the terminal rate hasn't been reached yet.”

“I still believe that yesterday was not the last rate hike,” he added.

Additional quotes

Related reads

• Forex Today: US Dollar struggles to find demand as mood improves
• ECB’s Villeroy: We sent a strong message of confidence

AUD firmed on signs of sustained risk-on momentum as fears of banking stresses eased. Economists at OCBC Bank expect the Aussie to enjoy further gains.

Bias for upside play

“We see room for AUD to rise should broad market confidence stabilise further. No more negative news of bank fall outs and a tamer Fed tightening trajectory will be pre-requisites for AUD to stay supported.” 

“Daily momentum shows signs of turning mild bullish while RSI rose. Bias for upside play.” 

“Resistance at 0.6710 and 0.6760/80 levels (38.2% fibo, 21, 50, 200-DMAs).” 

“Support at 0.6660 (50% fibo), 0.6550 (61.8% fibo retracement of Oct low to Feb high) and 0.64 levels (76.4% fibo).”

• GBP/JPY oscillates in a narrow range and is influenced by a combination of diverging forces.
• Fears of a full-blown global banking crisis benefit the safe-haven JPY and act as a headwind.
• The BoJ's dovish outlook should continue to lend support and limit any meaningful downfall.

The GBP/JPY cross struggles to capitalize on the previous day's strong recovery move of over 350 pips from a fresh one-month low and oscillates in a narrow trading band through the early part of the European session on Friday. The cross remains below the 162.00 mark and the recent price action warrants some caution for aggressive traders or before positioning for a firm near-term direction.

The market sentiment remains fragile amid persistent worries about a full-blown global banking crisis, which continues to drive some haven flows towards the Japanese Yen (JPY) and acts as a headwind for the GBP/JPY cross. Adding to this, expectations that the Bank of England (BoE) will pause its rate-hiking cycle sooner rather than later also contribute to capping the upside for the cross. In fact, interest rate futures suggest a 50% chance that the BoE will leave interest rates unchanged next week and an equal possibility of a smaller 25 bps lift-off.

That said, the emergence of heavy selling around the US Dollar benefits the British Pound and lends support to the GBP/JPY cross. Moreover, multi-billion-dollar lifelines for troubled banks in the US and Europe might have eased concerns about widespread contagion, which should keep a lid on any meaningful gains for the JPY and help limit any meaningful slide for the cross. It is worth mentioning that large US banks came to the rescue of troubled First Republic Bank and injected $30 billion into the California, San Francisco-based lender on Thursday.

The development followed Credit Suisse's announcement that it will exercise an option to borrow up to $54 billion from the Swiss National Bank (SNB) to shore up liquidity. Apart from this, growing acceptance that the Bank of Japan (BoJ) will stick to its dovish stance to support the domestic economy supports prospects for some meaningful appreciating move for the GBP/JPY cross. In fact, the outgoing BoJ Governor Haruhiko Kuroda said earlier this Friday that there is room to cut interest rates further into negative territory from the current -0.1%.

In the absence of any relevant market-moving economic releases on Friday, the aforementioned fundamental backdrop suggests that the path of least resistance for the GBP/JPY cross is to the upside. That said, this week's repeated failures near the 164.00 mark and the lack of any meaningful buying warrants caution before positioning for any meaningful appreciating move in the near term.

Technical levels to watch

“We sent a strong message of confidence,”European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau said on Friday.

Additional quotes

“Our priority is to fight inflation.”

“French and European banks are 'very solid'.”

“European banks are not in the same situation as the US banks.”

Market reaction

The Euro remains on the front foot, as EUR/USD is extending its recovery to near 1.0665, at the time of writing.

The Euro did not appreciate following the ECB decision. However, economists at Commerzbank expect to see higher EUR/USD levels.

Why did we not see EUR strength following the ECB decision?

“The market is clearly more concerned about the ECB not being sufficiently sensitised to the risks rapid rate hikes might involve following years of zero and negative interest rates, which make a hard landing of the financial system and the real economy more likely, than it is about the immediate carry a EUR position benefits from today.”

“This concern is not likely to be overcome quickly. However, with every day the market distortions of the past few days are not repeated these concerns are likely to abate a little. As a result, the Euro is unlikely to return to its old strength again soon, but will only appreciate again slowly.”

Here is what you need to know on Friday, March 17:

As the market mood continues to improve on easing concerns over a deepening financial crisis toward the end of the week, the US Dollar is having a tough time staying resilient against its major rivals. Eurostat will release February inflation data (revision) in the European session. Later in the day, the University of Michigan's Consumer Sentiment Survey and the US Federal Reserve's (Fed) Industrial Production data for March will be looked upon for fresh impetus. 

The European Central Bank (ECB) raised its key rates by 50 basis points (bps) following its March policy meeting as expected. Although ECB President Christine Lagarde refrained from committing to additional big rate hikes in the near futures, she reassured markets that the banking sector in the Eurozone was in good condition. 

ECB Quick Analysis: Lagarde banks on show of confidence, Euro set to resume uptrend.

Meanwhile, the Fed announced late Thursday that 11 banks deposited $30 billion into First Republic Bank to help it resolve the liquidity issues. Wall Street's main indexes gathered bullish momentum on this development and registered decisive daily gains. Following Wednesday's sharp decline, the benchmark 10-year US Treasury bond yield rose more than 3%.

Early Friday, US stock index futures cling to modest daily gains and the US Dollar Index stays deep in negative territory slightly below 104.00 while the 10-year US T-bond yield fluctuates above 3.5%.

EUR/USD fluctuated during the ECB event on Thursday but managed to keep its footing in the American session. The pair preserves its recovery momentum early Friday and was last seen trading above 1.0650.

GBP/USD posted gains on Thursday and continued to push higher early Friday. Supported by the renewed US Dollar weakness, the pair trades above 1.2150 in the European morning.

Following Thursday's indecisive action, USD/JPY came under modest bearish pressure and declined toward 133.00 on Friday. Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Friday that it would be possible to further lower short-term interest rate from minus 0.1% but added that he cannot comment on to what extent. During the Asian trading hours, the Nikkei Asian Review reported that the Japanese Government, the BoJ and the Financial Services Authority (FSA) will meet later this evening to assess the financial market situation in Japan.

The Reserve Bank of New Zealand (RBNZ) said in a statement early Friday that all New Zealand banks are currently operating above their minimum regulatory requirements. NZD/USD gathered bullish momentum on this headline and advanced toward 0.6250.

Gold price closed virtually unchanged on Thursday as rising US Treasury bond yields didn't allow XAU/USD to capitalize on the renewed US Dollar weakness. Nevertheless, the pair seems to have turned north early Friday, trading near $1,930.

Bitcoin benefits from the risk-positive market environment and trades at around $26,000 early Friday, rising nearly 4% on the day. On the back of Thursday's rebound, Ethereum continues to stretch higher and trades above $1,700 in the European morning.

Economists at ANZ Bank expect Platinum to enjoy gains this year and hit the $1,250 mark by the end of 2023.

Long-term negative view on Palladium

“Improving auto sector growth, higher loadings and substitution away from Palladium are likely to benefit Platinum.”

“Auto catalyst demand is likely to grow by 5% YoY. Constrained supply and robust demand could shift the market into deficit by 145 koz. A tighter market should encourage stronger investor activity.” 

“We expect ETF holdings to rise by 300 koz this year after two consecutive years of outflows. This should push Platinum prices to $1,250 towards the end of this year. However, we hold a long-term negative view on Palladium due to weakening auto catalyst demand.”

• Gold price catches fresh bids on Friday and steadily climbs back closer to a multi-week top.
• Concerns about a full-blown global banking crisis seem to benefit the safe-haven commodity.
• Bets for a less aggressive Federal Reserve, a weaker US Dollar also lend support to the metal.

Gold price regains some positive traction following the previous day's good two-way price moves and maintains its bid tone through the early European session on Friday. The XAU/USD is currently placed just above the $1,930 level, up over 0.60% for the day, and remains well within the striking distance of a six-week high touched on Monday.

Banking crisis woes continue to benefit Gold price

Despite multi-billion-dollar lifelines for troubled banks in the United States (US) and European, concerns about widespread contagion continue to drive some haven flows and benefit Gold price. It is worth mentioning that large US banks came to the rescue of troubled First Republic Bank and injected $30 billion into the California, San Francisco-based lender on Thursday. This followed Credit Suisse's announcement that it will exercise an option to borrow up to $54 billion from the Swiss National Bank (SNB) to shore up liquidity. The developments, however, fail to boost investors' confidence or ease fears of a full-blown global banking crisis, which is evident from the prevalent cautious market mood.

Bets for less hawkish Federal Reserve, weaker US Dollar also lend support

Furthermore, last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - forced traders to scale back expectations of more aggressive interest rate hikes by the Federal Reserve (Fed). In fact, the markets are now pricing in a nearly 90% chance of a smaller 25 bps lift-off at the upcoming Federal Open Market Committee (FOMC) meeting on March 21-22. This, in turn, leads to a modest downtick in the US Treasury bond yields and lends additional support to the non-yielding Gold price. Meanwhile, expectations for a less hawkish Fed prompt fresh selling around the US Dollar, which turns out to be another factor acting as a tailwind for the US Dollar-denominated commodity.

Gold price is poised for the biggest weekly gains since mid-November

The aforementioned supportive fundamental backdrop suggests that the path of least resistance for Gold price is to the upside. Nevertheless, the XAU/USD remains on track to register its biggest weekly gain since mid-November and seems poised to prolong the recent appreciating move witnessed over the past two weeks or so. Market participants now look to the release of the Michigan US Consumer Sentiment Index for some impetus later during the early North American session on Friday. The focus, however, will remain on the two-day FOMC meeting, starting next Tuesday.

Gold price technical outlook

From a technical perspective, any subsequent move beyond the $1,937-$1,938 region, or the weekly swing high, is likely to confront some resistance near the multi-month top, around the $1,959-$1,960 area touched in February. Some follow-through buying will be seen as a fresh trigger for bullish traders and allow Gold price to aim towards reclaiming the $2,000 psychological mark.

On the flip side, immediate support is pegged near the $1,920-$1,918 horizontal zone, ahead of the overnight swing low, around the $1,908-$1,907 region. This is followed by the $1,900 round figure, which if broken might prompt some technical selling and drag the XAU/USD to the $1,886-$1,885 area en route to the $1,872-$1,871 support, or the weekly low set on Monday.

Key levels to watch

In the opinion of UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia, AUD/USD is likely to extend the range bound theme for the time being.

Key Quotes

24-hour view: “AUD traded sideways between 0.6612 and 0.6669 yesterday, narrower than our expected range of 0.6585/0.6680. Further sideways trading appears likely, expected to be in a range of 0.6630/0.6690.”

Next 1-3 weeks: “Three days ago (14 Mar, spot at 0.6665), we highlighted that AUD appears to have moved into a consolidation phase and that it is likely to trade in a range between 0.6570 and 0.6770. While we continue to expect AUD to trade within its consolidation range, in view of the decreased volatility, we have narrowed the expected range to 0.6570/0.6735.”

Open interest in gold futures markets increased by nearly 3K contracts after three consecutive daily pullbacks on Thursday according to preliminary readings from CME Group. Volume, instead, remained choppy and shrank by almost 191K contracts.

Gold: Further gains not ruled out

Gold prices advanced marginally amidst an inconclusive session on Thursday. That price action was in tandem with rising open interest and a marked drop in volume, which suggests that further indecision could lie ahead and at the same time does not rule out the continuation of the underlying upside bias. The immediate resistance for the yellow metal comes at the 2023 high at $1959 per ounce troy (February 2).

• USD/CHF retreats to 0.9250 amid broad-based US Dollar weakness and softer US Treasury yields.
• Swiss National Bank's decisive action alleviates Credit Suisse's liquidity concerns.
• Market uncertainty looms as questions on the liquidity front remain unresolved.

USD/CHF retreated from the 0.9300 mark in early Asian trading hours on Friday. The broad-based US Dollar weakness has led the pair to erase some of the previous day's gains and head toward Thursday's low at 0.9230. Improved risk appetite has pushed the US Dollar lower amid slightly softer US Treasury yields.

The Swiss Franc has strengthened due to an improvement in the situation regarding the troubled Swiss bank Credit Suisse. 

The Swiss National Bank (SNB) quickly stepped in and provided support for Credit Suisse after pressure from international counterparts, according to some reports. Thereafter, SNB showed a willingness to provide a covered loan facility to Credit Suisse to help them escape the liquidity trap. 

Credit Suisse said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. The bank called the loan a "decisive action to preemptively strengthen its liquidity."

On the United States front, we have seen a cumulative effort to revive First National Bank by key market players like JPMorgan, Citibank, Bank of America, and many others, which provided a pool of liquidity totaling around $30 billion.

The key question still remains unresolved, as the market doesn't know how many chapters are yet to be disclosed on the liquidity front. USD/CHF could become volatile if we see some escalation of liquidity problems.

Levels to watch

• USD/CAD picks up bids to pare intraday losses during two-day losing streak.
• Oil price fades the previous day’s bounce off the lowest levels since December 2021.
• Market sentiment dwindles amid light calendar, pre-Fed concerns and lack of confidence in global banking system.
• US, Canada Industrial Production, US consumer-centric data to entertain Loonie traders ahead of next week’s FOMC.

USD/CAD consolidates weekly losses as it reverses from the intraday low of 1.3683 to 1.3710 during early Friday morning in Europe. The Loonie pair’s latest rebound could be linked to the WTI crude oil’s pullback, Canada’s key export earner. In doing so, the quote struggles to justify the US Dollar’s second consecutive daily loss amid sluggish trading in the last day of the volatile week.

WTI crude oil fades bounce off multi-month low to drop back below $69.00 as the Asian session risk-on mood eases ahead of the European traders’ arrivals. The reason could be linked to the mixed headlines suggesting the market’s fears of global banking system.

Among the key headline is Reuters’ analysis suggesting the British firms’ withdrawal of funds after the latest banking chaos surrounding the Silicon Valley Bank and the Credit Suisse. On the same line is the hedge funds’ rush towards securing positions via the traditional safe-haven Yen as Bloomberg said, “Hedge funds held the biggest yen-bearish positions in six months last week, a painful trade as the collapse of Silicon Valley Bank suddenly boosted demand for Japan’s currency as a haven.”

Furthermore, receding hawkish calls for the European central bank’s next move and the doubts over the Fed’s rate hikes past the next week’s 0.25% lift also weigh on the sentiment and allow the US Dollar to remain firmer.

Alternatively, the mildly positive sentiment could be linked to the global policymakers’ and bankers’ efforts to avoid the return of 2008’s financial crisis, as well as comments from rating agencies suggesting no more challenges for the baking sector.

Against this backdrop, the S&P 500 Futures reverses the early day gains around 3,990, following an upbeat close of the Wall Street benchmarks, whereas the US Treasury bond yields fade the previous day’s corrective bounce off the monthly low.

Moving on, the US and Canadian Industrial Production for February could entertain the USD/CAD pair traders ahead of the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Also important to watch will be the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month.

Technical analysis

A two-week-old symmetrical triangle restricts immediate USD/CAD moves between 1.3685 and 1.3785.

Gold price, finally, closed Thursday above the February 3 high of $1,919, yielding the much-needed upside break. More gains in the offing, FXStreet’s Dhwani Mehta reports.

Thursday’s low at $1,908 will be put to test should upside momentum fizzle out

“After a firm break above $1,919, doors now open up for a fresh rally toward the year-to-date high of $1,960. However, Gold bulls will need to clear Wednesday’s high of $1,937 to accelerate the upside.”

“On the downside, Thursday’s low at $1,908 will be put to test should the upside momentum fizzle out. The next cushion is envisioned at the $1,900 threshold, below which Tuesday’s low at $1,895 could challenge bullish commitments. Additional declines will need to crack the weekly low at $1,886.”

European Central Bank (ECB) Governing Council member Madis Muller is making some comments on the global banking crisis, in his appearance on Friday.

Key quotes

“SVB created a backdrop of uncertainty.”

“Credit Suisse has had problems for years.”

“SNB’s intervention in Credit Suisse has made decision-making easier.”

“There are not many euro area banks that took risks like SVB did.”

Market reaction

The EUR/USD pair is extending its recovery mode above 1.0650 on the above comments. At the press time, the pair is trading at 1.0654, adding 0.48% on the day.

Further consolidation, likely within the 1.1950-1.2190 range, is expected in GBP/USD in the next weeks, noted UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

24-hour view: “We highlighted yesterday that GBP could drop further but ‘any decline is likely part of a lower trading range of 1.2000/1.2150’. GBP dropped briefly to 1.2029 in London trade, rebounded to 1.2128 before ending the day on a slightly firm note at 1.2110 (+0.45%). Today, GBP could edge higher but a sustained rise above 1.2150 is unlikely. The major resistance at 1.2190 is not expected to come under threat. On the downside, a breach of 1.2050 (minor support is at 1.2080) would indicate that the current mild upward pressure has eased.”

Next 1-3 weeks: “Our update from yesterday (16 Mar, spot at 1.2075) is still valid. As highlighted, GBP is likely to trade in a broad consolidation range, expected to be between 1.1950 and 1.2190.”

• The index adds to Thursday’s decline and puts 104.00 to the test.
• Persistent risk-on mood keeps weighing on the dollar.
• Industrial Production, Consumer Sentiment take centre stage in the docket.

The selling pressure keeps dominating the sentiment around the greenback and forces the USD Index (DXY) to confront the key support at 104.00 at the end of the week.

USD Index looks at data, risk trends

The index retreats for the second session in a row on Friday amidst the persistent recovery in the appetite for the risk complex, which remains propped up at the same time by diminishing concerns around the banking sector in both Europe and the US.

In the meantime, investors continue to favour a 25 bps rate hike by the Federal Reserve at its March gathering. This view remains underpinned by the loss of momentum in some US fundamentals and lower inflation figures in February.

Friday’s releases in the US calendar include the Industrial Production, Manufacturing Production, the CB Leading Index and the advanced Michigan Consumer Sentiment for the month of March.

What to look for around USD

The index comes under pressure and threatens to breach the so far key support around 104.00 at the end of the week.

The risk aversion derived from banking jitters appears somewhat diminished and supports some selling pressure in the dollar amidst firmer conviction among investors of a 25 bps rate hike by the Federal Reserve at the March 22 meeting.

So far, the index remains under pressure against the backdrop of reinvigorated bets of a Fed’s pivot in the short-term horizon. However, the still elevated inflation and the resilience of the US economy continue to play against that view.

Key events in the US this week: Industrial Production, Flash Michigan Consumer Sentiment, CB Leading Index (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 0.36% at 104.07 and the breakdown of 103.48 (monthly low March 13) would open the door to 102.58 (weekly low February 14) and finally 100.82 (2023 low February 2). On the other hand, the next hurdle emerges at 105.88 (2023 high March 8) seconded by 106.64 (200-day SMA) and then 107.19 (weekly high November 30 2022).

• EUR/USD refresh intraday high during two-day uptrend, consolidates Wednesday’s big losses.
• Sustained break of 200-HMA, two-day-old bullish channel keeps buyers hopeful.
• Nearly overbought RSI conditions, sluggish MACD signals prod bulls.
• Convergence of 100-HMA, 61.8% Fibonacci retracement guards immediate upside.

EUR/USD picks up bids to renew intraday top around 1.0650 as it portrays a two-day uptrend during the early hours of Friday. In doing so, the major currency pair cheers the upside break of the 200-Hour Moving Average (HMA) within a two-day-old ascending trend channel.

Although the 200-HMA breakout joins bullish channel formation to keep the EUR/USD bulls in the driver’s seat, the upside momentum appears to run out of steam as the RSI approaches the overbought territory while the MACD signals seem sluggish despite being bullish of late.

Apart from that, a convergence of the 100-HMA and 61.8% Fibonacci retracement level of the pair’s heavy fall on Wednesday, around 1.0665, appears a tough nut to crack for the bulls.

In a case where EUR/USD remains firmer past 1.0665, the aforementioned channel’s top line, near 1.0690 at the latest, precedes the monthly high surrounding 1.0760, marked on Wednesday, to challenge the quote’s further advances.

Meanwhile, the 200-HMA level surrounding 1.0630 restricts the immediate downside of the EUR/USD pair, a break of which highlights the stated channel’s bottom line, close to 1.0620, as the key support.

Should the EUR/USD pair drops below 1.0620, it defies the bullish chart formation and can drop to the monthly low marked on Wednesday around 1.0515.

EUR/USD: Hourly chart

Trend: Limited upside expected

UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia suggest EUR/USD risks further decline in the near term.

Key Quotes

24-hour view: “Yesterday, we held the view that EUR ‘could weaken further but a clear break of 1.0500 is unlikely’. However, aside from a brief drop to 1.0548 in London trade, EUR traded mostly sideways. The price movements appear to be consolidative and further sideways trading is likely. Expected range for today; 1.0570/1.0645.”

Next 1-3 weeks: “After EUR plunged to a low of 1.0514, we highlighted yesterday (16 Mar, spot at 1.0575) that ‘while the rapid drop appears to be ‘too fast, too soon’, the risk of EUR dropping further has increased’. We added, ‘it remains to be seen if EUR can break the major support at 1.0470’. There is no change in our view for now. Overall, only a breach of the ‘strong resistance’ at 1.0680 (no change in level) would indicate that the downside risk has faded.”

FX option expiries for Mar 17 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0500 1.2b
• 1.0660 1.7b
• 1.0710 5.1b
• 1.0775 1.4b

- USD/JPY: USD amounts                     

• 131.00 937m
• 132.00 1.7b
• 133.00 2.0b
• 133.60 698m
• 134.00 1.2b
• 135.00 1.5b

- AUD/USD: AUD amounts  

• 0.6580 831m
• 0.6650 1.1b
• 0.6700 611m

• EUR/JPY is facing barricades in extending its recovery above 142.00.
• The 20-period EMA at 141.50 is providing a cushion to the Euro bulls.
• An oscillation in the 40.00-60.00 range by the RSI (14) indicates a consolidation for now.

The EUR/JPY pair is continuously struggling to cross the immediate resistance of 142.00. A loss in the upside momentum is favoring a correction as investors are pouring funds into the Japanese Yen amid soaring fears of global banking turmoil.

Bloomberg reported that “Hedge funds held the biggest yen-bearish positions in six months last week, a painful trade as the collapse of Silicon Valley Bank suddenly boosted demand for Japan’s currency as a haven.

The Euro is struggling to gain traction despite a third consecutive 50 basis points (bps) interest rate hike by the European Central Bank (ECB). ECB President Christine Lagarde pushed interest rates to 3.5% despite the debacle of Credit Suisse. The interest rate decision of 50 bps was supported by a promise of a 50bln Swiss Francs infusion into Credit Suisse.

An absence of follow-up buying in the EUR/JPY pair is conveying exhaustion in the upside momentum. The cross is demonstrating an inventory adjustment phase on an hourly scale. It would to early naming it as an accumulation or a distribution amid a volatility contraction.

The 20-period Exponential Moving Average (EMA) at 141.50 is providing a cushion to the Euro bulls.

An oscillation in the 40.00-60.00 range by the Relative Strength Index (RSI) (14) indicates a consolidation for now.

For an upside move, the cross needs to deliver a breakout of the consolidation formed in a 141.50-142.00 range, which will send the major toward March 12 low around 143.00 followed by February 28 low at 143.88.

On the flip side, a downside break below the intraday low at 141.50 would drag the cross toward March 13 low at 139.48. A slippage below the same would expose the asset to January 19 low around 138.00

EUR/JPY hourly chart

• EUR/GBP prints three-day losing streak, justifies downside break of 0.8770-75 confluence.
• Bearish MACD signals add strength to downside bias.
• Recovery moves need validation from 0.8815 to convince bulls.

EUR/GBP justifies the downside break of the previous key support confluence as it portrays a three-day downtrend near 0.8760 heading into Friday’s London open. In doing so, the cross-currency pair remains depressed around the Year-To-Date (YTD) lows marked earlier in the week.

A daily closing below the 0.8775-70 support-turned-resistance confluence, comprising the 100-DMA and an upward-sloping trend line from late December 2022 keeps EUR/GBP bears hopeful. Adding strength to the downside bias are the bearish MACD signals and lower high formation since March 08.

That said, the 61.8% Fibonacci retracement level of the pair’s upside from the last December to February, around 0.8710, seems to lure the EUR/GBP bears of late.

Following that, the December 20, 2022’s low near 0.8690 and the 200-DMA level surrounding 0.8685 could act as the key downside support to challenge the EUR/GBP bears, a break of which could quickly drag prices towards the late 2022 trough of near 0.8550.

Alternatively, recovery moves need to provide successful trading above the 0.8770-75 resistance confluence, previous support, to tease the EUR/GBP buyers.

Even so, a one-week-old descending resistance line, around 0.8815, precedes a three-week-old horizontal resistance, near 0.8835, to challenge the EUR/GBP buyers.

To sum up, EUR/GBP is likely to extend the latest south-run towards refreshing the YTD lows.

EUR/GBP: Daily chart

Trend: Further downside expected

• NZD/USD benefits from revived risk appetite and a softer US Dollar.
• Central banks to stay on rate hiking path despite liquidity crisis.
• Questions remain on future bank support and policy implications.

NZD/USD cheers the optimism in Asian hours led by the soft-footed US Dollar and positive risk appetite. The risk proxy NZD/USD is reflecting a relief rally led by quick intervention in the banking crisis. The pair is trading up around 0.68% at the time of writing. Most of the Asian equity complexes are trading in the green along with steady US Treasury yields.

Friday's price action for NZD/USD is more likely the exploitation of the previous day in the absence of any top-tier data from both the US and New Zealand. The risk sentiment got boosted when the Swiss National Bank (SNB) came to rescue Credit Suisse by providing CHF50 billion as a covered loan facility.

Given the fact that we have seen Credit Suisse's financial situation get cluttered last year, and it's not a while ago that a fundamentally similar situation happened with Deutsche Bank. 

On Thursday, we saw a cumulative effort to revive the First Republic Bank in the US from some key market players like JPMorgan, Citibank, Bank of America, and many others by providing a pool of liquidity totaling US$30 billion.

In a nutshell, investors are confident that no matter what, there will be some sort of support from authorities to ease any financial glitch. And we have seen such type of effort during the COVID crisis when all central banks did whatever it took to revive the economy.

But the big question is, the market doesn't know how many chapters are yet to be disclosed on the liquidity front, and if so, what stance will the central banks adopt. Given the fact that on Thursday, the European Central Bank (ECB) did not shift its rate hiking plan despite the Credit Suisse crisis. And some reports suggest that it is highly unlikely the Federal Reserve will take a pivotal change at the March FOMC meeting.

Some earlier comments from US Treasury Secretary Yellen stated that the USD 250K uninsured deposit limit will not be extended to every bank that fails. Therefore, there are lots of questions yet to be answered.

Levels to watch

Jeffrey Gundlach, Wall Street's bond king and Founder and Chief Executive Officer of DoubleLine Capital, offered his take on the US economy amidst the banking sector crisis.

Key quotes

“Liquidity in treasuries "bad."

“US not interested in buying credit at all at these levels, particularly junk bonds.”

Related reads

• Fitch: Recent developments will not cause major shifts in Fed monetary policy
• US: Eleven banks deposit $30 billion into First Republic Bank

• Asian stocks are following the footprints of the S&P500’s solid recovery recorded on Thursday.
• The collapse of Silicon Valley Bank suddenly boosted demand for the Japanese Yen as a safe-haven.
• An expansionary monetary policy stance is expected by the PBoC as the economy is on the path to economic recovery.

Markets in the Asian domain are following the footprints of the S&P500 as the 500-US stocks basket displayed a solid recovery on Thursday. Stellar recovery in the United States equities was witnessed after investors ignored the potential risk of a global banking meltdown and cheered rising expectations of a smaller interest rate hike by the Federal Reserve (Fed).

The US Dollar Index (DXY) has corrected sharply below 104.10 as the appeal for safe-haven assets has squeezed dramatically. Sheer buying interest for global equities indicates an improvement in the risk appetite of the market participants.

At the press time, Japan’s Nikkei225 jumped 1.14%, ChinaA50 climbed 1.33%, Hang Seng soared 1.72%, and Nifty50 added 0.50%.

Chinese stocks are rising firmly ahead of the interest rate decision by the People’s Bank of China (PBoC), which will be announced on Monday. Considering the requirement of stimulus to trigger overall demand in the Chinese economy after the rollback of pandemic controls, an expansionary monetary policy is expected.

Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

Meanwhile, Japanese equities have got strengthened as ex-Bank of Japan (BoJ) Governor Haruhiko Kuroda has advocated for more rate cuts. Investors should be aware of the fact that BoJ’s current interest rate is already negative and a further rate cut delivers an expression of more stimulus required to trigger more demand. The collapse of the Silicon Valley Bank (SVB) has fueled the demand for the Japanese Yen as safe-haven. Bloomberg reported that “Hedge funds held the biggest yen-bearish positions in six months last week, a painful trade as the collapse of Silicon Valley Bank suddenly boosted demand for Japan’s currency as a haven.

On the oil front, oil price have scaled above $69.00 as an upward revision in 2023 China’s Gross Domestic Product (GDP) to 6.0% by Goldman Sachs, conveys more oil demand ahead. Earlier, the investment banking firm projected a growth rate of 5.5%.

Economists at Goldman Sachs said in a note on Friday that they now expect the European Central Bank (ECB) to raise interest rates by 25 basis points (bps) in May vs. the prior estimate of 50 bps, pushing the terminal rate to 3.50% from 3.75%.

Additional quotes

“Believe the ECB remains in tightening mode despite financial market volatility.”

“We expect Europe's core inflation to remain firm in the coming months, moving up further to 5.8% YoY in March.”

• EUR/USD refreshes day high above 1.0640 as hawkish Fed bets diminish, USD corrects further

Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Friday, it is “possible to further lower short-term interest rate from minus 0.1%, but cannot comment on to what extent.”

developing story ...

• GBP/USD picks up bids during two-day uptrend, eyes third consecutive weekly gain.
• Cabl buyers cheer Brexit optimism, no more labor strikes in the UK and the US Dollar’s retreat.
• Fears of downbeat UK housing market reaction to the BoE’s rate hike cap the prices ahead of the key central bank events.

GBP/USD clings to mild gains around 1.2150 heading into Friday’s London open. In doing so, the Cable pair remains firmer for the second consecutive day amid downbeat US Dollar, as well as due to the price-positive catalysts. It should be noted, however, that the cautious mood ahead of the next week’s key monetary policy meetings from the Bank of England (BoE) and the Federal Reserve (Fed), as well as the final voting on the Brexit verdict, keeps the Cable buyers chained.

The multi-month-old labor problems in the UK are likely to end soon as The Guardian said, “The government has confirmed it is making a significant new pay offer to National Health Services (NHS) staff in England, including a one-off bonus which unions say amounts to £2.5bn.” the news also adds that the Unions involved in the pay talks said further strikes by ambulance staff and other NHS workers had been suspended and they would recommend members accept the new offer.

Elsewhere, hopes of witnessing a sooner and positive end to the Brexit deadlock also allow the GBP/USD buyers to remain hopeful as The Telegraph said that the UK’s Members of the Parliament (MPs) will deliver their final verdict on Rishi Sunak’s new Brexit deal next week after Downing Street confirmed a vote on the Windsor Framework will be held on Wednesday. 

Above all, the market’s cautious optimism and the US Dollar’s positioning for the next week’s Federal Open Market Committee (FOMC) monetary policy meeting seem to allow the GBP/USD buyers to keep the reins for the third consecutive week.

The mildly positive sentiment could be linked to the global policymakers’ and bankers’ efforts to avoid the return of 2008’s financial crisis, as well as comments from rating agencies suggesting no more challenges for the baking sector.

Against this backdrop, the S&P 500 Futures pick up bids to pare the intraday losses around 3,995, following an upbeat close of the Wall Street benchmarks, whereas the US Treasury bond yields fade the previous day’s corrective bounce off the monthly low.

Looking forward, the UK’s Consumer Inflation Expectations for March will precede the preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month to direct intraday GBP/USD moves ahead of the key week.

Technical analysis

A clear rebound from the 21-DMA support, around 1.2025 by the press time, directs GBP/USD towards the monthly top surrounding 1.2200.

• AUD/USD has sensed a stellar buying interest amid the declining USD Index.
• A bull cross, delivered by the 20-and 50-period EMAs at 0.6648 indicates more upside ahead.
• The RS) (14) has shifted into the bullish range, which indicates that the upside momentum has been triggered.

The AUD/USD pair has witnessed sheer buying interest from the market participants and has reached near its weekly high plotted near 0.6720. The Aussie asset has attracted significant bids as investors have lightened their longs in the US Dollar Index (DXY) significantly. The reason behind ignoring the USD Index despite fears of global banking turmoil is the accelerating expectations of a less-hawkish stance on interest rates by the Federal Reserve (Fed) ahead.

S&P500 futures have recovered their nominal losses witnessed in Asian morning and has turned positive now. A follow-up buying in the 500-US stocks basket futures after a prominent Thursday indicates a further strengthening of the risk appetite theme. The USD Index has shifted its auction below 104.20 and is expected to deliver more losses, considering that the risk-aversion theme is fading.

After breaking above the critical resistance of 0.6668, AUD/USD has soared above 0.6700. At the press time, the Aussie asset is hovering near the weekly high. A bull cross, delivered by the 20-and 50-period Exponential Moving Averages (EMAs) at 0.6648 indicates more upside ahead.

Adding to that, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates that the upside momentum has been triggered.

Should the asset breaks above March 13 high at 0.6717, Aussie bulls would drive the asset further toward March 07 high at 0.67478 followed by the horizontal resistance plotted from February 23 low at 0.6781.

On the contrary, a slippage below March 15 low at 0.6564 will drag the asset toward October 4 high at 0.6547 and the round-level support at 0.6500.

AUD/USD hourly chart

• USD/INR extends the previous day’s pullback from three-week high.
• US Treasury bond yields weigh on greenback amid receding fears of financial crisis.
• Mixed sentiment, light calendar and pre-Fed anxiety are extra catalysts that allow Indian Rupee to lick its wounds.

USD/INR holds lower grounds near 82.50 while keeping the previous day’s U-turn from a three-week low during early Friday. Even so, the Indian Rupee (INR) pair remains firmer for the second consecutive week heading into the next Wednesday’s Federal Open Market Committee (FOMC) monetary policy meeting.

The pair’s latest losses could be linked to the market’s cautious optimism as global policymakers and bankers try hard to avoid the return of 2008’s financial crisis. Additionally weighing on the USD/INR price could be the statements from the global rating giant Fitch that ruled out fears of US and European banking fallouts on the Asia-Pacific (APAC) banks.

Elsewhere, mixed US data raised doubts about the Federal Reserve’s (Fed) future rate hikes, even if the 25 basis points (bps) of an interest rate increase is almost given, which in turn allows the USD/INR to pare recent gains. Furthermore, the easing in Oil prices, despite the latest rebound, also favors the INR due to India’s reliance on energy imports and heavy current account deficit.

Alternatively, the recent downside inflation clues from India and the equity market rout challenge the pair sellers amid broad-based US Dollar buying. Additionally, traders appear less convinced by the latest efforts to defend the global banking sector as the measures appear restrictive. Also, the key central banks turned down the expectations of easy rate hikes and have allegedly blocked information on the causes behind the latest baking rout, which in turn keeps USD/INR bulls hopeful.

Amid these plays, the S&P 500 Futures pick up bids to pare the intraday losses around 3,995, following an upbeat close of the Wall Street benchmarks, whereas the US Treasury bond yields fade the previous day’s corrective bounce off the monthly low.

Looking forward, preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month will also be important for clear directions ahead of the next week’s Fed meeting.

Technical analysis

A failure to cross the five-week-old descending resistance line, around 82.85 by the press time, directs USD/INR bears toward a convergence of the 100 and 50 DMAs, near 82.10.

• USD/JPY in search for direction bias amid steady US Treasury yield.
• ECB rate hike impacts global yield complexes; central banks hold steady amid liquidity crunch.
• Fed's March FOMC meeting unlikely to see pivotal shift in rate hiking cycle.

USD/JPY price is heading down, looking to test the 130.00 mark on the back of softer US Treasury (UST) yields. Although the soft footing of the US Dollar across the board is not indicating anything significant yet, USD/JPY bounced on Thursday due to stabilization in UST yields. The risk aversion environment earlier in the week, led by a liquidity crunch among banks, prompted UST to fall.

The falling UST yields could be attributed to a recalibration of the Federal Reserve (Fed) rate hike expectations for March. That being said, the liquidity-drained incident from Silicon Valley Bank (SVB) to Credit Suisse has triggered a fresh wave of pessimism for the Fed's March FOMC meeting.

The thought process was simple: the Fed should not deliver a jumbo rate hike at the March FOMC meeting amid a cluttering banking ecosystem. Therefore, the aforementioned expectation was factored into the yield price actions. As a result, the UST yields-sensitive USD/JPY started to fall.

Meanwhile, along with the Fed, investors were also dialing back rate hike expectations for other central banks like the European Central Bank (ECB). Contrary to this, the ECB delivered a pre-committed 50 bps rate hike on Thursday.

Sentiment took a U-turn this week when some key central banks intervened in the liquidity crises with backstop plans and prompted the ECB to maintain their rate-hiking plan. After the ECB event, global yield complexes rose on Thursday. And It seems like central banks are not keen to budge on this ongoing liquidity issue until it gets worse, and they will most likely remain on their hiking path.

An earlier comment from US Treasury Secretary Yellen said that government refunds of uninsured deposits will not be extended to every bank that fails and the Fitch rating agency said “our base case is that recent developments in the US will not cause major shifts in US monetary policy”.  

Therefore, any pivotal shift seems premature for now. It might be the case that the Fed will deliver a 25 bps hike at the March FOMC meeting, but any major shift in the rate-hiking cycle is highly unlikely.

Levels to watch

• Gold price grinds higher amid US Dollar pullback, sluggish sentiment.
• Sustained trading beyond $1,920 and $1,925 supports keep XAU/USD buyers hopeful.
• Receding fears of banking crisis, lack of major data/events strengthen bullish bias.
• Second-tier US data, bond market moves eyed for clear directions as Fed’s 0.25% rate hike seems given.

Gold price (XAU/USD) braces for the biggest weekly gains since early November, during a three-week winning streak, even as markets appear easy on Friday after a volatile week. In doing so, the precious metal grinds higher past the $1,925 resistance confluence amid cautious optimism.

Adding strength to the bullish bias for XAU/USD could be the downbeat US Treasury bond yields, as well as the global policymakers’ and bankers’ efforts to avoid the return of 2008’s financial crisis. On the same line could be the mixed US data that raise doubts about the Federal Reserve’s (Fed) future rate hikes, even if the 25 basis points (bps) of an interest rate increase is almost given. Furthermore, hopes of sustained economic recovery in China, one of the biggest Gold consumers, also keep the XAU/USD buyers hopeful.

Alternatively, traders appear less convinced by the latest efforts to defend the global banking sector as the measures appear restrictive. Also, the key central banks turned down the expectations of easy rate hikes and have allegedly blocked information on the causes behind the latest baking rout, which in turn keeps Gold traders on a dicey floor ahead of the next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

Gold Price: Key levels to watch

Our Technical Confluence Detector shows that the Gold price stays comfortable above the immediate key support surrounding $1,925, encompassing Pivot Point one-month R1 and Fibonacci 38.2% on one-day.

Also acting as the crucial downside support is the $1,920 mark that includes 10-HMA and the upper band of the Bollinger on the Daily formation.

It’s worth noting that Pivot Point one-week R2, around $1,912, acts as the last defense of the XAU/USD bulls.

On the north side, the Gold price’s route appears smooth unless hitting the $1,953 hurdle comprising Pivot Point one-week R3.

That said, the previous daily high and Pivot Point one-day R2 act as immediate upside hurdles for the XAU/USD price near $1,935 and $1,945 in that order.

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.

• USD/CAD has slipped further below 1.3700 amid an extended correction in the USD Index.
• Oil price has scaled above $69.00 amid the revised 2023 China GDP forecast to 6.0% from 5.5% previously estimated.
• Going forward, Canada’s Inflation data will be of utmost importance.

The USD/CAD pair has slipped below the round-level support of 1.3700 in the Asian session. The Loonie asset is following the footprints of the US Dollar Index (DXY) and has witnessed selling pressure. The downside move in the major is also backed by an extension in the oil price on the upside.

S&P500 futures have recovered nominal losses generated in the early Asian session, portraying further improvement in the risk appetite of the market participants. The US Dollar Index (DXY) has slipped below the crucial support of 104.20 and is expected to remain on the tenterhooks as the Federal Reserve (Fed) is expected to sound less hawkish in its monetary policy meeting next week.

Meanwhile, US government bonds are showing confusing performance amid a lack of clarity over the Fed’s monetary policy outlook. The 10-year US Treasury yields are hovering around 3.57%.

Going forward, the Canadian Dollar is likely to dance to the tunes of Canada’s inflation data, which will release on Tuesday. As per the consensus, the headline Consumer Price Index (CPI) is expected to accelerate by 0.4%, lower than the former release of 0.5%. This might drag the annual headline CPI further to 5.5%. Also, the annual core CPI is expected to trim to 4.6% from the former release of 5.0%.

It seems that Canadian inflation is declining according to the roadmap designed by the Bank of Canada (BoC) to bring down stubborn inflation and achieve price stability.

Investors should be aware of the fact that BoC Governor Tiff Macklem has already held interest rates steady at 4.5%. BoC Macklem considers the current monetary policy as restrictive enough to scale down price pressures.

On the oil front, oil price has extended its recovery above $69.00 as investment banking firm, Goldman Sachs, has revised 2023 China’s GDP projections to 6% from 5.5% anticipated earlier. It is worth noting that Canada is a leading exporter of oil to the United States and higher oil prices would support the Canadian Dollar.

• EUR/USD has extended its recovery above 1.0640 as the USD Index is losing steam further.
• Federal Reserve might remain steady on interest rates after discounting lower inflation in February and fresh banking instability.
• European Central Bank went for a third consecutive 50 bps interest rate hike to tame rampant inflation despite Credit Suisse’s debacle.
• EUR/USD has scaled above the 50% Fibonacci retracement, which cements a bullish reversal.

EUR/USD has printed a fresh day's high at 1.0642 in the Asian session as the US Dollar Index (DXY) has extended its correction further. The major currency pair has extended its recovery move above 1.0636 gradually and is expected to deliver more gains. The USD Index has refreshed its two-day low at 104.17 and is expected to slip further as uncertainty for the interest rate decision by the Federal Reserve (Fed) is escalating dramatically.

The Euro remained in action on Thursday as the European Central Bank (ECB) went for a third consecutive 50 basis points (bps) interest rate hike to tame rampant inflation in Eurozone. European Central Bank President Christine Lagarde ignored volatility linked to the deepening global banking crisis and remained stuck to its plan of hiking interest rates by 50 bps.

S&P500 futures are showing marginal correction after a stellar recovery on Thursday as investors ignored the likely global banking turmoil and cheered rising odds of a less-hawkish monetary policy stance by the Federal Reserve. The USD Index is facing the heat amid a recovery in the risk appetite of the market participants. A minor demand has been observed for US government bonds, which has trimmed 10-year US Treasury Yields to 3.56%.

Banking turmoil cements consideration for a steady Fed policy

Investors were worried after scrutiny of January economic indicators that the Federal Reserve will dial back the 50 bps rate hike spell to strengthen its competitiveness against United States' stubborn inflation. However, weak monthly inflation growth, higher jobless rate, lower Producer Price Index (PPI) figures, and contracting Retail demand conveyed that January’s data was a one-time show and Fed chair Jerome Powell would continue the 25 bps rate hike spell.

Meanwhile, fresh fears of a global banking meltdown have joined the declining inflation scenario, which has stemmed the odds of an unchanged monetary policy announcement by Federal Reserve chair Jerome Powell. After the collapse of Silicon Valley Bank (SVB), Signature Bank, and the debacle of Credit Suisse, financial instability issues have stretched to First Republic Bank. Similar to the new lifeline inculcation in Credit Suisse by the Swiss National Bank (SNB), First Republic Bank has also got tremendous liquidity support from various financial institutions including JP Morgan Chase & Co and Morgan Stanley. However, the fears of further global banking turmoil are still solid.

ECB went for a bigger rate hike despite Credit Suisse's fiasco

Inflation in the Eurozone economy is extremely persistent and only a restrictive monetary policy could contain rampant price index. For that, a 50 bps rate hike was already announced by European Central Bank Lagarde a few weeks back. However, investors thought that the European Central Bank won’t go big this time as fresh banking sector debacle fears could ruin the economic stability. In spite of the Credit Suisse fiasco, European Central Bank continued its 50 bps streak and pushed interest rates to 3.50%.

Reuters reported on Thursday that European Central Bank policymakers agreed to go ahead with a 50 bps increase in key rates after the Swiss National Bank (SNB) "threw a lifeline" to Credit Suisse. Also, European Central Bank's policy debate was between a 50 basis points hike and leaving rates unchanged. There was no discussion of a 25 bps hike.

For further action, the street is expecting more rates from the European Central Bank as current inflation levels are well-above the targeted range, and European Central Bank Lagarde has cleared that wage pressures are extremely solid.

Analysts at Rabobank see two more hikes of 25bp. Persistent unrest in financial markets is the main downside risk, but if this fades, inflation persistence could still require higher rates.”

EUR/USD technical outlook

EUR/USD has challenged the 50% Fibonacci retracement (plotted from March 15 high at 1.0760 to March 15 low at 1.0516. The shared currency pair has scaled above the 20-and 50-period Exponential Moving Averages (EMAs) at 1.0617 and 1.0626 respectively, which indicates that the short-term trend is bullish.

Meanwhile, the Relative Strength Index (RSI) (14) is attempting to shift into the bullish range of 60.00-80.00. An occurrence of the same will trigger the upside momentum.

• Markets remain cautiously optimistic as policymakers rush to defend major banks in US, Europe.
• Mixed US data, hopes of no abrupt brake of monetary policy pattern add to the upbeat sentiment.
• Headlines suggesting fears among Fed policymakers, US Treasury Secretary Yellen’s comments prod optimists.
• Second-tier US data eyed as the last clues for next week’s FOMC.

A volatile week seems bracing for a calmer end as traders remain mostly inactive while showing mild optimism during early Friday. In doing so, the market players seem to take a sigh of relief as major policymakers manage to placate fears surrounding the global banking system, after the fallouts of banks in the US and Europe. However, doubts about the catalysts that caused such a panic joins the regulators calculated measures to probe the risk-on mood.

While portraying the mood, the S&P 500 Futures pick up bids to pare the intraday losses around 3,995, following an upbeat close of the Wall Street benchmarks, whereas the US Treasury bond yields fade the previous day’s corrective bounce off the monthly low.

That said, US 10-year and two-year Treasury bond yields struggle for clear directions around 3.56% and 4.18% respectively as the previous day’s rebound fails to reverse the two-week downtrend.

Recent headlines from the global rating agency Fitch suggesting no major challenges to the monetary policy of the US Federal Reserve (Fed), as well as the Asia-Pacific (APAC) banks, despite the fallouts of the US and European banks, seem to have favored sentiment of late.

On the same line could be the comments from Saudi National Bank's Chairman, Ammar Al Khudairy, conveying the “sound” conditions of Credit Suisse join the major US banks’ efforts to help California-based First Republic Bank to avoid a liquidity crunch to favor the risk-on mood. On the same line was the news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity, as well as Reuters quoting anonymous sources to confirm that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, US Treasury Secretary Janet Yellen’s assurance over the US banking industry’s health and European Central Bank’s (ECB) 50 bps rate hike, matching expectations, also favored the sentiment.

Alternatively, the Fed’s hiding of information that initially caused the liquidity crunch at the Silicon Valley Bank (SVB) joins US Treasury Secretary Yellen’s comments stating limited insurance to the bank deposits to probe the risk takers.  Additionally, challenging the sentiment could be a light calendar and the return of the hawkish Fed bets.

Looking ahead, traders should keep their eyes on the clues for the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Additionally, preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month will also be important for clear directions.

Also read: Forex Today: Unexpected consolidation, DXY drops as risk sentiment improves

Reserve Bank of New Zealand (RBNZ) said in a statement on Friday, “all New Zealand banks are currently operating above our minimum regulatory requirements.”

Additional quotes

“Aware of current financial stability issues with a small number of banks internationally, monitoring the situation closely.”

“In regular contact with other regional regulators and regulated entities.”

Market reaction

NZD/USD is holding higher ground near 0.6230 on the above headlines. The spot is up 0.50% on the day.

“Our base case is that recent developments in the US will not cause major shifts in US monetary policy,” said global rating agency Fitch during early Friday.

More to come

• USD/MXN reverses from 100-HMA hurdle to pare intraday gains.
• Bearish chart formation needs confirmation from 18.55, downbeat oscillators keep sellers hopeful.
• 200-HMA acts as additional downside filter, bulls need validation from February’s top to tighten the grips.

USD/MXN bears remain hopeful as the Mexican Peso (MXN) pair take a U-turn from the 100-Hour Moving Average (HMA) to pare intraday gains around 18.75 during early Friday.

Not only the failure to cross the 100-HMA but bearish MACD signals and downbeat RSI (14), not oversold, also favor the USD/MXN sellers.

Above all, the pair’s “double top” bearish chart pattern, by reversing twice from the 19.20 hurdle, keeps the USD/MXN sellers hopeful.

However, a clear downside break of the stated pattern’s lower end, around 18.55, becomes necessary for the bears to retake control.

Following that, the 200-HMA level of 18.45 may act as a buffer during the theoretical fall targeting the monthly low surrounding 17.90, also the lowest level since 2017.

Meanwhile, recovery moves, need to cross the 100-HMA hurdle of 18.80 to convince intraday buyers.

Even so, the previous support line from March 09, close to 18.93 at the latest, could challenge the USD/MXN pair’s run-up towards the double tops marked around 19.20.

In a case where USD/MXN crosses the 19.20 hurdle, February’s peak of 19.29 and the 20.00 psychological manget appear as the key upside levels to watch for buyers.

USD/MXN: Hourly chart

Trend: Further downside expected

• GBP/USD faces key resistance at 50-DMA and descending trendline.
• Major central bank's intervention supports GBP/USD rebound.
• Eyes on UK CPI data and BoE rate decision next week. 

GBP/USD rebounds from the 21-Daily Moving Average (DMA) at the 1.2000 key psychological level. The bounce comes after easing demand for the US Dollar due to backstop plans put forward by major central banks.

Federal Reserve (Fed), Swiss National Bank (SNB), and Bank of England (BoE) intervened with rescue plans, calming risk sentiment fired by liquidity crunch among some regional and international banks. 

GBP/USD needs to surpass the 50-DMA, currently around 1.2125, to maintain the bullish bias. The Relative Strength Indicator (RSI) remains in favor of the upside.

A convincing break above the 50-DMA could lead the pair toward the next resistance and descending trendline from January's high at 1.2435. Breaking above the downward slope could take GBP/USD to the March high of 1.2215.

As for the downside, it's likely to be to limit the 21-DMAaround Thursday's low at 1.2025. A convincing break below the 21-DMA could lead the pair to multi-tested support at 1.1924.

The last line of support is seen at 1.1830. All important levels are being watched ahead of next week's UK Consumer Price Index (CPI) and BoE announcements.

GBP/USD: Daily chart

• WTI crude oil picks up bids to rebound from the lowest levels since December 2021.
• Bullish Doji candlestick, US Dollar pullback joins hopes of more energy demand from China to favor Oil price recovery.
• US President Biden’s readiness for additional SPR release, mixed sentiment probe Oil buyers.

WTI crude oil prints mild gains around $68.65 as it pares the biggest weekly loss since early December on Friday. In doing so, the energy benchmark justifies the price-positive technical details while also taking clues from the market’s cautious optimism.

That said, the bullish Doji candlestick on the daily chart formation joins the oversold RSI (14) line to favor the WTI crude oil’s corrective bounce off the lowest levels since December 2021. Adding strength to the corrective bounce could be the US Dollar’s latest retreat, as well as hopes of overcoming the fears of the 2008 financial crisis.

It should be noted that the headlines suggesting China’s gradual economic recovery, shared by Bloomberg, join the talks suggesting a continuation of the Oil supply accord by the major energy producers favor the black gold buyers.

However, US President Joe Biden’s push for using the Strategic Petroleum Reserve (SPR) joins the looming economic recession woes, emanating from the US and European banks, seem to weigh on the WTI prices. Earlier in the day, US Energy Envoy Amos J Hochstein mentioned that US President Biden is committed to replenishing strategic oil reserves. 

It’s worth noting that comments from Saudi National Bank's Chairman, Ammar Al Khudairy, conveying the “sound” conditions of Credit Suisse join the major US banks’ efforts to help California-based First Republic Bank to avoid a liquidity crunch to favor the risk-on mood. On the same line was the news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity, as well as Reuters quoting anonymous sources to confirm that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, US Treasury Secretary Janet Yellen’s assurance over the US banking industry’s health and European Central Bank’s (ECB) 50 bps rate hike, matching expectations, also favored the sentiment and allowed the latest run-up in the Oil price.

On the contrary, a light calendar and the market’s lack of confidence in the global policymakers’ efforts to push back the financial crisis seem to weigh on the Oil price.

While portraying the mood, US 10-year and two-year Treasury bond yields struggle for clear directions as the previous day’s rebound fails to supersede the two-week downtrend. However, Wall Street closed in the green with more than 1.0% gains by each of the benchmark indices while S&P 500 Futures remain lackluster at the latest.

Moving on, traders should keep their eyes on the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Ahead of that, preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month will be important for clear directions.

Technical analysis

Thursday’s bullish Doji at the multi-day low joins the oversold RSI (14) conditions to suggest the black gold’s further recovery. However, the WTI bulls remain off the table unless witnessing a clear upside break of the December 2022 low surrounding $70.30.

• EUR/GBP trades listlessly on ECB’s blurred rate hike path amid global banking turmoil.
• Liquidity crisis and policy uncertainty left Euro with mixed reactions.
• Market awaits UK CPI and BoE Interest Rate decision next week. 

EUR/GBP is currently hovering around the 0.8760 mark, as the European Central Bank (ECB) portrayed a blurred picture around the future rate hike path. The market participant was assuming that the ECB would not hike by 50 basis points (bps) after the recent turbulence in the  banking sector globally.

Following the US Silicon Valley Bank (SVB) fallout, the market has witnessed many small to large banks falling into liquidity traps emerging from higher borrowing costs across the world. Credit Suisse was the first European bank to face a liquidity crunch this week, although the Swiss National Bank (SNB) intervened with some rescue plans.

Therefore, the expectation prior to the ECB rate decision on Thursday was low for a 50 bps hike. Despite that, the ECB raised the rate by 50 bps. Later on, some backdoor sources suggest that the driving force behind the 50 bps rate was after SNB threw a lifeline to Credit Suisse. Adding to this, the ECB feared ditching a 50 basis point hike would panic investors. Even though some policymakers discussed no change in the rate hike, there was no discussion on a 25 bps hike.

Highlighting the policy statement from the ECB, President Christine Lagarde said underlined price pressures remain strong and wage pressures are strengthening. ECB's Lagarde has poured cold water on any pre-determined rate hike expectation by switching to a data-dependent mode. The liquidity crisis and policy uncertainty from ECB got the Euro mixed action across the board.

Therefore, it has thrown the market expectation for future rate hikes to the sideline, waiting for more data releases to frame any expectations for May's ECB meeting. Subsequently, the market expectation of a 25 bps hike for the May meeting is 50-50. For the Pound Sterling, it is important to watch the Consumer Price Index (CPI) data released from the UK, due next Wednesday, prior to the BoE Interest Rate Decision on Thursday.

Levels to watch

• AUD/USD pers up in Tokyo trade to score fresh corrective highs. 
• Markets are jittery into the weekend with central banks in mind. 

AUD/USD is rallying in Tokyo, making fresh highs of 0.6691 after perking up from the 0.6660s. Markets are jittery ahead of next week´s Federal Reserve meeting. Overnight, the European Central Bank lifted rates that provoked a sell-off in Euro on the knee-jerk that later recovered and continued to press against resistance. 

Markets are choppy surrounding the banking crisis but there is an undertone of risk on that is feeding into Friday´s markets whereby global equities rose on Thursday on news that a large group of banks were infusing cash into US lender First Republic Bank. Also, the Swiss National Bank came to the rescue of Credit Suisse which has also eased fears of a global contagion.

Meanwhile, a 25-basis-point rate hike by the Federal Reserve is being priced in for next week despite the 50 basis points hike from the ECB.  ECB President Christine Lagarde described the central bank's rate rise on Thursday, which took its key rate to 3%, as a "robust decision". 

´´While the Fed is likely to continue the hiking cycle to address inflation, if needed, it could slow down or temporarily suspend its current balance sheet reduction schedule, as it is doing more or less the opposite of the new bank term funding program,´´ analysts at Rabobank argued. 

as for the Reserve Bank of Australia, the markets have almost priced out the chance of the central bank lifting its 3.6% cash rate at its April meeting although the general consensus is that the RBA will hike at least once more given the labor market remains tight.

• GBP/JPY prints mild losses while reversing the previous day’s bounce off one-month low.
• Bearish MACD signals, repeated failures to cross 200-EMA keep sellers hopeful.
• 11-week-old ascending trend channel restricts short-term downside, suggests gradual run-up to refresh YTD top.

GBP/JPY consolidates the biggest daily gain in two weeks around 161.60, down 0.30% intraday, during early Friday. In doing so, the cross-currency pair braces for the second consecutive weekly loss while staying inside an upward-sloping trend channel stretched from late December 2022.

That said, the aforementioned bullish channel’s lower line triggered the quote’s rebound the previous day. However, the 200-day Exponential Moving Average (EMA), at 162.00 by the press time, challenged the GBP/JPY upside and paved the way for the pair’s latest fall.

In addition to the failure to cross the 200-EMA, the bearish MACD signals also favor the GBP/JPY sellers to aim for the 160.00 psychological magnet. Though, the stated channel’s bottom line, close to 158.65 by the press time, could challenge the pair bears afterward.

In a case where the cross-currency pair drops below 158.65, the odds of witnessing a south-run targeting the Year-To-Date (YTD) low of near 155.35 can’t be ruled out.

On the contrary, an upside break of the 200-EMA hurdle surrounding 162.00 could trigger a rally targeting the 50% Fibonacci retracement level of the pair’s moves between October 2022 and January 2023, around 163.80 as we write.

It’s worth noting, however, that the bullish channel’s top line surrounding 165.00 could challenge GBP/JPY bulls past 163.80, a break of which could quickly refresh 2023 peak, near 166.00 at the latest.

GBP/JPY: Daily chart

Trend: Gradual upside expected

• USD/CNH is oscillating around 6.9000 as investors await PBoC policy for fresh impetus.
• A dovish stance is expected on the LPR by the PBoC as the economy is aiming for a recovery.
• The appeal for the USD Index has been trimmed as investors are dubious about the upcoming Fed's policy.

The USD/CNH has continued to auction sideways around 6.9000 in the Asian session. The major is not delivering any action as investors are awaiting the interest rate decision by the People’s Bank of China (PBoC), which is scheduled for Monday.

S&P500 futures are showing minimal losses in the Asian session after a stalwart recovery on Thursday, portraying an improvement in the risk appetite of the market participants. The US Dollar Index (DXY) has delivered a breakdown of the consolidation formed in a narrow range of 104.30-104.60. The appeal for the USD Index has trimmed as investors are dubious about the upcoming monetary policy by the Federal Reserve (Fed) after a decline in the United States inflation and broadening banking turmoil.

Sluggish demand for US government bonds after a confident recovery in the 500-US stocks basket futures has improved returns offered on the same. The 10-year US Treasury yields have surpassed the 3.59% figure.

Going forward, the release of the PBoC’s monetary policy decision will be in focus. Economist at UOB Group suggests that the PBoC could reduce the Loan Prime Rate (LPR) at its next meeting on March 20. They further added, “With the need for further support measures toward the real economy and for 5Y loan prime rate (LPR) to fall further to boost demand for homes, we see the possibility for the 1Y LPR to fall to 3.55% and 5Y LPR to 4.20% in Mar, following the National People’s Congress (NPC).”

Meanwhile, an upside revision in China’s Gross Domestic Product (GDP) forecasts would support the Chinese Yuan. Investment banking firm, Goldman Sachs, has revised its 2023 China GDP projections to 6.0% from the prior estimation of 5.5%.

• Silver price bounces off intraday low, eyes the biggest weekly gain since late 2022.
• Strong yields probe XAG/USD bulls but the metal’s safe-haven status keep Silver price firmer.
• Market’s indecision about the next week’s Fed moves, lack of major data/events restrict immediate moves of the Silver price.

Silver price (XAG/USD) picks up bids to post a recovery from the intraday bottom to $21.80 during a sluggish Friday as the metal traders take a breather at the end of a volatile week amid a light calendar and mixed feelings. Even so, the XAG/USD appears well set to post the biggest weekly gain since the week starts from November 28.

The global policymakers’ efforts to push back the fears of the financial market crisis of 2008 gained little reception but manages to avoid any more casualties in the market and hence traders remain cautiously optimistic. However, the mixed US data join hawkish Fed bets to challenge the optimists.

The comments from Saudi National Bank's Chairman, Ammar Al Khudairy, conveying the “sound” conditions of Credit Suisse join the major US banks’ efforts to help California-based First Republic Bank to avoid a liquidity crunch to favor the risk-on mood. On the same line was the news that Credit Suisse eyes borrowing up to CHF50 billion from the Swiss National Bank (SNB) to strengthen liquidity, as well as Reuters quoting anonymous sources to confirm that the US banks are less vulnerable to the Credit Suisse debacle. Furthermore, US Treasury Secretary Janet Yellen’s assurance over the US banking industry’s health and European Central Bank’s (ECB) 50 bps rate hike, matching expectations, also favored the sentiment and allowed the latest run-up in the XAG/USD prices.

That said, Weekly Initial Jobless Claims dropped to 192K for the week ended on March 10 versus 205K expected and 212K prior whereas the four-week average figure dropped to 196.5K versus 197.25K prior (revised). Further, Housing Starts jumped to 1.45M in February from 1.321M previous reading and 1.31M analysts’ estimations while the Housing Starts jumped to 1.524M during the said month versus 1.34M expected and 1.339M prior. Additionally, the Philadelphia Fed Manufacturing Survey gauge came in as -23.2 compared to -14.5 consensus and -24.3 prior.

It should be observed that the latest reduction in the US inflation expectations per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data also favors the Silver price, by way of exerting downside pressure on the US Dollar.

While portraying the mood, US 10-year and two-year Treasury bond yields struggle for clear directions as the previous day’s rebound fails to supersede the two-week downtrend. However, Wall Street closed in the green with more than 1.0% gains by each of the benchmark indices while S&P 500 Futures print mild losses at the latest.

Elsewhere, headlines suggesting China’s sustained economic recovery, shared by Bloomberg, also challenge the Silver bears.

Looking ahead, metal traders should keep their eyes on the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Ahead of that, preliminary readings of the US Michigan Consumer Sentiment Index for March and the UoM 5-year Consumer Inflation Expectations for the said month will be important for clear directions.

Technical analysis

Unless crossing a convergence of the 50-DMA and 100-DMA, around $22.32 by the press time, the Silver price is likely to remain bearish. However, the early month’s swing high near $21.30 restricts the immediate downside of the XAG/USD amid bullish MACD signals and a steady RSI (14) line.

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.9052 compared with the last close of 6.8998.

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.

• EUR/USD struggles to extend the previous day’s corrective bounce during the first downbeat week in three.
• Three-week-old descending support line repeatedly challenges bears even if the key SMAs probe upside momentum.
• Bearish MACD signals, one-month-old descending resistance line add to the upside filters.

EUR/USD stays defensive around 1.0610-15 as bulls and bears jostle near the end of a volatile week, eyeing the first weekly loss in three despite the previous day’s bounce off a 10-week low.

In doing so, the Euro pair struggles to extend the U-turn from a three-week-long support line, around 1.0515 by the press time, as the 50-bar Simple Moving Average (SMA) joins the bearish MACD signals to challenge the bulls.

With this, the major currency pair is all set to retest the aforementioned support line of near 1.0515. However, the 1.0600 threshold and multiple supports around the 1.0580-75 zone could test the EUR/USD bears.

In a case where the pair sellers break the previously stated key support of 1.0515, the 1.0500 round may act as a validation point for the south-run targeting the four-month-old horizontal support comprising the Year-To-Date low and November 2022 high surrounding 1.0485-80.

Alternatively, an upside break of the 50-SMA, around 1.0630 by the press time, may help the EUR/USD buyers to aim for the 200-SMA hurdle surrounding 1.0680.

However, a downward-sloping resistance line from mid-February, near 1.0755 by the press time, could challenge the bulls afterward.

To sum up, EUR/USD is likely to remain pressured even if the downside room appears limited.

EUR/USD: Four-hour chart

Trend: Further downside expected

• Gold price is showing volatility contraction as investors have mixed responses to Fed’s policy outlook.
• The street believes that the reason behind deepening fears of the banking crisis is the Fed’s steepest and fastest rate hikes.
• Gold price is auctioning in a Symmetrical Triangle chart pattern, which indicates a squeeze in volatility.

Gold price (XAU/USD) is demonstrating a sheer squeeze in volatility amid the puzzle for monetary policy outlook by the Federal Reserve (Fed), which will be announced next week. The policy puzzle is getting more confusing as First Republic Bank has come under scrutiny after the collapse of Silicon Valley Bank (SVB) and Signature Bank.

Federal Reserve executes its monetary policy through commercial banks, which are going through a rough phase and investors are worried that more burden of higher rates would lead to more banks’ debacles.

The street believes that the reason behind deepening fears of a banking crisis is the steepest and fastest interest rate hikes from the Fed. Therefore, the odds of an unchanged monetary policy have stemmed. However, the CME Fedwatch tool is showing mere 20% chances that Fed chair Jerome Powell would keep interest rates steady.

S&P500 futures are showing nominal losses in the Asian session after a super-bullish Thursday, however, the risk appetite is still solid. The US Dollar Index (DXY) continues to juggle around 104.40 as investors are awaiting the preliminary Michigan Consumer Sentiment Index (March) data. A steady number is anticipated at 67.0. Meanwhile, the return generated on the 10-year US Treasury bonds looks sticky at around 3.58%.

Gold technical analysis

Gold price is auctioning in a Symmetrical Triangle chart pattern on an hourly scale, which indicates a squeeze in volatility that is followed by an expansion in the same. The downward-sloping trendline of the aforementioned chart pattern is placed from March 15 high around $1,939.40 while the upward-sloping trendline is placed from March 16 low at $1,907.56.

Overlapping 20-period Exponential Moving Average (EMA) at $1,919.60 with the asset indicates a rangebound move.

Adding to that, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which indicates that investors are awaiting a potential trigger for further action.

Gold hourly chart

USD/CHF remains sidelined around 0.9300, after a downbeat daily performance, as traders look set to snap a two-week losing streak. In doing so, the Swiss currency pair traces the upbeat options market signals while suggesting further advances of the quote.

That said, a one-month risk reversal (RR) of the USD/CHF pair, a gauge of the spread between the call and put options, prints the first weekly mark in three, as well as the highest figure in a month, while posting the 0.040 mark at the latest.

It’s worth noting, however, that the daily RR portrayed a -0.145 figure by the end of Thursday’s North American session and poked the USD/CHF bulls with the lowest mark in three days.

Hence, the USD/CHF pair’s current indecision could be linked to the mixed plays between the weekly and daily RR even if the bulls hold the reins.

Also read: USD/CHF Price Analysis: Bulls and bears clashed around 0.9280/90 on sideways trading

• USD/CAD holds lower grounds after declining below 50-HMA, 100-HMA.
• Downbeat oscillators direct sellers towards a two-week-old ascending support line.
• Bulls may aim for weekly resistance line on crossing 1.3740 hurdle.

USD/CAD struggles for clear directions around 1.3720-25 after welcoming the bears the previous day. In doing so, the Loonie pair stays defensive while keeping Thursday’s downside break of the 100 and 50 Hourly Moving Averages (HMAs).

Not only the HMA breakdown but the bearish MACD signals and descending RSI (14), not oversold, also keeps the Loonie sellers hopeful of witnessing the further south-run.

That said, the 1.3700 threshold appears to be the immediate support for the USD/CAD sellers to watch ahead of a two-week-old ascending trend line, near 1.3690-85 at the latest.

In a case where the Loonie pair breaks 1.3685, the weekly low surrounding 1.3650 will gain the market’s attention before highlighting the monthly bottom of around 1.3555.

On the flip side, the 100-HMA and the 50-HMA restrict immediate USD/CAD recovery near 1.3730 and 1.3740 in that order.

However, a descending trend line stretched from the last Friday, near 1.3795, as well as the 1.3800 threshold, could restrict the pair’s upside past 1.3740.

Should the quote rally past 1.3740, the odds of witnessing a fresh Year-To-Date (YTD) high, currently around 1.3860, can’t be ruled out.

Overall, USD/CAD remains sidelined between the fortnight-old and weekly trend lines. However, the latest downside break of the HMAs and downbeat oscillators favor the intraday sellers.

USD/CAD: Hourly chart

Trend: Further downside expected

• AUD/JPY rebounds after rapid actions to address emerging financial turmoil.
• Central banks intervene to rescue banks facing liquidity crunches.
• Japanese Yen’s dynamics are back in play after a long time.

The risk proxy AUD/JPY was hammered brutally earlier this week, pushing the pair to touch the 87.50 level in a risk-averse environment. The liquidity crisis that emerged from the US banking sector revealed who was swimming naked.

This week was a roller coaster ride, with several banks facing liquidity crunches to fulfill their regular market operations. The banks include SVB, Signature Bank, Credit Suisse, and The First Republic Bank. After the SVB fallout, no one expected such a fast pace of banks falling into the liquidity trap.

It seems that surging borrowing costs and quantitative tightening have drowned liquidity globally and are putting pressure on banks. AUD/JPY was hit hard on Wednesday when troubles at Credit Suisse, a key player in global operations, sparked strong risk aversion.

As the media focused on Credit Suisse, some key central banks jumped into action. The Bank of England (BoE) held important talks with international counterparts, and the Swiss National Bank (SNB) offered a CHF50 billion covered loan facility. 

In the US, First Republic Bank faced similar problems, but major banks like JPMorgan, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley came to the rescue with a pool of liquidity.

These backstop plans and rapid actions to deal with the emerging liquidity crisis boosted the AUD/JPY in the previous trading session. Despite upbeat Australian jobs numbers, AUD/JPY mostly traded in line risk sentiment this week.

Levels to watch

USD/JPY bears eye 131.00, a level that could easily come back under pressure for the days ahead.

Meanwhile, bulls will need to commit at 4-hour support. 

USD/JPY is at 133.40, up from 132.74 as of Thursday's Tokyo stock market close. Currency markets were broadly calmer on Thursday after Credit Suisse said it would borrow up to $54 billion from the Swiss National Bank to shore up liquidity and investor confidence.

This has left the Yen sideways vs. the US Dollar, near to trendline resistance in USD/JPY as the following illustrates:

USD/JPY daily chart

The market is on the front side of the bearish trendline, submerged by the horizontal and dynamic trendline resistance on the daily chart. With that being said, the price did fall out to the backside of the prior dominant bull trend, and the bears vaulted support structure. This makes for a viable downside case. However, as illustrated, should the bulls break the resistance, there will be prospects of a move higher to test the 135.20s in a 50% mean reversion. 

USD/JPY H4 chart

The M-formation is pulling in the price to the neckline support. However, should the bulls commit, then there will be prospects of a breakout of resistance. On the other hand, if the bears stick around, then while being on the front side of the bear trend, 131.00 could easily come back under pressure for the days ahead:

• GBP/USD has managed to sustain its auction above 1.2100 as investors are mixed for Fed policy.
• The odds of a 50 bps rate hike by the Fed have vanished as January’s renewed price pressures were a one-time blip.
• UK FM announced a tax-free pension allowance so that individuals don’t consider early-age retirement.

The GBP/USD pair has sensed a buying interest after a corrective move to near 1.2100 in the early Asian session. The Cable is attempting to extend further above the immediate resistance of 1.2130 as investors are getting anxious for mixed views on Federal Reserve’s (Fed) monetary policy outlook, scheduled for next week.

S&P500 futures ended Thursday’s trading session on a promising note as various financial institutions came forward to provide liquidity into the US-based First Republic Bank and the Swiss National Bank (SNB) infused a new lifeline into Credit Suisse, portraying an improvement in investors’ risk appetite. The US Dollar Index (DXY) is hovering near 104.40 as investors are skeptical about the interest rate decision by the Federal Reserve (Fed), which will be announced next week.

The odds of a 50 basis point (bps) interest rate hike by the Fed have almost vanished as the continuous decline in the United States economic data for February month has confirmed that January renewed inflationary pressures were a one-time blip. Therefore, investors are mixed about an unchanged policy stance as the banking crisis is deepening dramatically or a 25 bps rate hike as Fed chair Jerome Powell is required to continue to weigh pressure on the US Consumer Price Index (CPI).

On the Pound Sterling front, the Office for National Statistics (ONS) reported a 3% jump in job advertisements for the week ending March 10. The scale of addition in job adverts was 19% lower than the figure recorded a year ago.

The United Kingdom's economy is facing the problem of a shortage of labor, which is getting offset by higher offerings from firms. To tame the labor shortage, UK Finance Minister (FM) Jeremy Hunt has already announced a tax-free pension allowance so that individuals don’t consider early-age retirements.

Japan's Finance Minister Shunichi Suzuki said prices are weighing on households and that they need to respond to inflation with additional measures.

Suzuki said that they are closely coordinating with the Bank of Japan and other central banks in taking response to financial situations.

USD/JPY update

USD/JPY is at 133.40, up from 132.74 as of Thursday's Tokyo stock market close. Currency markets were broadly calmer on Thursday after Credit Suisse said it would borrow up to $54 billion from the Swiss National Bank to shore up liquidity and investor confidence.