Forex-novosti i prognoze od 28-03-2023

• Oil price is oscillating near its two-week high around $73.90.
• The USD Index has tumbled to near 102.40 as investors are split about Fed’s interest rate outlook.
• An upside break of the triangle chart pattern resulted in wider ticks and heavy volume.

West Texas Intermediate (WTI), futures on NYMEX, is hovering near its two-week high around $73.90 in the early Asian session. The oil price has shown a solid run in the past two trading sessions amid weakness in the US Dollar and expectations of more sanctions on Russia.

The US Dollar Index (DXY) has tumbled to near 102.40 as investors are split about the interest rate outlook of the Federal Reserve (Fed). As per the CME Fedwatch tool, more than 50% of investors are favoring a steady monetary policy by the Fed for its May meeting.

The execution of bases for nuclear weapons in Belarus by Russia has mounted global tensions. The street is discussing that the decision from Russian President Vladimir Putin will attract more sanctions from G7 countries, which might hinder the oil supply further.

On Wednesday, investors’ entire focus will remain on oil inventories data, which will be reported by the United States Energy Information Administration (EIA). As per the consensus, the US EIA will report a small build-up in oil stockpiles by 0.187 million barrels for the week ending March 24.

WTI has witnessed a sharp upside after a breakout of the Symmetrical Triangle chart pattern formed on an hourly scale. An upside break of the triangle chart pattern resulted in wider ticks and heavy volume. The 20-period Exponential Moving Average (EMA) at $73.30 is providing support to the oil bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates that upside momentum is already active.

Going forward, a decisive move above the immediate resistance of $74.00 will drive the oil price towards the horizontal resistance plotted from March 03 high at $76.00. A break above the latter would expose the asset to March 02 high at $78.65.

On the flip side, a slippage below March 23 high at $71.39 would drag the asset toward March 17 high at $69.83 followed by March 24 low at $66.88.

WTI hourly chart

Overview

Australia’s Monthly Consumer Price Index (CPI) for February, scheduled for publishing on early Wednesday around 00:30 GMT, appears the crucial data for the AUD/USD pair traders to watch. The reason could be linked to the Reserve Bank of Australia’s (RBA) recent hesitance in defending the hawkish monetary policy, not to forget the downbeat Aussie Retail Sales and upbeat employment figures.

Forecasts suggest that the headline CPI is expected to ease to 7.1% YoY versus 7.4%, confirming policymakers’ latest claims of easing inflation pressure due to higher rates.

Ahead of the release, Analysts at the ANZ said,

On the other hand, National Australia Bank (NAB) said

TD Securities further elaborated the Aussie inflation impact while saying,

How could AUD/USD react to the news?

AUD/USD retreats from intraday high to 0.6705 ahead of the day, probing the two-day uptrend, while portraying the pre-data anxiety. Adding strength to the pair’s pullback moves could be the looming financial market check in Australia and the market’s indecision about the much-debated $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank. However, overall optimism about overcoming the banking crisis keeps the Aussie pair buyers hopeful.

Even so, Tuesday’s downbeat Australia Retail Sales and the previously cautious commentary from the Reserve Bank of Australia (RBA) officials keep the sellers on the lookout for a softer Australia Monthly Consumer Price Index (CPI) below the 7.2% YoY forecast. In that case, the RBA’s policy pivot could gain the market’s attention and weigh on the AUD/USD price.

Alternatively, a positive surprise may join the risk-on mood and broader USD weakness to underpin the bullish bias surrounding the AUD/USD pair.

Technically, A two-week-old bullish channel keeps AUD/USD buyers hopeful unless the quote breaks the 0.6765-6645 zone.

Key notes

AUD/USD bulls attack 0.6700 with eyes on Australia inflation data, banking news

AUD/USD Forecast: Looking bullish while above 0.6645, tough resistance ahead

About Aussie Consumer Price Index

The quarterly Consumer Price Index (CPI) published by the Australian Bureau of Statistics (ABS) has a significant impact on the market and the AUD valuation. The gauge is closely watched by the Reserve Bank of Australia (RBA), in order to achieve its inflation mandate, which has major monetary policy implications. Rising consumer prices tend to be AUD bullish, as the RBA could hike interest rates to maintain its inflation target. The data is released nearly 25 days after the quarter ends.

Markets remain dicey during early Wednesday as traders await more clues to overcome the mixed sentiment backed by hopes of overcoming the banking crisis and indecision about the global central banks’ next moves amid the light calendar.

However, the cautious optimism and recently firmer US data put a bit under the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED). The same underpins the US Treasury bond yields and allows the Fed bets to remain firmer.

That said, the US 10-year and two-year Treasury bond yields grind higher after rising in the last two consecutive days while the CME’s FedWatch Tool suggests market players placing near 65% bets on another 0.25% rate hike for May 03 meeting.

It should be noted that the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) recently flashed a three-day and two-day winning streak respectively while posting the 2.31% and 2.34% level in that order. With this, the inflation precursors rose to the highest levels in a fortnight.

Given the latest run-up in inflation expectations, as well as the rebound in the US Treasury bond yields, the US Dollar should witness a corrective bound. However, it all depends upon Friday’s key inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, also known as the Fed’s preferred inflation index.

Also read: Forex Today: Dollar keeps moving south as markets settle down

• AUD/NZD struggles for clear directions after posting a trend-changing candlestick.
• Downbeat expectations from Australia Monthly CPI, 21-DMA hurdle challenge recovery moves.
• Nearly four-month-old horizontal support appears a tough nut to crack for the bears.

AUD/NZD portrays the pre-data anxiety by making rounds to 1.0700 during early Wednesday, waiting for Monthly Consumer Price Index (CPI).

In addition to the cautious mood ahead of the key Aussie data, mixed technical signals also test the pair traders.

That said, the quote’s sustained bounces off a horizontal area comprising multiple levels marked since early December 2022 join bullish MACD signals to tease buyers. However, the 21-DMA and the previous day’s Doji candlestick challenge the upside momentum. Furthermore, the steadily rising RSI (14) adds strength to the recovery.

It should be noted that a clear break of the 21-DMA hurdle, around 1.0760 by the press time, could defy the bearish candlestick and can propel the price towards the previous weekly top of 1.0805.

On the contrary, a downside break of the 1.0660-75 zone won’t hesitate to revisit the late December lows near 1.0625.

It’s worth observing that the AUD/NZD pair’s upside past 1.0805 appears difficult while the weakness below 1.0625 has a comparatively smoother road to accepting bears.

As a result, the AUD/NZD pair is likely to decline further if backed by the downbeat Aussie inflation data, expected 7.2% YoY for February versus 7.4% prior.

Also read: AUD/USD bulls attack 0.6700 with eyes on Australia inflation data, banking news

AUD/NZD: Daily chart

Trend: Further downside expected

• USD/CHF has shown a recovery above 0.9200 despite the further correction in the US Dollar.
• The reputation of the Swiss Franc as a safe-haven has been significantly dented after the Credit Suisse collapse.
• It seems that stubborn US inflation would be handled by tight credit conditions from US banks ahead.

The USD/CHF pair has recovered after a minor correction below 0.9200 in the early Tokyo session. The Swiss Franc asset has shown a recovery despite a firm correction in the US Dollar Index (DXY). The demise of Credit Suisse has dented the reputation of the Swiss Franc as a safe-haven.

The Swiss Franc used to be the first choice of investors if the US Dollar went through turbulent times. US banking shakedown resulted in a sheer demand for the Japanese Yen and the Gold while Swiss Franc weakened further against the mighty US Dollar after the Credit Suisse collapse. Money managers ditched the Swiss franc at the fastest rate in two years last week in the run-up to the dramatic takeover of Credit Suisse by UBS, as reported by Reuters.

Meanwhile, correction in the USD Index has extended to near 102.40 as the Federal Reserve (Fed) is expected to take the route of steady monetary policy in times when the US banking system is going through major headwinds. While stubborn inflation would be handled by tight credit conditions from US banks. Disbursement of advances to households and businesses will go through more filters as banks are required to remain precautions in times of higher interest obligations.

Going forward, the release of the Quarterly Bulletin (Q1) by the Swiss National Bank (SNB) will be keenly watched. The Quarterly Bulletin will be filled with monetary policy report and business cycle trends in the Swiss region. Inflationary pressures in the Swiss region are beyond the control of the SNB. And, SNB Chairman Thomas J. Jordan has already confirmed more rates head to contain higher Consumer Price Index (CPI).

• AUD/JPYretrats from daily highs, on risk-off impulse.
• AUD/JPY correction fails to shake bearish bias, resistance at 20-day EMA.
• AUD/JPY is on the rise as the 4-hour chart shows bullish momentum

AUD/JPY edges down as the Asian session begins, but Tuesday’s gains opened the door for further upside in the pair. However, the AUD/JPY is still downward pressured, but resistance at the 20-day Exponential Moving Average (EMA) at 88.77 could be challenged. At the time of writing, the AUD/JPY is trading at 87.70.

AUD/JPY Price action

After printing back-to-back bullish candles, the AUD/JPY corrected upwards, yet a bearish bias remains. To change the pair’s preference to neutral, AUD/JPY buyers must conquer the 20-day EMA at 88.77 before reclaiming 89.00. Once achieved, the next resistance would be the 50-day EMA at 89.99, around 90.00. Conversely, the AUD/JPY would continue its downtrend if the pair stumbles below the March 28 low of 87.15, which could open the door for further losses.

In the near term, the AUD/JPY 4-hour chart portrays the pair’s testing of the 50-EMA at 87.91. The Relative Strength Index (RSI) in bullish territory favors upside price action, the same as the Rate of Change (RoC). Therefore, the AUD/JPY path of least resistance is upwards.

The AUD/JPY first resistance would be the confluence of the R1 pivot and the 88.00 figure. A breach of the latter will expose the R2 pivot at 88.34 before testing the 100-EMA at 88.71. On the flip side, the AUD/JPY first support would be the daily pivot at 87.61, followed by the 20-EMA At 87.49, ahead of testing the S1 pivot at 87.34.

AUD/JPY 4-hour chart chart

AUD/JPY Technical levels

• Australian Treasury bond yields remain firmer two-day rebound from the lowest levels since August 2022.
• Downbeat Aussie Retail Sales contrast, review of how global banking crisis affects Australia prods bond buyers.
• Australia's Monthly CPI is expected to ease to 7.2% YoY in February, suggesting more hardships for RBA hawks.

Australia bond markets continue witnessing the week-start buying as traders brace for the key Aussie Monthly Consumer Price Index (CPI) data for February on early Wednesday.

That said, the benchmark 10-year Australia Treasury bond yields seesaw around 3.53% after posting a two-day recovery from the lowest levels since August 2022, marked on the last Friday. On the same line, the two-year counterpart pokes the 3.10% level during its third consecutive day of rebound.

While tracing the clues of the latest recovery in the Aussie bond coupons the looming fears of a financial market check in Australia and downbeat Retail Sales gain major attention. However, the macro risk-on mood supersedes the woes amid the month-end positioning.

Talking about the Aussie data, the seasonally adjusted Retail Sales growth for February came in at 0.2% versus 0.4% market forecasts and 1.9% prior.

Alternatively, news that Australian Treasurer Jim Chalmers will convene a meeting of the country's top financial regulators to check how the latest volatility in global financial markets could affect the country, an official in the treasurer's office said on Tuesday per Reuters, prod the optimism. On the same line could be the much-debated $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank.

Moving on, Aussie bond traders will keep their eyes on the Monthly CPI for February, expected 7.2% YoY versus 7.4% prior, as downbeat Retail Sales and recently softer talks of the Reserve Bank of Australia (RBA) suggest a pause in the rate hike trajectory.

Also read: AUD/USD bulls attack 0.6700 with eyes on Australia inflation data, banking news

• USD/CAD remains depressed around fortnight low after two-day downtrend.
• Bears remain hopeful as Loonie pair’s U-turn from six-month-old horizontal resistance gains support from downbeat oscillators.
• Ascending trend line from June 2022 gains bear’s attention.
• Buyers need validation from 1.3865 to retake control.

USD/CAD bears struggle to keep the reins during early Wednesday as the 50-day Exponential Moving Average (EMA) probes the Loonie pair’s two-day downtrend near 1.3600 at the latest.

It’s worth noting that the quote’s failure to cross the key horizontal resistance surrounding 1.3845-65, established since September 2022, joins the bearish MACD signals and downbeat RSI (14), not oversold, to keep the Loonie pair sellers hopeful.

That said, a downside break of the immediate 50-EMA support near 1.3590 could quickly drag the USD/CAD price towards an ascending support line from early June 2022, around 1.3450.

However, the RSI is declining below the 50 level and suggests weaker momentum supporting the quote’s further downside. Hence, the Loonie pair may reverse from the stated key support line, if not then the 200-EMA level surrounding 1.3370 can act as the last defense of the USD/CAD buyers.

Alternatively, recovery moves may initially aim for the last December’s peak of around 1.3700 ahead of challenging the previous weekly high of near 1.3805.

Above all, the USD/CAD remains on the bear’s radar unless crossing the aforementioned six-month-old horizontal resistance area between 1.3845 and 1.3865.

USD/CAD: Daily chart

Trend: Further downside expected

• GBP/USD is oscillating below 1.2350 as expectations of a steady policy by the Fed have improved risk sentiment.
• S&P500 futures remained choppy on Tuesday despite the widening US Goods Trade Deficit.
• More rates would be welcomed by the BoE if there would be evidence of persistent inflation.

The GBP/USD pair is demonstrating a back-and-forth action below 1.2350 in the early Asian session. The Cable has turned sideways after a bumper rally and is expected to stretch its upside journey further amid improved sentiment for risk-sensitive assets. The major has been underpinned as the market participants are not expecting bold decisions on interest rates from the Federal Reserve (Fed) ahead.

S&P500 futures remained choppy on Tuesday despite the widening United States Goods Trade Deficit (Feb). Exports of goods witnessed a decline led by weak outgo of motor vehicles and parts along with consumer goods and capital goods, as reported by Reuters. Further imports of goods also slipped by 2.3%.

The US Dollar index (DXY) corrected firmly to near 102.40 as investors anticipate continuous pressure on US Consumer Price Index (CPI) through tight credit conditions from US banks amid a turbulent environment, which is prone to further financial instability.

Going forward, the release of the US Gross Domestic Product (GDP) (Q4) data will remain in focus. Tuesday’s annualized GDP is expected to remain steady at 2.7%. Apart from that, quarterly core Personal Consumption Expenditures (PCE) (Q4) might also remain anchored at 4.3%.

On the United Kingdom front, the Pound Sterling remained solid as Bank of England (BoE) Governor Andrew Bailey has remained doors open for further policy-tightening after hiking rates by 25 basis points (bps) last week to 4.25%. More rates would be welcomed by the BoE if there would be evidence of persistent inflation.

Meanwhile, overall shop inflation in the UK economy has climbed to 8.9% from the prior release of 8.4%, the highest reading in 18 years as reported by the British Retail Consortium (BRC). Rising food inflation has been a major catalyst behind stubborn UK shop inflation.

Analysts at Bank of America (BoA) are of the view that the BoE won’t hike rates further and will keep rates steady until 2024.

• USD/JPY gives up some of Monday’s gains as investors brace for safety.
• The USD/JPY needs to tumble below 130.49 for a bearish continuation.
• Conversely, a bullish scenario is likely if the USD/JPY climbs toward 131.76.

USD/JPY pares some of Monday’s gains and drops below the 131.00 figure after Wall Street closed with losses. At the time of writing, the USD/JPY is trading at 130.91, registering minuscule gains as the Asian session begins.

USD/JPY Price action

The USD/JPY is neutral to downward biased, and Tuesday’s close below 131.00 could exacerbate a fall toward the last week’s lows of 129.64. For a bearish continuation, the USD/JPY needs to tumble below 130.49, which could open the door toward 130.00, ahead of 129.64. Contrarily, a bullish scenario is likely if the USD/JPY climbs toward 131.76. Hence. The USD/JPY first resistance would be 132.00, followed by 133.00. Once cleared, the 50-day EMA would be tested at 133.27, followed by the 200-day EMA at 133.81.

Short term, the USD/JPY 4-hour chart is consolidating after Tuesday’s low of 130.40. additionally, the Relative Strength Index (RSI) shifted flat, in bearish territory, while the Rate of  Change (RoC) is almost unchanged. Therefore, the USD/JPY might continue to be range-bound before resuming upwards/downwards.

If the USD/JPY breaks above the 20-EMA at 131.00, that will open the door for further upside. The next resistance would be the R1 daily pivot point at 131.44, followed by the 50-EMA at 131.67, ahead of challenging 132.00. On the other hand, the USD/JPY first support would be the S1 daily pivot at 130.29, followed by 130.00, ahead of testing the YTD low at 129.64.

USD/JPY 4-hour chart

USD/JPY Technical levels

• AUD/USD grinds higher after rising the most in two weeks.
• Softer Australia Retail Sales fail to push back buyers amid broadly softer US Dollar, risk-on mood.
• Receding fears of banking crisis, mixed US data weigh on the greenback.
• Softer Australia Monthly CPI can challenge RBA’s rate hike and probe the Aussie pair buyers.

AUD/USD pokes 0.6700 mark as bulls await the key Australian inflation data on early Wednesday, after a two-day uptrend. It’s worth noting that the market’s reassessments of the baking risk and the broad US Dollar weakness allowed the Aussie pair to ignore downbeat Australia Retail Sales while posting the biggest daily gain in two weeks the previous day.

That said, Australia’s seasonally adjusted Retail Sales growth for February came in at 0.2% versus 0.4% market forecasts and 1.9% prior.

On the other hand, the US Conference Board (CB) Consumer Confidence rose to 104.2 in March, versus 101.0 expected and an upwardly revised prior figure of 103.4. Further, US Housing Price Index rose 0.2% MoM in January versus -0.6% expected and -0.1% prior while the S&P/Case-Shiller Home Price Indices matched 2.5% YoY forecasts for the said month compared to 4.5% previous readings.

It’s worth noting, however, that Wall Street closed with mild losses and the US Treasury bond yields managed to recover but the US Dollar Index (DXY) failed to improve as hawkish Fed bets eased. That said, CME’s FedWatch Tool suggests market players placing near 65% bets on another 0.25% rate hike for May 03 meeting.

Talking about the risks, the US and EU policymakers’ rush to defend respective banks supersede the criticism by some of their diplomats as well as the much-debated $5.4 million Credit Default Swap (CDS) trade of Deutsche Bank.

At home, Australia’s Assistant Treasurer and Minister for Financial Services Stephen Jones tried to restore the market sentiment in the Aussie banks early Tuesday while speaking on local radio. The policymaker said, “Australia’s banking system is resilient,” while also adding that Australia's financial system is well-equipped to deal with challenges in the global economy.

In an interview with CNBC on Tuesday, US House Speaker Kevin McCarthy said that there was no need for blanket insurance on all bank deposits "at this moment in time," as reported by Reuters. On the same line, Jose Manuel Campa, Chairman of the European Banking Authority (EBA), warned in the German Handelsblatt newspaper, "The risks in the financial system remain very high." The policymaker also added that the rising interest rates continued to weigh on financial markets.

Moving on, the firmer sentiment may help the AUD/USD pair grind higher ahead of Australia’s Monthly Consumer Price Index (CPI), expected 7.2% YoY versus 7.4% prior, but a likely disappointment from the data can weigh on the Aussie pair.

Technical analysis

A two-week-old bullish channel keeps AUD/USD buyers hopeful unless the quote drops below the 0.6645 support.

• EUR/USD has refreshed its four-day high near 1.0850 amid rising expectations for an unchanged Fed policy.
• Upbeat US Consumer Confidence data failed to provide support to the USD Index.
• The annual German HICP will soften firmly to 7.5% from the former release of 9.3%.

The EUR/USD pair has stretched its north-side journey to near the critical resistance of 1.0850 in the early Asian session. The absence of exhaustion signals indicates that the major currency pair is gathering strength to add more gains. Improved market sentiment after easing United States banking jitters and rising expectations for a steady monetary policy by the Federal Reserve (Fed) led to a solid rally in the shared currency pair.

S&P500 futures remained choppy on Tuesday amid the absence of potential triggers, portraying a quiet market mood. The US Dollar Index (DXY) corrected further to near 102.40 as the Fed would look to keep rates unchanged. Also, US inflation would remain under pressure due to tight credit conditions by US banks. The demand for US government bonds remained weak as the absence of bad news about US banking was considered good news by the market participants. This led to a further rise in 10-year US Treasury yields to 3.57%.

Upbeat US Consumer Confidence data failed to provide support to the USD Index. The sentiment data improved to 104.2 from the former release of 103.4. The economic data rose after a three-month losing trend despite potential fears of a banking fiasco and higher rates by the Fed, which are denting households’ sentiment as they are struggling to offset the impact of inflated prices of goods and services.

On the Eurozone front, the release of the German Harmonized Index of Consumer Prices (HICP) data will be of significant importance. As per the projections, the annual German HICP will soften firmly to 7.5% from the former release of 9.3%. An expected decline in German inflation would relieve some pressure from the European Central Bank (ECB).

• Gold price is moving in on key resistance. 
• Federal Reserve prospects are weighing on sentiment. 

Gold price was higher on Tuesday following two sessions of declines with support from a weaker US Dollar even as bond yields climbed.  Wall Street's major indexes lost ground as investors grew concerned again that the Federal Reserve would keep interest rates higher for longer as fears of further banking sector failures faded. At the time of writing, the Gold price is trading at $1,973 and has traveled between a low of $1,949 and $1,975. 

The US Dollar was losing ground vs. a number of currencies for a second straight day as easing worries about the banking system revived investors' appetite for riskier currencies. There have been no new signs of bank failures over the weekend which is supporting risk appetite and weighing on the US Dollar. Risk appetite improved due to First Citizens BancShares' agreement to buy all of the failed lender Silicon Valley Bank's deposits and loans. US regulators said on Monday they would backstop a deal for regional lender First Citizens BancShares to acquire failed Silicon Valley Bank, triggering an estimated $20 billion hit to a government-run insurance fund. First Citizens shares jumped more than 53% during Monday trading on Wall Street.

US lawmakers quizzed top US bank regulators on Tuesday during testimony in Washington D.C. Michael Barr, the Federal Reserve's top bank regulator told a Senate panel that Silicon Valley Bank did a "terrible" job of managing risk before its collapse as he fended off criticism from lawmakers who blamed bank watchdogs for missing warning signs.

All eyes back on the Federal Reserve

While the testimony suggested that the bank's problems may be isolated, investors' focus moved back to inflation risks and the implications of higher interest rates from the Fed. ´´The next FOMC meeting is May 2-3 and WIRP suggests around 55% odds of 25 bp hike then.  After that, it’s all about the cuts.  Nearly two cuts by year-end are priced in.  While down from 4-5 cuts priced in during the height of the banking crisis earlier this month, even two cuts seem very unlikely.  In that regard, Jerome Powell said after the March 22 decision that Fed officials “just don’t see” any rate cuts this year,´´ analysts at Brown Brothers said. 

Meanwhile, US Treasuries benchmark 10-year yields moved higher on Tuesday but pared gains after the Treasury Department saw solid demand for an auction of five-year notes. The benchmark 10-year notes were higher by 3.6 basis points to 3.564%, from 3.528% late on Monday.

Gold technical analysis

Gold price is testing the $1,980s resistance but the W-formation is a bearish pattern and this could see a pull on the Gold price. If the bears break the lows of the W, then the Gold price would be expected to head to the prior support near the $1,930s.

Markets continued to settle down on Tuesday, despite the red in Wall Street. Banking concerns ease as attention turns to inflation data. The US Dollar remained weak and fell for the second day in a row, even as US yields rebounded. Inflation numbers from Australia will be critical on Wednesday ahead of the next RBA meeting. On Thursday, Eurozone countries will release CPI numbers and the US will publish the core PCE on Friday.

Here is what you need to know on Wednesday, March 29:

Wall Street ended lower, with the S&P 500 falling by 0.2% and the Nasdaq Composite losing 0.5%. This time it wasn’t the bank sector but tech what drove US equities lower. The banking crisis eased further and financial markets continued to settle down.

The DXY dropped 0.40%, posting the lowest close since early February below 102.50. Not even higher US yields helped the Greenback. The US 10-year Treasury yield settled at 3.56% and the 2-year above 4.05%.

US Consumer Confidence (CB) improved in February, with the main index rising from 103.4 to 104.2. The key report is due on Friday with the Core Personal Consumption Expenditure Price Index.

EUR/USD held firm above 1.0800 and is about to test 1.0850. Expectations that the European Central Bank (ECB) will continue raising rates are offering support to the Euro. Inflation data from Eurozone countries will be released on Thursday.

GBP/USD is consolidating above 1.2300 after failing to do so last week. UK credit data on Wednesday will show how the tightening cycle is affecting lending.

AUD/USD is testing levels above 0.6700, trading at the highest level since last Thursday. Australian Retail Sales rose 0.2% in February, below the 0.4% of market consensus. On Wednesday, the Monthly Consumer Price Index is due (consensus: 7.1% YoY). The numbers will be a key input for next week’s Reserve Bank of Australia (RBA) meeting, which could raise rates further or pause. The numbers are also relevant for the Kiwi. NZD/USD it at 0.6250.

USD/CHF remains sideways unable to rise above 0.9200. The Swiss Franc was among the worst performers on Tuesday. EUR/CHF rose a hundred pips, approaching parity. The Swiss National Bank (SNB) will release its Quarterly Bulletin on Wednesday. 

Gold found support above $1,950 and rose to $1,975, while Silver posted the highest close in almost two months above $23.30. WTI gained 0.85%, advancing to the highest level in two weeks above $73.30. 
 
 

• Safe havens send Silver Prices surging above $23.00.
• Mixed US economic data, and higher US Treasury bond yields, could not dent demand for Silver.
• XAG/USD Price Analysis: To test $24.00, once buyers reclaim $23.52.0

Silver price rises sharply late in the New York session, up 0.34% due to overall US Dollar (USD) weakness, amidst a risk-off impulse in the financial markets. Investors seeking safety moved funds toward the precious metals segment. At the time of typing, the XAG/USD is trading at $23.30 after hitting a low of $22.83.

XAG/USD underpinned by sentiment and a weaker US Dollar

Wall Street’s shifted gears as it approaches Tuesday’s close. Even though sentiment changed after First Citizens BancShares acquired Silicon Valley Bank (SVB), traders expect another rate hike by the US Federal Reserve (Fed) in the summer. Reflection of that is US T-bond yields are climbing, with 2s above the 4% threshold.

Data-wise, the US economic docket featured the Conference Board (CB) Consumer Confidence for March, which rose to 104.2 from 103.4 in February. “Driven by an uptick in expectations, consumer confidence improved somewhat in March but remains below the average level seen in 2022,” said Ataman Ozyildirim, senior director of economics at the Conference Board.

Early data revealed that before Wall Street opened, the House Price Index climbed 0.2% MoM in January vs. a fall of 0.6% estimated, data from the US Federal Housing Finance Agency showed on Tuesday. At the same time, the S&P/Case-Shiller Home Price Index arrived at 2.5% YoY in January, down from 4.6% in the prior month.

In the meantime, the US Dollar Index, which tracks the buck’s value vs. six currencies, extended its losses for two straight days, falling to three-day lows at 102.407, down 0.42%.

XAG/USD Technical analysis

Silver’s daily chart suggests the XAG/USD is neutral to upward biased, with the 20-day Exponential Moving Average (EMA) crossing above the 50-day EMA. At bullish territory, the Relative Strength Index (RSI) resumed its upward trajectory, while the Rate of Change (RoC) is neutral. That said, mixed signals warrant caution. For XAG/USD to test the YTD highs, th white metal needs to reclaim $23.52. Once done, XAG/USD could rally toward the $24.00 figure before testing the YTD high at $24.63.

• NZD/USD bears eye a break of 0.6190 that could open significant risks to the downside.
• 0.6270 is key resistance on the daily chart. 

NZD/USD is in a grind and making hard work of the upside near 0.6270s resistance. The pair moved up from 0.6195 and reached a high of 0.6253 on the day, climbing higher by some 0.9%. However, the price is failing to convince as it is contained by the horizontal resistance.

Risk appetite improved due to First Citizens BancShares' agreement to buy all of the failed lender Silicon Valley Bank's deposits and loans. US regulators said on Monday they would backstop a deal for regional lender First Citizens BancShares to acquire failed Silicon Valley Bank, triggering an estimated $20 billion hit to a government-run insurance fund. First Citizens shares jumped more than 53% during Monday trading on Wall Street.

´´The Kiwi recovered from yesterday’s sub-0.62 levels overnight as the USD came under pressure and commodity prices bounced. There was no real catalyst for overnight moves but markets continue to fiercely debate the outlook for Fed policy, and cuts priced in beyond May seem to be really weighing on the dollar,´´ analysts at ANZ Bank said.

´´Locally there’s very little in the calendar until next week’s MPR, so we’ll likely go with the ebb and flow of global sentiment as in recent weeks,´´ the analysts added. ´´As we noted yesterday, we continue to ask; will NZ’s remoteness to all this deliver NZD strength if the RBNZ can get the OCR to 5¼%? Will a hawkish tone (they’re hardly going to throw the towel in and be dovish) give the Kiwi a boost next week? It might.´´

NZD/USD technical analysis

NZD/USD has been sliding out of the dynamic trendline support in what has been a sideways grind for the best part of the month. Failures to hold 0.6190 could open significant risks to the downside while below 0.6270. 

Analysts at the National Bank of Canada see the USD/CAD moving in the 1.36-1.39 range during the next months, before the Loonie makes a comeback. Their year-end target is 1.32 for the pair. 

Key Quotes: 

“The Canadian dollar remains relatively weak against the greenback, as it continues to hover near its cyclical high. While many investors fear a tightening of global credit conditions, some believe that Canadian banks could face a very difficult environment due to their exposure to residential real estate in a much higher interest rate environment. Combined with weakening commodity prices, the short-term outlook does not support a stronger loonie.”

“USD/CAD should remain in the 1.36-1.39 range in the first half of 2023, before making a comeback in the second half of the year when more central banks finally end their tightening cycle.”

• Bulls are in the market and a break of the equal highs near 1.2450 opens risk to the 1.2670's.
• GBP/USD bulls press up against neckline resistance. 

GBPUSD increased to a 7-week high of 1.2349, a key area of resistance as the following charts will illustrate.

GBP/USD weekly charts

The inverse head and shoulders pattern is bullish but the price is yet to break the neckline resistance and could easily reverse course and head lower. 

On the other hand, if the bulls can get above the neckline and break the 1.2500 area, they will be in the runnings for an extended move toward the 1.3150s:

AUD/USD daily chart

Bulls are in the market and a break of the equal highs near 1.2450 opens risk to the 1.267's and should bulls commit above 1.2200, then there will be prospects of a move towards 1.3150. 

• AUD/USD supported on the approach to 0.6720s resistance. 
• Traders will turn to the Aussie CPI event as a potential catalyst.

AUD/USD is higher on the day by some 0.75% after rising from a low of 0.6644 to score a high of 0.6710 on Tuesday. A risk on appetite is supporting the high beta currencies such as the Aussie. Investors have taken solace from First Citizens BancShares' agreement to buy all of the failed lender Silicon Valley Bank's deposits and loans.

US regulators said on Monday they would backstop a deal for regional lender First Citizens BancShares to acquire failed Silicon Valley Bank, triggering an estimated $20 billion hit to a government-run insurance fund. First Citizens shares jumped more than 53% during Monday trading on Wall Street.

The package includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC.” “In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million,” the FDIC said in a release.

Eyes on Aussie CPI

Meanwhile and domestically, Australia's February Consumer Price Index print will grab attention after the Reserve Bank of Australia flagged it as a key data point for its April monetary policy decision, as analysts at TD Securities explained.

´´We expect CPI inflation to ease further to 7% YoY in February (cons: 7.2%) from 7.4% last month and further affirm the RBA's view that inflation likely peaked in Q4 last year. Our below consensus forecast is due to the large seasonal decline from recreational services (e.g., travel prices), partly offset by firm price increases for education and transport. We still retain a 25bps hike forecast for the April meeting as inflation is still far above the RBA's inflation target and central banks such as ECB and Fed have pushed through with hikes despite recent financial volatility.´´

• After a Kurdistan/Baghdad arbitrage decision, supply risks halted 450K barrels of exports through Turkey.
• A soft US Dollar underpins US crude oil benchmark prices.
• WTI shows neutral to downward bias, but oscillators turned bullish, suggesting further upside.

Western Texas Intermediate (WTI), the US crude oil benchmark, climbs in the mid-North American session, spurred by crude oil supply issues. In addition, a risk-on impulse weakened safe-haven assets, like the greenback. At the time of writing, WTI exchanges hands at $73.55 a barrel.

WTI experienced a $3 jump after a halt of 450K barrel exports from Iraq Kurdistan region through Turke, spurred by an arbitration ruling that validated that Baghdad’s approval was necessary to transport the oil.

Meanwhile, sentiment shifted after First Citizens BancShares acquired Silicon Valley Bank (SVB) deposits and loans. That propelled a recovery in global bank shares as a banking system crisis waned.

Therefore, safe-haven assets, like the US Dollar (USD), tumble across the board. The US Dollar Index (DXY) drops 0.38% to 102.449. A weaker greenback makes oil cheaper for international buyers and lifts WTI’s price.

Russian President Vladimir Putin’s announcement to deploy tactical nuclear weapons in Belarus to intimidate the West increased oil prices due to its support for Ukraine. NATO described Putin’s comments as “dangerous and irresponsible.”

At the same time, Russia’s Deputy Prime minister Alexander Novak commented that Moscow is close to achieving its 500K crude output, to about 9.5 million bpd.

WTI Technical analysis

WTI is still neutral to downward biased, though it has cleared the 20-day EMA. Oscillators turned bullish, with the Relative Strength Index (RSI) above 50, which could pave the way for further upside. That said, WTI  could rally to $80.00. Hence, WTI’s first resistance would be the 50-day EMA at $74.93, followed by the 100-day EMA at $78.06, before testing the $80.00 mark.

• Risk appetite is returning and supporting the Euro.
• EUR/USD bulls are climbing their way towards 1.09´s.

EUR/USD climbed to a five-day high at 1.0846 as euro zone government bond yields rose on Tuesday and after a deal backed by the US regulator for First Citizens BancShares to buy up Silicon Valley Bank helped alleviate concerns in the banking sector. At the time of writing, EUR/USD is trading at 1.0841 and is 0.4% higher having rallied from the day´s low of 1.0795.

The US Dollar fell against a basket of currencies for a second straight day on Tuesday with the DXY,  which measures the currency against six rivals, falling to a low of 102.41, not far now from the seven-week low of 101.91 hit last Thursday.

Last week, the Federal Reserve's Federal Open Market Committee raised interest rates by 25 basis points, as expected, but took a cautious stance due to the banking sector crisis at hand. Nonetheless, Fed Chair Jerome Powell kept the door open for further rate rises if necessary which stalled the drop in the US Dollar. 

´´We believe that markets are overestimating the Fed’s capacity to ease and so the dollar should eventually recover when expectations are repriced,´´ analysts at Brown Brothers Harriman argued. 

´´Fed officials continue to view the banking crisis as a regulatory failure.  If this turns out to be so, the impact on monetary policy is likely to end up being not too significant,´´ the analysts added. 

´´The next FOMC meeting is May 2-3 and WIRP suggests around 55% odds of 25 bp hike then.  After that, it’s all about the cuts.  Nearly two cuts by year-end are priced in.  While down from 4-5 cuts priced in during the height of the banking crisis earlier this month, even two cuts seems very unlikely.  In that regard, Powell said after the March 22 decision that Fed officials “just don’t see” any rate cuts this year.´´

EUR/USD technical analysis

Meanwhile, EUR/USD has broken out of the falling wedge resistance and is eyeing a run to test prior highs in the 1.09´s. However, a break of the micro trendline support will open the risk of a significant drop as illustrated above.

• USD/CHF gains momentum, signaling a possible bullish trend in coming sessions.
• Double bottom in the 4-hour chart could pave the USD/CHF way to 0.9300.
• USD/CHF Price Analysis: Daily close above 0.9220 would confirm the double bottom.

The USD/CHF bounces off weekly lows of 0.9136 and climbs toward testing 0.9200 in the North American session. After hitting a daily high of 0.9226, the USD/CHF is trading at 0.9199, above its opening price.

USD/CHF Price action

Early, the USD/CHF tested last week’s low of 0.9118; since then, it has not looked back. However, as long as the USD/CHF pair achieves a daily close below 0.9200, that would keep the major trading sideways, awaiting a fresh catalyst. On the other hand, the USD/CHF could resume upwards, and it might test the 20 and 50-day EMAs, each at 0.9240 and 0.9272, respectively. Upside risks lie at 0.9300, followed by the 100-day EMA at 0.9343.

Short term, the USD/CHF 4-hour chart portrays a double bottom formed. However, the exchange rate must clear the March 24 high at 0.9216 to confirm its validity. That would pave the way toward the March 21 high of 0.9317, but the pair needs to hurdle some resistance levels on its way north.

The USD/CHF first resistance would be 0.9216. A breach of the latter wand the USD/CHF will face the 100-EMA at 0.9233, followed by the 200-EMA at 0.9255. Once broken, the 0.9300 figure would be up for grabs.

USD/CHF 4-hour chart

USD/CHF Technical levels

• USD/MXN falls as the US Dollar weakens across the board.
• US Consumer confidence improved but failed to underpin the US Dollar.
• USD/MXN Price Analysis: Remains downward biased but could shift neutral above 18.50.

USD/MXN dropped and extended its losses to a three-week low in early trading during the New York session. US equities are mixed, while the greenback continues to tumble as market expectations for a rate cut in 2023 persist. Therefore, the USD/MXN s trading at 18.2631 after hitting a high of 18.3573.

CB Consumer Confidence exceeded estimates, but the US Dollar didn’t blink

Traders’ sentiments remain fragile. Economic data in the United States (US) was mixed, with the Conference Board (CB) Consumer Confidence rising to 104.2 from 103.4 in February. “Driven by an uptick in expectations, consumer confidence improved somewhat in March but remains below the average level seen in 2022,” said Ataman Ozyildirim, senior director of economics at the Conference Board.

Further details of the survey revealed that the Present Situation Index declined to 151.1 from 153, and the Consumer Expectations Index rose to 74 from 70.4

In early data, the House Price Index rose 0.2% MoM in January vs. a drop of 0.6% estimated, data showed from the US Federal Housing Finance Agency showed on Tuesday. At the same time, the S&P/Case-Shiller Home Price Index arrived at 2.5% on a yearly basis in January, down from 4.6% in the prior month.

USD/MXN traders ignored most US data. Consumer confidence improvement barely moved the pair, which is still pushing lower, with sellers eyeing 18.20. The US Dollar Index (DXY), a gauge of the buck’s value vs. a basket of peers, tumbles 0.30%, at 102.518

US Treasury bond yields are recovering some ground, with 2s gaining four bps at 4.039%. The 10-year benchmark note rate is at 3.556%.

On the Mexican front, the lack of data keeps traders leaning on sentiment and expectations for a 25 bps rate hike by Banxico (Bank of Mexico) on March 30. That would lift rates from 11% to 11.25%.

USD/MXN Technical analysis

The USD/MXN remains downward biased after briefly testing the 19.00 mark after the banking crisis in the US. Since then, the USD/MXN pair dropped below the 50 and 20-day Exponential Moving Averages (EMAs), setting the stage for further downside. The Relative Strength Index (RSI) and the Rate of Change (RoC) suggest that sellers gather momentum. That said, the USD/MXN first support would be 18.0000, followed by the YTD low at 17.8967. In an alternate scenario, and the less likely to occur, if buyers reclaim 18.5000, that would exacerbate a rally to 19.0000.

In a report published on Tuesday, the Federal Reserve Bank of New York said that the expected rent price increase for next year was at 8.2%, down from 11.5% last year, as reported by Reuters.

Additional takeaways

"Expected home price increase over next year at 2.6% vs 7% a year ago."

"Expected home price increase stands at lowest in survey history."

"A large majority of Americans still see housing as a good investment."

Market reaction

This headline doesn't seem to be impacting the US Dollar's performance against its rivals. At the time of press, the US Dollar Index was down 0.35% on the day at 102.48.

Concerns over the banking sector have led to a move towards safe haven assets and Fold has clearly benefited from this. While economists at ING see a short-term pullback in prices, we expect these to strengthen over the second half of the year.

Fed policy should support Gold later in the year

“Fed policy is likely to be key for Gold over the medium term. We see a final 25 bps hike in May, which would leave the Fed funds range at 5-5.25%. Rate cuts will likely then become the theme for 2H23, and we see the Fed cutting by 75 bps in the fourth quarter. We would expect real yields to follow policy rates lower later in the year, which should prove supportive for Gold prices.”

“Whilst we expect a pullback in prices in the short term, we see Gold prices moving higher over 2H23 and expect spot Gold to average $2,000 over 4Q23. The assumptions around this are that we do not see further deterioration in the banking sector and that the Fed starts cutting rates towards the end of this year.” 

Economists at Scotiabank expect the US Dollar Index to sustain losses in April, which could extend into the third quarter. 

April is the worst month of the year for the DXY over the last 20 years

“The DXY could drop a little more and broader USD losses to extend to 2-3% more (and perhaps as much as 5%) from current levels in the next few months. Those losses may be concentrated in Q2-Q3 before a year-end rebound if seasonal patterns are any guide.”

“Seasonal trends are just about to turn less favourable for the USD. Over the last 20 years, the DXY has weakened 70% of the time through April, kicking off a soft run in the USD’s broader performance that typically extends into Q3. The DXY has weakened an average of -1% through April since 2002.”

It has been quite a turbulent ride in EUR/USD lately. Economists at Nordea expect the pair to grind higher. 

USD could be stronger if we get a new global turndown

“While the USD usually benefits during turbulent times, it has been hurt by the lower rate differential.”

“Given our latest views on the Fed and ECB, we believe the ECB needs to do more from here to bring inflation under control, pointing to a higher EUR/USD ahead. Uncertainty is markedly high though, if we get a new global turndown, the USD could be stronger than we expect.”

• Consumer confidence in the US improved slightly in March.
• US Dollar Index recovers above 102.50 with the initial reaction.

Consumer sentiment in the US improved modestly in March with the Conference Board's Consumer Confidence Index edging higher to 104.2 from 103.4 in February (revised from 102.9).

Further details of the publication revealed that the Present Situation Index declined to 151.1 from 153 and the Consumer Expectations Index rose to 74 from 70.4

Finally, the one-year consumer inflation expectations ticked up 6.3% in March from 6.2% in February (revised from 6.2%).

Market reaction

The US Dollar Index edged slightly higher with the initial reaction and was last seen losing 0.18% on the day at 102.65.

• USD/JPY drops to the 130.40 region earlier in the session.
• The selling interest in the dollar weighs on the pair so far.
• US Consumer Confidence surprised to the upside in March.

The continuation of the weak fashion around the greenback put USD/JPY under renewed downside pressure and forced it to revisit the 130.40 region earlier on Thursday.

USD/JPY looks at banking jitters, US yields

The noticeable downtick in USD/JPY eroded part of Monday’s auspicious start of the new trading week on the back of further retracement in the greenback and some safe haven demand in response to still unabated concerns around the banking system.

The daily advance in spot comes in contrast to another positive session in US yields across the curve, which manage to add to gains recorded at the beginning of the week, while the JGB 10-year yield remain within a consolidative phase below the 0.40% level.

No data releases in Japan on Tuesday left the attention to the US data releases, where the preliminary Goods Trade deficit is seen at $91.63B in January, the House Price Index gauged by the FHFA rose 0.2% MoM in January and the Consumer Confidence measured by the Conference Board surpassed expectations at 104.2 for the current month.

USD/JPY levels to consider

As of writing the pair is retreating 0.38% at 131.01 and the break below 129.63 (monthly low March 24) would open the door to 128.08 (monthly low February 2) and finally 127.21 (2023 low January 16). On the other hand, the immediate hurdle comes at 132.38 (55-day SMA) seconded by 133.00 (weekly high March 22) and then 135.11 (weekly high March 15).

• USD/CAD lacks any firm intraday direction and is influenced by a combination of factors.
• The Fed’s less hawkish outlook, easing fears of a banking crisis weigh on the Greenback.
• Rallying US bond yields limits the USD losses and lends support amid subdued Oil prices.

The USD/CAD pair struggles to gain any meaningful traction and seesaws between tepid gains/minor losses through the early North American session on Tuesday. The pair is currently placed just above mid-1.3600s, nearly unchanged for the day and is influenced by a combination of diverging forces.

The US Dollar (USD) drifts lower for the second successive day and keeps a lid on USD/CAD pair's modest intraday bounce to the 1.3700 neighbourhood. The Federal Reserve's less hawkish outlook, signalling that a pause to interest rate hikes was on the horizon, along with easing fears of a full-blown banking crisis, continue to weigh the safe-haven Greenback. That said, a modest pullback in Crude Oil prices, from a two-week high touched earlier this Tuesday, undermines the commodity-linked Loonie and acts as a tailwind for the major, at least for the time being.

Despite the latest optimism over a strong recovery in China and worries about supply disruptions in Turkey, worries that a deeper global economic downturn will dent fuel demand act as a headwind for the black liquid. This, along with expectations that the Bank of Canada (BoC) will refrain from raising interest rates any further, supports prospects for some meaningful appreciating move for the USD/CAD pair. That said, a convincing break below the 1.3630 horizontal support will negate the positive outlook and pave the way for a deeper corrective pullback.

Moving ahead, the focus now shifts to the release of the final US Q4 GDP print on Thursday, which will be followed by the monthly Canadian GDP and the Fed's preferred inflation gauge - the Core PCE Price Index - on Friday. In the meantime, the US bond yields and the broader risk sentiment will drive the USD demand. Apart from this, traders will take cues from Oil price dynamics to grab short-term opportunities around the USD/CAD pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.

Technical levels to watch

Economists at UBS move bonds to most preferred relative to equities.

Global stocks to deliver limited returns

“Given the headwinds to growth, we now see a higher probability that central bank hiking cycles will end sooner. We, therefore, think it’s time to increase exposure to bonds, which we upgraded this month to most preferred.”

“While equities should remain a key component of long-term portfolios, we expect global stocks to deliver limited returns and exhibit high volatility over the remainder of the year. In this light, we downgraded equities this month to least preferred.”

In reaction to the banking turmoil, markets have been pricing in larger Fed rate cuts for this year. However, the options market shows that the uncertainty about the Fed’s rate path has jumped, which means that markets have become less clear about the exact rate path, economists at Rabobank report.

It gets cloudy after the pivot 

“The banking turmoil has strengthened the market’s belief that the Fed is going to cut rates before the end of the year. However, the implied policy rate path should be taken with a grain of salt, as the uncertainty about the rate path has increased substantially.” 

“So markets are pricing in a stronger pivot, but the exact rate path has become less clear.”

The Russian central bank’s (CBR) Gold reserves have increased. Nonetheless, strategists at Commerzbank do not expect CBR to continue purchasing the yellow metal.

Russian central bank announces Gold purchases

“CBR announced last week that it has topped up its Gold reserves by 1 million ounces since the Ukraine war began 13 months ago. This is equivalent to 31 tons.” 

“Originally, the CBR was not planning to buy any further Gold. However, it has clearly seen itself forced to do so in order to support the domestic Gold industry, as Russian Gold producers are having problems selling their Gold. Russian banks, which previously were the most important buyers, have been hit by the West’s sanctions.”

“What is more, re-routing exports to Asia does not appear to be happening as quickly as with Crude Oil. Hence, a longer stretch of Gold purchases by the Russian central bank cannot be expected.”

• GBP/USD scales higher for the second straight day and climbs back closer to the monthly peak.
• The Fed’s less hawkish outlook, easing fears of a banking crisis weigh on the USD and lend support.
• Rallying US bond yields could limit losses for the USD and cap any meaningful upside for the pair.

The GBP/USD pair builds on the previous day's positive move and gains some follow-through traction for the second successive day on Tuesday. The momentum pushes spot prices to the 1.2330 region, back closer to the monthly peak touched last week and is sponsored by the prevalent selling bias surrounding the US Dollar (USD).

Against the backdrop of the Federal Reserve's less hawkish outlook, receding fears of a full-blown banking crisis turn out to be a key factor weighing on the safe-haven Greenback and lending support to the GBP/USD pair. It is worth recalling that the Fed last week toned down its aggressive approach to reining in inflation and signalled that a pause to interest rate hikes was on the horizon. Furthermore, the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company helped calm market nerves about the contagion risk and reverse the recent negative sentiment.

The British Pound, on the other hand, draws support from the fact that the Bank of Governor Andrew Bailey, in his speech last night, stressed that interest rates may have to move higher if there were signs of persistent inflationary pressure. This turns out to be another factor acting as a tailwind for the GBP/USD pair. That said, the ongoing rally in the US Treasury bond yields limits losses for the buck and caps the major, making it prudent to wait for some follow-through buying beyond the 1.2340-1.2345 area, or the monthly peak before placing fresh bullish bets.

Nevertheless, the fundamental backdrop supports prospects for a further near-term appreciating move, suggesting that any pullback might be seen as a buying opportunity and is more likely to remain limited. Next on tap is the US macro data - the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. Traders will further take cues from the US bond yields, which, along with the broader risk sentiment, might influence the USD price dynamics and produce short-term opportunities around the GBP/USD pair.

Technical levels to watch

• House prices in the US increased marginally in January.
• US Dollar Index stays in negative territory near 102.50.

House prices in the US rose by 0.2% on a monthly basis in January, the monthly data published by the US Federal Housing Finance Agency showed on Tuesday. This reading came in better than the market expectation for a decrease of 0.6%.

Meanwhile, the S&P/Case-Shiller Home Price Index arrived at 2.5% on a yearly basis in January, down from 4.6% in December and in line with the market expectation.

Market reaction

These data don't seem to be having an impact on the US Dollar's performance against its rivals. As of writing, the US Dollar Index was down 0.27% on the day at 102.55.

The USD continues to trade on a softer footing since banking fears emerged. A tentative improvement in global investor risk sentiment is set to continue undermining the greenback, economists at MUFG Bank report.

Yield spreads have moved against the USD this month

“The US rate market remains much more confident now that the Fed is close to ending their hiking cycle with only 12 bps of further hikes priced in for this year, and then expects around 60 bps of cuts in anticipation that the US economy will slow sharply/fall into recession later this year.”

“The tentative improvement in global investor risk sentiment at the start of this week leaves the US Dollar vulnerable to further weakness on the back of the recent sharp adjustment lower in US yields.”

In an interview with CNBC on Tuesday, US House Speaker Kevin McCarthy said that there was no need for blanket insurance on all bank deposits "at this moment in time," as reported by Reuters.

Market reaction

There seems to be a negative reaction from markets to this comment. As of writing, US stock index futures were down between 0.1% and 0.2%.

Meanwhile, the US Dollar Index, which measures the US Dollar's performance against a basket of six major currencies, was last seen losing 0.3% on the day at 102.50.

• EUR/USD extends the upside bias beyond 1.0800.
• Further gains could see the monthly high near 1.0930 revisited.

EUR/USD adds to the promising start of the week and surpasses the key 1.0800 hurdle on Tuesday.

The continuation of the bullish move appears favoured for the time being. Against that, the pair could now set sail to the March peak at 1.0929 (March 23) prior to a potential test of the 2023 high at 1.1032 (February 2).

Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0335.

EUR/USD daily chart

• NZD/USD catches fresh bids on Tuesday and draws support from a modest USD weakness.
• Easing fears of a banking crisis, the Fed’s less hawkish outlook weighs on the Greenback.
• Rallying US bond yields could act as a tailwind for the buck and cap the upside for the pair.

The NZD/USD pair regains positive traction on Tuesday, following the previous day's directionless price moves, and sticks to its strong intraday gains, around the 0.6230-0.6235 area heading into the North American session.

Receding fears of a full-blown banking crisis, along with the Federal Reserve's less hawkish outlook, drags the US Dollar (USD) lower for the second successive day and turns out to be a key factor lending support to the NZD/USD pair. The market nerves about the contagion risk calmed following the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company. Adding to this, regulators reassured that they stood ready to address any liquidity shortfalls further boosted investors' confidence and helped reverse the recent negative sentiment.

The US central bank, meanwhile, toned down its aggressive approach to reining in inflation and signalled last week that a pause to interest rate hikes was on the horizon. This further contributes to the underlying bearish sentiment surrounding the Greenback and acts as a tailwind for the NZD/USD pair. That said, a strong follow-through rally in the US Treasury bond yields could limit deeper losses for the USD, which might hold back traders from placing aggressive bullish bets around the major and keep a lid on any further gains, at least for the time being.

Even from a technical perspective, the recent two-way price moves witnessed over the past two weeks or so, within a familiar trading range, point to indecision over the near-term trajectory for the NZD/USD pair. Moreover, last week's failure to find acceptance above the 200-day Simple Moving Average (SMA) further warrants some caution before placing aggressive bullish bets and positioning for a further appreciating move. Market participants now look forward to the US macro data to grab short-term trading opportunities.

Tuesday's US economic docket features the release of the Conference Board's Consumer Confidence Index and the Richmond Manufacturing 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 NZD/USD pair. The focus, however, will remain glued to the Fed's preferred inflation gauge, the US Core PCE Price Index, due on Friday.

Technical levels to watch

Cable dipped in European trade but found firm support on weakness to the upper 1.22s. Economists at Scotiabank expect GBP/USD to test the mid 1.24s on a break past 1.2340.

Firm trend persists

“Short-term trends suggest firm resistance in the 1.2330/40 zone but there is a fair degree of GBP-bullish momentum under this market and firm support under Cable in the 1.2255/60 zone.” 

“Gains through 1.2340 target a retest of the mid 1.24s.”

See: GBP/USD can head towards the key 1.2426 December high and 1.2500 resistances – ING

Loonie underperforms after USD/CAD losses base in the low 1.36s. Nevertheless, Loonie is unlikely to suffer a substantial drop, Shaun Osborne, Chief FX Strategist at Scotiabank, reports.

Broader range trading seems likely to persist for now

“Material gains in the CAD still look a struggle but I also feel that the CAD is unlikely to fall too far at the moment, with a lot of bad news already factored in.”

“While the CAD is finding it very hard to make material gains, the pattern of short-term trade since mid-March has been one of (very) mild improvement in the CAD tone. Still, broader range trading seems likely to persist for now.”

“Support is 1.3625/30. Resistance is 1.3725/50.”

EUR/USD has gained steadily from last week’s low near 1.0720 and looks set to drive a little higher still in the short run, Shaun Osborne Chief FX Strategist at Scotiabank, reports.

EUR retains a steady bid tone

“EUR found solid support on minor weakness to the low 1.07 area over the past few days – a little below where I thought demand would emerge – but the broader trend remains constructive, supported by the incremental improvement in economic data and the leeway that affords the ECB to ratchet up policy a little more in the coming months.”

“We spot minor resistance at 1.0875/80 and 1.0920/25.”

“Broader trends continue to point to a test of the 1.10+ area.”

• Silver is seen oscillating in a narrow trading band around the $23.00 mark on Tuesday.
• The setup favours bullish traders and supports prospects for additional near-term gains.
• A convincing break below the $22.00 mark is needed to negate the constructive outlook.

Silver struggles for a firm intraday direction on Tuesday and seesaws between tepid gains/minor losses through the first half of the European session. The white metal is currently placed around the $23.00 round-figure mark, nearly unchanged for the day, and seems poised to prolong its recent upward trajectory witnessed over the past three weeks or so.

The intraday downtick finds some support near the 61.8% Fibonacci retracement level of the recent pullback from a multi-month peak. Furthermore, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, favours bullish traders and suggests that the path of least resistance for the XAG/USD is to the upside.

That said, it will still be prudent to wait for some follow-through buying beyond the overnight swing high, near the $23.25 area, before positioning for any further gains. The XAG/USD might then surpass the $23.50 hurdle (the multi-week top set last Friday) and accelerate the momentum towards the $24.00 mark en route to the multi-month peak, around the $24.65 region touched in February.

On the flip side, weakness below the $22.80 zone is likely to find some support near the $22.50 area. Some follow-through selling has the potential to drag the XAG/USD towards the $22.20 region. This is followed by the $22.00 mark and the $21.75-$21.70 support (38.2% Fibo. level). Failure to defend the said support levels will negate the positive outlook and shift the near-term bias in favour of bears.

Silver daily chart

Key levels to watch

Maintaining confidence in the banking system is essential. Economists at ANZ Bank think central banks have acted appropriately, but it is taking time for markets to settle. The very early evidence is that real economic activity has proved resilient.

Caution warranted, but very early data resilient

“The very early evidence shows the real economy in the US and EA has held up well during recent banking volatility. That may reflect the quick and comprehensive response by policymakers, aimed at underwriting bank liquidity and assuring depositors’ money is safe. However, it will take time before a comprehensive assessment can be made.”

“A healthy banking system is central to economic stability. If interventions are successful in allaying a widespread and disinflationary tightening in credit conditions, central bank tightening will have further to run.”

• DXY extends the decline further south of the 102.00 support.
• The next support level of note emerges at the monthly low near 101.90.

DXY adds to Tuesday’s losses and approaches the 102.50 region on turnaround Tuesday.

If bulls fail to regain control of the sentiment – ideally in the very near term - the index could lose the grip and challenge recent lows in the sub-102.00 zone (March 23). Extra losses from here could put a visit to the 2023 low around 100.80 (February 2) back on the investors’ radar

Looking at the broader picture, while below the 200-day SMA, today at 106.58, the outlook for the index is expected to remain negative.

DXY daily chart

Enrico Tanuwidjaja, Economist at UOB Group, assesses the outlook for the economic growth in Indonesia for the current year.

Key Takeaways

“Economic growth in 2022 in all regions of Indonesia posted an increase from the previous year. The highest economic growth was recorded in the Sulawesi-Maluku-Papua (Sulampua) region with growth at 7.49% (y/y), followed by Java at 5.31% (y/y), Bali-Nusa Tenggara (Balinusra) at 5.08% (y/y), Kalimantan at 4.94% (y/y), and Sumatra at 4.69% (y/y).”

“Sumatra's economy is estimated to grow within the range of 4-4.8% in 2023; Java’s economy within the range of 4.8-5.6%; Kalimantan's economy in the range of 3.5-4.3%, lower than previous growth; Balinusra’s economy in the range of 4.5-5.3%; Sulampua’s economy within the range of 7.2-8%.”

“Indonesia's economic growth in 2023 is estimated to be within Bank Indonesia’s (BI) target of 4.5-5.3%. Nevertheless, there are a number of risks that could potentially inhibit growth this year such as the cumulative impact of aggressive global monetary policy tightening, slower than expected economic recovery in China, and rising global uncertainty that might hold back foreign investment and render inflation to remain high and elevated due to prolonged supply chain disruptions.”

EUR/HUF has pulled back after challenging the 200-DMA near 399/402. A break below would open up more losses toward 372, then 367, analysts at Société Générale report.

399/402 must be overcome to affirm an extended bounce

“The 200-DMA around 399/402 remains a crucial resistance zone and must be overcome to affirm an extended bounce.” 

“The pair is drifting towards interim support of 379, the 76.4% retracement from the low formed earlier this month. Failure to defend could mean a deeper down move towards 372 and perhaps even towards the lower limit of a multi-month channel at 367.”

• EUR/JPY keeps the erratic performance well in place on Tuesday.
• Further range bound trade seems the name of the game.

EUR/JPY fades part of the auspicious start of the week and probes the 141.00 neighbourhood on Tuesday.

The cross keeps hovering around the key 200-day SMA near 141.80, and a sustainable surpass of this region should open the door to further upside in the short-term horizon. Moving forward, the consolidation theme is expected to remain unchanged as long as the March peaks around 145.50 continue to cap the upside.

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

EUR/JPY daily chart

Senior Economist at UOB Group Alvin Liew comments on the release of Industrial Production readings in Singapore.

Key Takeaways

“Singapore’s industrial production (IP) extended its weakness with a -11.7% m/m SA, -8.9% y/y decline in Feb, from a revised -0.4% m/m, -3.1% y/y in Jan. The Feb contraction was way worse than Bloomberg’s median forecast of +1.1% m/m, 1.8% y/y but close to our forecast of -10.7% y/y. This was the fifth consecutive month of y/y decline and the worst streak since 2015. Excluding the volatile biomedical manufacturing, IP contracted by a smaller -4.9% y/y in Feb (from 7.1% y/y in Jan).”

“The Feb IP was weighed lower by sharper declines in electronics (-10% y/y from -4.8% in Jan) and chemicals (-14.9% y/y from -13.1% in Jan), while biomedical manufacturing output crashed heavily by -33.6% y/y, solely due to a -59% y/y plunge in pharmaceuticals output, its worst contraction since Jul 2008 (-69.6% y/y).”

“IP Outlook – Even if we excluded the volatility brought by the biomedical manufacturing component, the latest Feb IP print continues to affirm our downbeat manufacturing outlook, and thus, we maintain our forecast for Singapore 2023 manufacturing to contract by 5.4% due to the worsening electronics downcycle and weaker external demand. Cracks in the export outlook also became more pronounced with non-oil domestic exports (NODX) recording consecutive, deeper y/y contractions since Aug 2022. We are likely to see a few more months of y/y declines in NODX before improving in the 2H. We expect full year NODX to contract by -5.5% in 2023. In line with the negative trade and manufacturing projections, we also keep our modest 2023 GDP growth forecast of 0.7% (closer to the lower end of the official forecast range of 0.5-2.5%).”

• AUD/USD struggles to capitalize on its modest intraday uptick to the 0.6700 neighbourhood.
• The ongoing rally in the US bond yields helps revive the USD demand and acts as a headwind.
• The RBA’s dovish tilt continues to cap ahead of the key Australian CPI report on Wednesday.

The AUD/USD pair regains some positive traction on Tuesday, albeit struggles to capitalize on the move and fails just ahead of the 0.6700 round-figure mark. The pair, however, sticks to modest intraday gains through the first half of the European session and is currently trading around the 0.6670-0.6675 area, still up over 0.35% for the day.

Receding fears of a full-blown banking crisis remain supportive of a generally positive risk tone, which, in turn, continues to weigh on the safe-haven US Dollar (USD) and benefits the risk-sensitive Australian Dollar. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Furthermore, regulators reassured that they stood ready to address any liquidity shortfalls helped reverse the recent negative sentiment and boosted investors' confidence.

This, along with the fact that the Federal Reserve toned down its aggressive approach to reining in inflation, keeps the USD bulls on the defensive and acts as a tailwind for the AUD/USD pair. It is worth recalling that the US central bank sounded cautious about the outlook and signalled last week that a pause to interest rate hikes was on the horizon. The Aussie further draws support from mostly in-line domestic data, which showed that Retail Sales grew 0.2% MoM in February and indicated some economic resilience.

The aforementioned fundamental backdrop supports prospects for some meaningful appreciating move for the AUD/USD pair. That said, expectations that the Reserve Bank of Australia (RBA) will refrain from raising interest rates at its April policy meeting might hold back bulls from placing aggressive bets or positioning for further gains. Traders also seem reluctant and might prefer to move to the sidelines ahead of the release of the Australian consumer inflation figures, due during the Asian session on Wednesday.

In the meantime, Tuesday's US economic docket - featuring the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index - might provide some impetus to the AUD/USD pair. This, along with the US bond yields and the broader risk sentiment, might influence the USD and allow traders to grab short-term trading opportunities. The focus will then shift to the final US Q4 GDP print on Thursday and the Fed's preferred inflation gauge - the US Core PCE Price Index on Friday.

Technical levels to watch

Prospects for the USD have taken a turn for the worse. USD outlook is challenged by rate spreads, economists at Scotiabank report.

USD will be subject to sporadic gains

“A further, significant narrowing in spreads may take a while; we don’t think the Fed is liable to cut rates any time soon but we do look for rates in the Eurozone to push a bit higher still and for rates in Europe generally to remain higher for longer in 2024. This will exert more downward pressure on the USD in the longer run.” 

“The USD will be subject to sporadic gains, driven by data or weak risk appetite in the next few weeks but a sustained move lower appears to be developing which should curtail USD strength and provide investors with better or renewed opportunities to fade during these phases of short term strength.”

Energy volatility is rising, but fundamentals are strong. Economists at Rabobank update their forecast for Crude Oil and Natural Gas prices.

Henry Hub likely to restest $3.16 if $2.49 is breached in spring

“Brent likely to retest $80 in the short term, remains rangebound between $88 and $75 with some downside risk remaining as the financial markets look to take risk off positions.”

“Diesel and Gasoil remain market leaders and inventories will keep floor under prices, current levels are supported.”

“Henry Hub likely to restest $3.16 if $2.49 is breached in spring, otherwise see a retest of $2 and sideways prices due to muted power and heating demand.”

“TTF likely to retest €53 then €66 in the summer as industrial demand returns.”

The NOK and SEK remain the weakest link in the G10 sphere. Both currencies could stabilize into the summer, but downside risks remain in place, economists at Nordea report.

A normalization of global interest rates should lead to a somewhat stronger SEK and NOK

“While both the Riksbank and Norges Bank will have to follow suit with the ECB and Fed to prevent further weakening of their currencies, this will likely not be enough to help the SEK and the NOK during periods of risk-off. Thus, while we think the SEK and the NOK will move broadly sideways until the summer, the risk is clearly to the downside.”

“Longer out, a normalization of global interest rates should lead to a somewhat stronger SEK and NOK against the EUR. However, we (still) see them both remaining weak in a historical context.”

The National Bank of Hungary (NBH) is meeting today. Economists at ING expect the EUR/HUF to tick down toward 385 on a hawkish meeting.

NBH to confirm hawkish tone

“We expect rates to remain unchanged and a hawkish tone. The meeting will also bring an updated central bank forecast, however, we are unlikely to see any game-changer today.”

“The Hungarian Forint has maintained the highest beta against the global story, which, assuming favourable global conditions, creates room for a significant recovery.”

We believe the recent sell-off has cleared the very heavy long positioning that previously blocked further forint appreciation. The renewed rally is also supported by the energy story with the gas price testing new lows. Moreover, with the forint having by far the highest carry within the Central and Eastern Europe region, it will once again attract investors to the HUF market.” 

“Today's hawkish meeting should support the new gains and push the Forint below 385 EUR/HUF.”

• GBP/USD struggles to capitalize on its modest intraday gains amid a modest USD bounce.
• The ongoing rally in the US bond yields is seen as a key factor lending support to the buck.
• The Fed’s less hawkish outlook and a positive risk tone might keep a lid on the Greenback.
• The prospects for additional rate hikes by the BoE should extend some support to the pair.

The GBP/USD pair attracts some sellers following an early uptick to the 1.2330 region on Tuesday and retreats to the lower end of its daily trading range during the first half of the European session. The pair is currently placed just below the 1.2300 round-figure mark, nearing unchanged for the day, and remains at the mercy of the US Dollar (USD) price dynamics.

Easing fears of a full-blown banking crisis continues to push the US Treasury bond yields higher, which, in turn, assist the buck to recover its modest intraday losses to a two-day low. That said, the Federal Reserve's signal last week that it might soon pause the rate-hiking cycle, along with a positive risk tone, could cap the upside for the safe-haven Greenback and lend support to the GBP/USD pair.

The global risk sentiment remains supported by fading worries about the contagion risk from the recent turmoil in the banking sector, especially after the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company. Adding to this, regulators have reassured that they stood ready to address any liquidity shortfalls and further boosted investors' appetite for perceived riskier assets.

The British Pound, on the other hand, could draw support from the overnight remarks by the Bank of Governor Andrew Bailey, saying that inflation remained the main driver of monetary policy decisions. During a speech at the London School of Economics, Bailey signalled that the central bank is ready to deliver more monetary tightening if signs of persistent inflationary pressures become more evident.

The aforementioned fundamental backdrop suggests that the path of least resistance for the GBP./USD pair is to the upside and any subsequent pullback might still be seen as a buying opportunity. That said, bulls might wait for some follow-through buying beyond the monthly top, around the 1.2340-1.2345 area touched last week, before positioning for any meaningful gains.

There isn't any major market-moving macro data due from the UK on Tuesday, while the US economic docket features the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term opportunities around the GBP/USD pair.

Technical levels to watch

• USD/CAD attracts some buyers near the 1.3630 region on Tuesday amid a modest USD rebound.
• A fresh leg up in the US bond yields turns out to be a key factor lending support to the Greenback.
• Bullish Crude Oil prices could underpin the Loonie and keep a lid on any further gains for the pair.

The USD/CAD pair rebounds nearly 50 pips from the 1.3630 region on Tuesday and touches a fresh daily peak during the first half of the European session. The pair is currently placed around the 1.3675-1.3580 area and for now, seems to have stalled last week's pullback from levels just above the 1.3800 round-figure mark.

The intraday uptick could be attributed to a modest US Dollar (USD) bounce from a two-day low, supported by a fresh leg up in the US Treasury bond yields. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company from the Federal Deposit Insurance Corporation (FDIC) eases fears of a full-blown banking crisis. Adding to this, regulators reassured that they stand ready to address any liquidity shortfalls and push the US bond yields higher. That said, the Federal Reserve's signal last week that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector could cap the USD.

It is worth recalling that the US central bank raised interest rates by 25 bps on Wednesday, as was widely anticipated, though sounded cautious about the outlook. Furthermore, a generally positive risk tone around the equity markets might also contribute to keeping a lid on any meaningful gains for the safe-haven Greenback. Apart from this, a further positive move up in Crude Oil prices, to a two-week peak, could underpin the commodity-linked and act as a headwind for the USD/CAD pair. This, in turn, warrants some caution before placing aggressive bullish bets around the major and positioning for any further intraday strength.

Market participants now look to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. Apart from this, the US bond yields and the broader risk sentiment will drive the USD demand. This, along with Oil price dynamics, could produce short-term trading opportunities around the USD/CAD pair. The market focus will then shift to the release of the final US Q4 GDP print on Thursday, which will be followed by the monthly Canadian GDP and the Fed's preferred inflation gauge - the Core PCE Price Index - on Friday.

Technical levels to watch

Yesterday’s start into the new week was comparatively quiet. USD is likely to struggle for the time being, economists at Commerzbank report.

EUR should remain supported for now

“It remains to be seen whether the situation on the markets will continue to calm further. Nervousness is likely to remain high this week, and we should probably still expect sudden moves depending on the news flow.”

“In the second half of the week, the first estimates of March consumer price inflation from the Eurozone countries will be published. Whereas the headline rate should have continued to fall due to base effects, the core rate is likely to remain elevated and illustrate once again to the ECB that its concerns about inflation are justified. Against this background, EUR should remain supported for now, in particular after the Fed sounded rather dovish last week.”

“The price index for personal consumption expenditure (PCE deflator), the Fed’s preferred inflation measure, is due in the US at the end of the week. While the nervousness on the financial markets continues, the Fed might prefer a more balanced form of communication even if the inflation data were to surprise to the upside. That means the environment for USD is likely to remain difficult for now.”

“We shouldn't fear bank woes spreading to the Eurozone,” European Central Bank (ECB) policymaker Madis Muller said on Tuesday.

He add that “although inflation is decreasing, it is still too soon to declare success.”

Bank of England (BoE) Governor Andrew Bailey is testifying, along with Deputy Governor David Ramsden, about the collapse of Silicon Valley Bank (SVB) before the Treasury Select Committee on Tuesday.

Key quotes

more to come ...

Andrea Enria, Chair of the Supervisory Board of the European Central Bank (ECB), is speaking at an event on ‘A new stage for European banking supervision.’

Key quotes

Market reaction

EUR/USD is unperturbed by the above comments, keeping its range at around 1.0815, up 0.17% on the day.

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest inflation figures in Malaysia.

Key Takeaways

“Headline inflation maintained at 3.7% y/y in Feb (Jan: +3.7%), matching our expectations but coming in a tad higher than Bloomberg consensus’ 3.6%. This came as the moderation in transport and recreation & culture price inflation counterbalanced the rise in price inflation of other CPI components particularly food & non-alcoholic beverages; housing, utilities & other fuels; education; and restaurants & hotels.”

“Backed by year-ago high base effects, a downward trajectory for headline inflation throughout the year remains in sight, barring any potential changes in domestic price and subsidy policy that are expected to be implemented gradually in 2H23. We maintain our 2023 full-year average inflation forecast at 2.8% for now (MOF est: 2.8%-3.8%, 2022: 3.3%) given that inflation risks are capped by ongoing subsidies, existing price controls, remaining spare capacity in the economy, and stable global oil prices. Moderating economic growth and abating supply chain pressures will also help to lessen cost or exchange rate pass-through effects in the near term.”

“That said, core inflation remains a concern amid a positive domestic growth outlook and expectations of limited effects from global banking woes on Malaysia’s financial system. This continues to support our view that Bank Negara Malaysia (BNM) will deliver its last rate hike of 25bps in May, taking the Overnight Policy Rate (OPR) back to the pre-pandemic level of 3.00% and be held for the rest of 2023. Nonetheless, the path for global interest rates including Malaysia’s OPR has turned more complicated following the fallout in the US and European banking sector, suggesting that caution could prevail and moderating economic conditions may keep BNM on the back burner.”

Considering advanced figures from CME Group for natural gas futures markets, open interest rose by around 8.7K contracts at the beginning of the week, while volume reversed three daily drops in a row and increased by around 31.5K contracts.

Natural Gas approaches the $2.00 mark

Prices of the natural gas started the week on the back foot amidst increasing open interest and volume. Against that, the door remains open for further retracement to, initially, the $2.00 mark per MMBtu just ahead of the 2023 low at $1.967 (February 22).

GBP/USD climbs above 1.23. Economists at ING expect the pair to enjoy further gains toward the key 1.2426 (December high) and 1.2500 resistances.

Bailey helping the Pound

“Bank of England Governor Andrew Bailey sounded relatively hawkish in his remarks yesterday. While saying that rates should not be taken to the 2008 peak, he stressed how the UK banking system is in a sound position and that inflation remains the key focus, and that further rate hikes are possible if inflationary pressures persist.”

“With BoE rate expectations now supported, we think GBP/USD can head towards the key 1.2426 (December high) and 1.2500 resistances on the back of USD weakness and policy divergence relatively soon.”

In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, USD/CNH should keep the trade between 6.8100 and 6.9200 for the time being.

Key Quotes

24-hour view: “Yesterday, we held the view that ‘the overbought advance in USD could extend but a break of 6.9000 is unlikely’. Our view was not wrong as USD pulled back from a high 6.8955. The pullback has gathered some momentum and USD is likely to trade with a downward bias today. However, any decline is unlikely to break 6.8500. Resistance is at 6.8880, followed by 6.9000.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (27 Mar, spot at 6.8700). As highlighted, the USD weakness has stabilized. The current movement is likely the early parts of a consolidation phase and USD is likely to trade between 6.8100 and 6.9200 for now.”

CME Group’s flash data for crude oil futures markets noted traders reduced their open interest positions by around 22.4K contracts after four consecutive daily builds on Monday. In the same line, volume remained choppy and dropped by around 13.6K contracts.

WTI: Next on the upside comes the 55-day SMA

Prices of the WTI rebounded strongly and closed above the key $70.00 mark per barrel at the beginning of the week. The uptick, however, was on the back of declining open interest and volume and is indicative that further upside is not favoured in the very near term. In the meantime, the next up barrier comes at the interim 55-day SMA, today at $76.28.

• Gold price settles around $1,950 after extending retracement on Monday.
• Bright metal volatility is here to stay in the short term.
• Balance between inflation, growth and financial stress will shape Gold market.

Gold price has settled around $1,950 in a quiet start to Tuesday trading. The bright metal extended its retracement on Monday on another volatile day, dipping to $1,944 before closing at $1,957, losing more than 1% on the day. It was the seven consecutive day where Gold price range moved over 1%, either up or down.

Things look a lot calmer now, although a sneaky busy Tuesday economic docket could shake things up again. Central bank bosses Andrew Bailey (Bank of England) and Christine Lagarde (European Central Bank) scheduled to speak at different events and the publication of the CB Consumer Confidence in the United States. The banking sector seems to have stopped providing big headlines, but the debate among policymakers on whether to tighten or ease the monetary policy amid sticky inflation figures will likely keep the market guessing and swinging.

What’s next for Gold in a volatile market?

The surging volatility seen recently in financial markets could be here to stay as expectations over future interest rates remain unclear. All central bankers, most notably the US Federal Reserve (Fed), refused to indicate a clear path for their monetary policy in their recent meetings, and the market is trying to figure out what that means. 

Gold price reacting to recent fluctuations in interest rates (Source: World Gold Council)

Jeremy de Pessemier, Asset Allocation Strategist at the World Gold Council (WGC), analyzes the implications of this blurry scenario for Gold price in an article published on the WGC website. De Pessemier says that while it is “unknown” for “how long the Fed will hold rates at elevated levels”, the US central bank “is under a lot of pressure to fight inflation” and “avoid a replay of 1970s.” 

The World Gold Council strategist also acknowledges, though, that “getting inflation down to 2% is causing economic and financial damage”, which makes him write that “we may be close to the peak of central bank hawkishness”. If this is true, Gold price would be supported, “particularly if accompanied by a mild recession.” De Pessemier believes determining “the extent to which the crisis of the past week causes banks to tighten credit” is “a key issue” to understand what market we will live in.

His analysis concludes that short-term developments in “growth and inflation” will determine the immediate moves of Gold price. Regardless of that, de Pessemier also points to a long-term bullish scenario for the precious metal: 

USD/JPY could see its losses pick up pace once 129.60 is breached, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We expected USD to trade in a range of 130.20/131.40 yesterday. However, USD rose to a high of 131.76 before easing off. The advance lacks momentum and USD is unlikely to strengthen further. Today, USD is more likely to edge lower to 130.60, possibly testing the support at 130.20. Resistance is at 131.55, followed by 131.75.”

Next 1-3 weeks: “We have expected USD to weaken since the middle of last week. After USD dropped to 129.67 and rebounded strongly, in our latest update from yesterday (27 Mar, spot at 130.70), we indicated ‘Further USD weakness is not ruled out but USD has to break and stay below 129.60 before further decline is likely’. We continue to hold the same view. Overall, only a break of 132.00 (no change in ‘strong resistance’ from yesterday) would indicate that USD is not declining further.”

• USD/JPY meets with a fresh supply on Tuesday amid a modest USD weakness.
• The risk-on mood undermines the safe-haven JPY and helps limit the downside.
• The fundamental backdrop warrants some caution for aggressive bullish traders.

The USD/JPY pair comes under some renewed selling pressure on Tuesday and reverses a major part of the previous day's goodish recovery gains. Spot prices, however, manage to recover a few pips from the daily low and climb back to the 131.00 mark during the early European session.

The prevalent risk-on environment - as depicted by a generally positive tone around the equity markets - undermines the safe-haven Japanese Yen (JPY) and turns out to be a key factor lending some support to the USD/JPY pair. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company from the Federal Deposit Insurance Corporation (FDIC) helps calm market nerves about the contagion risk. Adding to this, regulators reassured that they stand ready to address any liquidity shortfalls and further boosted investors' appetite for perceived riskier assets. That said, a combination of factors warrants some caution before placing aggressive bulls bets around the major,

Expectations that the Bank of Japan (BoJ) will tweak its bond yield control policy and whittle down its massive stimulus under new Governor Kazuo Ueda could limit losses for the JPY. Apart from this, a modest US Dollar (USD) weakness might further contribute to keeping a lid on any meaningful upside for the USD/JPY pair. The Federal Reserve's signal last week that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector leads to a fresh leg down in the US Treasury bond yields. This, in turn, is seen dragging the Greenback lower for the second successive day and exerting some downward pressure on the major.

Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the USD/JPY pair's recent bounce from the 129.65 region, or the lowest level since February 03 touched last week. Market participants now look to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. Apart from this, the US bond yields might influence the USD price dynamics, which, along with the broader risk sentiment, could produce short-term trading opportunities around the major.

Technical levels to watch

• EUR/USD adds to the positive start of the week above 1.0800.
• The broad-based upbeat tone in the risk complex underpins the pair.
• US Consumer Confidence will be in the limelight later in the session.

The optimism around the European currency remains well and sound and motivates EUR/USD to advance to 2-day highs around 1.0830 on turnaround Tuesday.

EUR/USD up on risk-on mood, dollar weakness

EUR/USD advances for the second session in a row and regains the monthly uptrend following the weakness seen in the second half of last week.

The persistent improvement in the risk-linked galaxy continues to weigh on the greenback and props up the resumption of the upside bias in the pair. In addition, expectations that the Fed might keep the Fed Funds Target Range (FFTR) unchanged at the May event also keeps the price action around the buck subdued.

In the domestic calendar, Business Confidence in France eased to 104 (from 105) and improved to 104.2 in Italy (from 103), both prints for the month of March.

Across the ocean, the Conference Board’s Consumer Confidence will take centre stage seconded by housing data and preliminary trade balance figures.

What to look for around EUR

EUR/USD manages to extend the weekly recovery further north of 1.0800 the figure amidst persistent selling interest around the dollar.

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

Key events in the euro area this week: France, Italy Business Confidence (Tuesday) – Germany GfK Consumer Confidence, France Consumer Confidence (Wednesday) – Germany  Flash Inflation Rate, EMU Consumer Confidence, Economic Sentiment (Thursday) – Germany Retail Sales/Labor Market Report, EMU Flash Inflation Rate/Unemployment Rate, France Flash Inflation Rate, Italy Flash Inflation Rate (Friday).

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

EUR/USD levels to watch

So far, the pair is gaining 0.26% at 1.0825 and a break above 1.0929 (monthly high March 23) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level). On the flip side, immediate support emerges at 1.0712 (low March 24) followed by 1.0629 (100-day SMA) and finally 1.0516 (monthly low March 15).

Risk sentiment recovered yesterday as markets appeared calmer about the health of European lenders which had generated a sell-off on Friday. Monetary policy still seems to be heading in two different directions in Europe and the US, leaving the Dollar vulnerable.

Fed rate expectations keep bouncing around

“We are not surprised to see investors’ tentative optimism at the start of this week coincide with USD weakness. We can definitely see how European central bankers are more comfortable than their US counterparts when pushing ahead with a hawkish narrative.” 

“Since the Fed is not offering a hawkish narrative to lean on, market pricing of future rate moves remains strictly tied to news on financial stability. Consequently, Fed rate expectations have become an accurate measure of market sentiment about the banking turmoil.”

“We think that as long as fears of banking contagion remain relatively quiet in Europe, the balance of risks for the Dollar should remain tilted to the downside.”

“We could see markets once again favour JPY for tactical defensive positions.”

• Gold price ranges in the $1,950s as contagion concern subsides.
• Market buoyed by comments from Michael Barr that Fed will use all tools to support any institution no matter the size.
• US Treasury bond yields rise as traders price out risk of deeper crisis and start betting on hikes again.

Gold price flatlines in the $1,950s during the early European Session on Tuesday, suppressed by a confluence of overhead technical resistance at $1,960. The surge to over $2,000 last week on panic-buying as the banking crisis worsened seems to have been as short-lived as a distress flare from a castaway. 

The market mood took a turn for the better at the start of the week on more failing-bank-takeover news, and as United States policymakers assured lawmakers that they have the “tools” necessary to stop any further banking sector contagion from spreading. 

A Barr to further contagion 

On Monday, markets took comfort and rallied from the news First Citizens Bank had bought up the assets of defunct lender Silicon Valley Bank (SVB) in a copycat deal of UBS’s adoption of flailing (No) Credit Suisse. 

Investors were further reassured by the early publication of Federal Reserve (Fed) Vice Chair for Supervision Michael Barr’s testimony to the Senate Banking Committee, which is scheduled for hearings about the banking crisis on Tuesday and Wednesday. Barr’s language was unequivocal, stating, “We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools for any size institution, as needed, to keep the system safe and sound.”

The terminal rate debate

US Treasury bond yields impact Gold price as they reflect interest rate expectations and the opportunity cost of holding the bright metal, which is a non-yielding asset unlike cash deposits or bonds. 

Yields rose on Monday as traders took heart from the positive news about the banking crisis being in the rear view mirror and began pricing in the possibility that the US Federal Reserve would continue cranking up interest rates in their fight with inflation. 

The yield on the benchmark 10-year US Treasury bond rose a stonking 4.65% to 3.53% in one day as market expectations flipped back to expecting the return of an aggressive Fed. 
   
Another barometer of the Fed’s future course of policy, however, the Fed Fund Futures Curve, is stating the opposite, indicating the probabilities continue to support the Fed pausing at their next meeting in May – and even a chance of three 0.25% rate cuts before the end of the year, suggesting rates may have already reached their terminal peak. 

The divergence may explain Gold’s current lack of direction, and the fog needs to lift on the real state of the financial system before investors can start to get a real handle on the Fed’s future plans.

Uptrend still intact as long as Gold holds above $1,934

Despite the recent rollover from the plus-$2,000 highs, Gold price remains in an uptrend when looked at on a medium-term basis. Overall it continues to make higher highs and lows on the daily chart. This, according to the old adage, “The trend is your friend until the bend at the end,” still broadly favors bullish bets.

Gold price: Daily Chart

Yet within its uptrend Gold price appears to be range bound just now. The range’s high is at the $2,009 March top and a low at the $1,934 March 22 swing low. It would require a break above the former or below the latter to confirm the next directional move for Gold. 

A break and close above $2,009 would confirm a continuation higher (the base case). The next target for Gold price then lies at the $2,070 March 2022 highs. 

A break below $1,934 would introduce doubt into the overall bullish assessment of the trend and probably see a sharp decline to support at $1,990 supplied by the 50-day Simple Moving Average (SMA). 

Looking even closer, the Technical Confluence Indicator (below) is showing a thicket of resistance at $1,960, just above where price has been churning overnight. This tough crack will need to be broken to see Gold even attempt to return to its crisis highs.

The Relative Strength Index (RSI) momentum indicator on the daily chart, is losing pace with price dipping comparably lower and showing a touch of underlying weakness, though the divergence is not dramatic enough to draw any conclusions from.

S&P Global Ratings is out with its review, assessing the economic recovery risk of Asia-pacific, in the facing of the global banking crisis.

Key takeaways

“Growth in annual real GDP in Asia-Pacific will average at the mid 4% level over the next few years.”

“Have yet to see any meaningful contagion for Asia-Pacific from the turmoil of US regional banks and Credit Suisse.“

“For Asia-Pacific net rating outlook bias remains steady at negative 3%; downside risks are worsening.“

“Base case is for China's economy to recover in 2023, and most other Asia-Pacific geographies in 2024.”

“We assess the economic recovery risk of Asia-Pacific as high and unchanged.”

Sterling was able to appreciate in a benign market environment yesterday. The BoE expects inflation to ease significantly over the course of the year. However, economists at Commerzbank are not totally convinced by the BoE's line of argument, leaving Sterling vulnerable.

The BoE and its optimistic inflation projections

“Not so long ago the BoE had expected a deep recession that would continue for some time – which was an important reason for its assumption that inflation would fall significantly. It has since revised its economic outlook to the upside, but continues to expect a significant fall in inflation.”

“As we see the risk that inflation might not ease as quickly and that the BoE might drop behind the curve with its monetary policy, we remain sceptical regarding Sterling and expect weaker GBP levels over the coming months.”

Here is what you need to know on Tuesday, March 28:

The US Dollar is having a difficult time finding demand early Tuesday as the upbeat market mood stays intact on easing fears over a global banking crisis. February Goods Trade Balance and the Conference Board's Consumer Confidence Index for March will be featured in the US economic docket. Bank of England (BOE) Governor Andrew Bailey and European Central Bank (ECB) President Christine Lagarde will be delivering speeches later in the day.

US Consumer Confidence Preview: No good news for Americans.

Although the tech-heavy Nasdaq Composite closed in negative territory as the Technology and Communication Services indexes declined sharply on Monday, the S&P 500 and the Dow Jones Industrial Average registered gains, reflecting the risk-positive market environment. Early Tuesday, US stock index futures are up between 0.25 and 0.4% and the US Dollar Index stays in the red slightly above 102.50.

In an interview with the German Handelsblatt newspaper, Jose Manuel Campa, Chairman of the European Banking Authority (EBA), said that the risks in the financial system was still very high and added that rising interest rates were continuing to weigh on financial markets. These comments, however, don't seem to be having a negative impact on the Euro. After having closed in positive territory on Monday, EUR/USD trades above 1.0800 early Tuesday. At 1315 GMT, ECB President Lagarde will speak at the opening ceremony of the Bank for International Settlements Innovation Hub Eurosystem Centre. 

GBP/USD preserves its bullish momentum and trades above 1.2300 in the European morning. BOE Governor Bailey will testify before the UK Treasury Select Committee on the collapse of Silicon Valley bank and the rescue of Silicon Valley Bank UK.

The Japanese Yen continued to gather strength during the Asian trading hours and USD/JPY dropped to 130.50 area before staging a rebound toward 131.00. In an interview with MNI, a former Bank of Japan (BoJ) board member, Makoto Sakurai, said that he was not expecting the new governor to make changes to the yield curve control strategy in July. Meanwhile, Governor Haruhiko Kuroda repeated that it was premature to debate an exit from easy monetary policy.

During the Asian trading hours, the data from Australia showed that Retail Sales rose by 0.2% on a monthly basis in February, missing the market expectation of 0.4%. Nevertheless, AUD/USD took advantage of the risk positive mood and was last seen rising more than 0.5% on the day at around 0.6700.

Gold fell sharply amid recovering US Treasury bond yields and erased a large portion of the previous week's losses. XAU/USD fluctuates in a tight channel above $1,950 early Tuesday.

Bitcoin lost more than 3% on Monday but seems to have gone into a consolidation phase near $27,000 on Tuesday. Similarly, Ethereum fell 3.35% but managed to stabilize above $1,700. 

Binance and CEO CZ sued by CFTC for violating federal laws; Binance Coin price crashes by 6%.

Binance CEO calls CFTC suit “disappointing” as district court halts Voyager $1 billion sale to Binance.US.

• USD/CHF regains positive traction on Tuesday and reverses a major part of the overnight losses.
• A generally positive risk tone undermines the safe-haven CHF and lends support to the major.
• The Fed’s less hawkish outlook keeps the USD bulls on the defensive and might cap the upside.

The USD/CHF pair attracts some buyers near the 0.9135 region on Tuesday and spikes to a fresh daily high during the early part of the European session. The pair is currently placed around the 0.9180 area and has now reversed a major part of the previous day's losses.

Receding fears of a full-blown banking crisis remain supportive of a generally positive risk tone, which, in turn, undermines the safe-haven Swiss Franc (CHF) and pushes the USD/CHF pair higher. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Furthermore, regulators reassured that they stood ready to address any liquidity shortfalls helped reverse the recent negative sentiment and boosted investors' appetite for perceived riskier assets.

The US Dollar (USD), on the other hand, remains under some selling pressure for the second successive day and might hold back traders from placing aggressive bullish bets around the USD/CHF pair. The USD continues to be weighed down by the fact that the Federal Reserve toned down its approach to reining in inflation. This, along with a modest decline in the US Treasury bond yields, turn out to be another factor weighing on the buck and warrants caution before positioning for any further appreciating move for the major.

Market participants now look to Tuesday's US economic docket - featuring the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. Apart from this, the US bond yields, might influence the USD price dynamics and provide some impetus to the USD/CHF pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities. The focus, however, will remain on the release of the Fed's preferred inflation gauge - the US Core PCE Price Index on Friday.

Technical levels to watch

EUR/USD trades above the 1.08 mark. Economists at ING expect the pair to edge higher toward the 1.10 level.

Schnabel keeps hawkish tone going

“Isabel Schnabel reinforced her profile as one of the most hawkish members of the ECB governing council yesterday, as she said she wanted the ECB March statement to include a reference that more hiking was possible. Her comments likely helped push market rate expectations in the eurozone a little further.”

“We think EUR/USD can retain some bullish momentum on the back of the ECB's hawkish narrative and calmer investor nerves on the European banking situation.”

“Our view remains that 1.10 can be reached quite soon, although bumps along the way are highly likely.”

• GBP/USD renews intraday high as bulls keep the reins for the second consecutive day.
• Hawkish comments from BoE Governor Bailey joins Brexit optimism to propel the British Pound.
• Receding fears of banking fallouts, mixed Fed talks and downbeat yields weigh on the US Dollar.

GBP/USD refreshes intraday high near 1.2320 heading into Tuesday’s London open as risk-on mood joins price-positive headlines from the UK to please the Cable buyers. Adding strength to the quote’s upside momentum could be the hopes of witnessing hawkish comments from Bank of England (BoE) Governor Andrew Bailey, especially after he spoke the same the previous day.

On Monday, BoE’s Bailey sensed persistent inflationary pressures while also saying, “If they become evident, further monetary tightening would be required.” Adding strength to the Cable pair’s advances, as well as hopes of more inflation crunch, could be the Brexit barriers and labor problems that challenged the British economy until recently.

On the other hand, the global policymakers’ efforts via stretched emergency credit lines to troubled banks and deposit insurance schemes underpin the firmer sentiment and weigh on the US Dollar, which in turn propels GBP/USD price. Recently adding strength to the risk-on mood and weighing on the greenback are comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, the US Treasury Department said that the US will keep using tools to prevent banking contagion as needed.  Before that, Federal Reserve Governor Philip Jefferson and Fed Vice Chair for Supervision Michael Barr showed readiness to tame the banking crisis while signaling ease in the inflation woes.

It’s worth noting that the recently downbeat US data weighed on the hawkish Fed bets, especially after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, and exerted downside pressure on the US Dollar. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Against this backdrop, the US 10-year and two-year Treasury yields grind near 3.52% and 3.98% respectively by the press time, proding the week-start rebound after witnessing a three-week downtrend. That said, the stocks in the Asia-Pacific zone traded mixed while S&P 500 Futures print mild gains at the latest.

Looking ahead, GBP/USD bulls will seek more hawkish comments from BoE’s Bailey, as well as softer prints of the US Conference Board’s (CB) Consumer Confidence for March, to keep the buyers in the driver’s seat.

Technical analysis

GBP/USD stretches the previous run-up from the 50-bar Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level of the quote’s January-March downside, around 1.2220 and 1.2200 respectively supports amid the impending bulls cross on the MACD. That said, the previous week’s confirmation of the rising wedge bearish chart pattern keeps the Cable pair sellers hopeful unless the quote stays below the previous support line of the wedge, near 1.2330 by the press time.

• AUD/JPY finds support as global banking liquidity crisis eases.
• Fading Japanese Yen safe-haven demand provides relief to AUD/JPY.
• RSI signals oversold conditions, suggesting a potential pullback.

The risk proxy AUD/JPY has fallen sharply after reaching the March high near the 92.00 psychological mark on a daily timeframe, as demand for the safe-haven Japanese Yen surged amid the global banking liquidity crisis.

Investors have returned to traditional safe-haven assets like the Yen instead of the US Dollar during this banking crisis, although recent efforts to alleviate the liquidity crunch have diminished the Yen's demand somewhat.

The risk-sensitive AUD/JPY pair bounced back after finding support and registering a new March low at the key psychological level of 86.00, which also intersects the multi-year ascending trendline starting from 2020. This level is likely to be the last line of support before entering uncharted territory.

Any upside gains are expected to be limited around the current quote price, with a multi-month tested support-turned-resistance at the 87.53 mark. The 21-Day Moving Average (DMA) and 50-DMA crossover is also exerting downward pressure on the pair. A convincing break above the 87.53 mark will face challenges from both DMAs sequentially.

Key resistance is placed at 90.86, followed by 2023 high at 93.17.

The Relative Strength Index (RSI) signals an oversold condition, suggesting that a pullback in the pair may be due.

AUD/JPY: Daily chart

Hungary’s National Bank (MNB) will hold a rate setting meeting today. No change in base rate from the existing 13% is anticipated. Economists at Commerzbank believe that the EUR/HUF pair could reach the 390 mark in the coming weeks.

Hungary's MNB on hold in volatile environment

“We do not anticipate any cut to this rate today.”

“While there could have been some improvement in Hungarian core inflation dynamics in recent months, Hungary’s inflation outlook is still the most worrisome amongst the CE3. Whichever definition of policy rate we want to use, Hungary’s real interest rate works out to deeply negative. This keeps the exchange rate vulnerable.” 

“At this very time, the Forint appears relatively overvalued given the broader risk situation – this probably owes to the strong Euro, but we expect EUR/HUF to rise to the 390.00 level in coming weeks if current market jitters surrounding European banks were to continue.”

• Gold price renews intraday low as sellers attack with short-term key support confluence.
• Receding fears of more banking fallouts jostle with downbeat concerns about China to weigh on XAU/USD.
• Talks about inflation, banks become crucial for Gold traders to watch.

Gold price (XAU/USD) drops to a fresh intraday low of $1,955 as bears struggle to retake control, after an earlier retreat, during Tuesday’s European session. The bright metal’s latest weakness could be linked to the market’s optimism surrounding the banking sector as policymakers try hard to allow all means to stop financial markets from busting. Also favoring the XAU/USD sellers could be the mixed headlines surrounding China, mostly downbeat, as traders fear receding growth from one of the world’s biggest Gold consumers.

It’s worth noting, however, that the cautious mood ahead of this week’s key inflation clues from Europe and the US, as well as the mixed comments from the European Central Bank (ECB) and the Federal Reserve (Fed) officials prod the Gold sellers of late. That said, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves of the XAU/USD. 

Also read: Gold Price Forecast: 23.6% Fibo support fails, what’s next for XAU/USD?

Gold Price: Key levels to watch

As per our Technical Confluence Detector, the Gold price seesaw around the $1,960 level comprising the previous monthly high and 200-HMA. Adding strength to the stated trading filter is the middle band of the Bollinger on the 15-minute chart.

Given the ongoing bearish bias, a sustained downside break of $1,960 could quickly drag the Gold price towards $1,951 support confluence comprising the Fibonacci 23.6% on one-week and one-day.

Following that, pivot point one-week S1, around $1,938, and previous weekly low near $1,936, could challenge the Gold bears.

On the flip side, the precious metal’s successful trading above $1,960 support can allow the Gold buyers to flirt with the Fibonacci 61.8% on one-day and 5-DMA, around $1,968.

Should the XAU/USD remains firmer past $1,968, Fibonacci 61.8% on one-week, close to $1,981, could act as the last defense of the Gold bears.

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.

Australian Consumer Price Index (CPI) figures will be released on Wednesday, March 29 at 00:30 GMT and as we get closer to the release time, here are forecasts from economists and researchers of five major banks regarding the upcoming inflation data.

Headline is expected at 7.1% year-on-year vs. 7.4% in January. If so, it would be the second straight month of deceleration but would remain well above the 2-3% target range. 

ANZ

“Our expectation for the monthly CPI of a 6.8% yearly increase would imply a monthly outcome of 0.3%, which while solidly above the pre-2022 February averages would represent a step down from the February 2022 result. A monthly CPI result weaker than our expectation would present a challenge to our view that the RBA will tighten again in April.”

ING

“A further unwinding of the holiday-induced surge in travel and recreation prices in February, together with some lower food prices, will partly offset higher gasoline prices and some stickiness in other subcomponents to bring inflation in Australia back below 7% in February. If so, it will support the RBA’s recent hints that rates are close to a peak, with one more 25 bps hike looking like the most likely outcome now, taking the cash rate target to 3.85%.”

NAB

“We expect the Monthly CPI Indicator to fall to 7.2% from 7.4% YoY, in line with consensus, but what the services subcomponents say about inflation trends will be as important as the headline given the limitations of the monthly indicator.”

TDS

“February CPI print will grab attention after the Bank flagged it as a key data point for its April decision. Our dovish forecast (7.0% YoY) is due to the large seasonal decline from recreational services, partly offset by firm price increase rises for education and transport. We still retain a 25 bps hike for the April meeting as inflation is still far above the RBA's inflation target.”

SocGen

“We expect monthly headline inflation to have fallen from 7.4% in January to 7.0% in February, which would support the argument that headline inflation peaked in December. Further evidence that inflation may have peaked could justify a pause (or termination) in the RBA tightening cycle, but solid proof can only be provided by the quarterly CPI data to be released next month.”

In the view of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, NZD/USD is expected to navigate within the 0.6140-0.6280 range in the next few weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the decline lacks momentum and NZD is unlikely to weaken further’ and we expected NZD to trade sideways between 0.6185 and 0.6245. Our view of sideways trading was not wrong even though NZD traded in a narrower range than expected (0.6182/0.6217). The underlying tone appears to have firmed somewhat and today NZD is likely to edge higher. However, any advance is unlikely to break 0.6245. Support is at 0.6185, a break of 0.6160 would indicate that the current mild upward pressure has faded.”

Next 1-3 weeks: “We continue to hold the same view as yesterday (27 Mar, spot at 0.6205) wherein NZD is likely to consolidate and trade in a range of 0.6140/0.6280 for now.”

• NZD/USD is marching towards 0.6250 aid rising bearish bets for the USD Index.
• The street is anticipating that tight credit conditions by US banks are sufficient to soften inflation ahead.
• Dismal economic prospects of New Zealand after the flood situation have raised concerns over the growth rate.

The NZD/USD pair witnessed a sharp recovery after defending the 0.6180 support. The Kiwi asset has stretched its recovery perpendicularly above 0.6230 in the early European session. The upside bias for the Kiwi asset banks upon weakness in the US Dollar.

The US Dollar Index (DXY) has resumed its downside journey after short-term support of around 102.60. The USD Index has corrected further as investors are discounting expectations of a steady monetary policy by the Federal Reserve (Fed) for its May policy meeting. As per the CME Fedwatch tool, more than 60% odds are in favor of an unchanged monetary policy.

The street is anticipating that tight credit conditions by United States commercial banks are sufficient to soften inflation ahead. Therefore, Fed chair Jerome Powell won’t go for rate hikes as it could harm the economic outlook.

S&P500 futures are showing choppiness after a three-day winning spell. Meanwhile, global tensions have renewed as the Russian Defence Ministry cited that missile ships of the Pacific Fleet fired Moskit cruise missiles at a mock enemy sea target in the waters of the Sea of Japan,” as reported by Reuters. The risk profile has not been impacted and the risk appetite is still strong.

On the New Zealand Dollar front, dismal economic prospects after the flood situation have raised concerns over the growth rate. Analysts at ANZ Bank expect the Reserve Bank of New Zealand (RBNZ) will raise the Official Cash Rate (OCR) by 25bp to 5.00% at its Monetary Policy Review (MPR) next Wednesday. The deceleration in the pace of rate hikes is optimal for decelerating economy. The report from ANZ Bank also dictates that the OCR would peak at 5.25% with one more hike to come in May.

• AUD/USD grinds higher around intraday top, braces for the biggest daily gains in over a week.
• Upbeat MACD signals keeps buyers hopeful but 200-EMA holds the gate for bear’s exit.
• Aussie pair sellers remain off the table beyond 0.6650.

AUD/USD seesaws around the intraday high of around 0.6700 as the bulls jostle with the 100-bar Exponential Moving Average (EMA) during early Tuesday. In doing so, the Aussie pair grinds higher within a three-week-old symmetrical triangle.

It’s worth noting that the bullish MACD signals favor AUD/USD pair buyers to cross the immediate 100-EMA resistance of around 0.6700.

However, the 200-EMA hurdle of 0.6736 could act as an additional upside filter for the pair buyers before pushing back the bears.

Above all, the monthly high near 0.6785 appears the last defense of the AUD/USD bears.

Alternatively, pullback moves remain elusive unless the quote stays inside the aforementioned triangle, currently between 0.6710 and 0.6645.

Should the quote remains downbeat past 0.6645, a slump toward the monthly low of 0.6564 can’t be ruled out. During the fall, the 0.6700 round figure may act as an intermediate halt.

Overall, AUD/USD lures buyers but the upside momentum needs validation from the 200-EMA hurdle.

On a different page, a pause in the market’s risk-on mood seems to challenge the AUD/USD buyers, apart from the aforementioned technical indicators.

AUD/USD: Four-hour chart

Trend: Limited upside expected

Gold price is attempting a comeback after two straight days of losses. Will XAU/USD recover ground above 23.6% Fibo level? FXStreet’s Dhwani Mehta analyzes the pair’s technical outlook.

23.6% Fibo support fails, what’s next for XAU/USD?

“Gold bulls are trying their luck looking to clear the key support-turned-resistance of the 23.6% Fibonacci Retracement (Fibo) level of the March advance at $1,963. Acceptance above the latter will initiate a fresh upswing toward the previous day’s high of $1,981, above which the $2,000 level will be eyed.”

“To the downside, immediate support awaits at the $1,950 barrier and the previous day’s low of $1,944. The next cushion is seen at $1,934, which is the 38.2% Fibo level of the same ascent.”

• Positive risk appetite boosts Asian stock futures amid easing banking concerns.
• Extreme volatility in rate expectations influences the market outlook.
• Investors seek a clearer global inflation picture for stock market stability. 

Asian trading hours on Tuesday reflect a positive risk appetite among investors, with most Asian stock futures in the green.

MSCI's broadest index of Asia-Pacific shares is edging higher, along with HK50 and KOSPI. The US and European stock futures are looking firmer on the day.

Stocks experienced a relief rally due to a surge in global bond yields, particularly US Treasury bonds. The US regulator-backed deal for First Citizens BancShares to acquire the failed Silicon Valley Bank (SVB) alleviated broader concerns about issues in the banking sector.

On Monday, US banking regulators stated they planned to inform Congress that the overall financial system remains on solid footing despite recent bank failures. However, they will also comprehensively review their policies to prevent future collapses. Federal Reserve (Fed) Governor, Philip Jefferson, expressed concern about smaller banks.

It is premature to declare victory on the banking front until the situation remains calm for at least one or two quarters.

During this banking crisis, market pricing for the rate hike path has been volatile. In just one or two days, the market's outlook can change from expecting a 25 or 50 basis point rate hike to anticipating a 50 basis point rate cut in the year's second half.

The US Treasury 2-Year-10-Year yield spread is around 0.4%, again a concerning sign. Historically, four recessions had occurred when the yield spread reached 0.4%.

The market needs a clearer global inflationary picture for at least one more quarter to establish a clear bias for stocks. This would provide more certainty for investors and allow them to make informed decisions about the market's direction. Until then, the volatility in rate expectations and the ongoing concerns about the banking sector could continue to influence stock movements and investor sentiment.

• The index adds to the pessimism seen at the beginning of the week.
• US yields give away part of the advance recorded on Monday.
• Consumer Confidence, housing data, trade balance next on tap.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main rival currencies, drops to 2-day lows and revisits the 102.60/55 band on Tuesday.

USD Index now focuses on data

The index drops for the second session in a row and approaches the 102.50 region on the back of further improvement in the risk complex and the so far corrective decline in US yields across the curve.

The renewed selling pressure in the dollar came pari passu with investors’ repricing of a potential “on hold” decision at the Fed’s gathering in May. So far, CME Group’s FedWatch Tool sees the probability of this scenario at around 60%.

Later in the US data space, the Consumer Confidence gauged by the Conference Board will take centre stage seconded by the FHFA’s House Price Index, Advanced Goods Trade Balance and the first testimony by FOMC’s S.Barr before the Congress.

What to look for around USD

The index resumes the downside and accelerates the decline below the 103.00 barrier amidst the so far firm recovery in the risk-associated universe.

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

Key events in the US this week: Advanced Goods Trade Balance, FHFA House Price Index, CB Consumer Confidence Advanced (Tuesday) – MBA Mortgage Applications, Pending Home Sales (Wednesday) – Final Q4 GDP Growth Rate, Initial Jobless Claims (Thursday) – PCE, Personal Income/Spending, Final Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in 2024. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.20% at 102.62 and the breach of 101.93 (monthly low March 23) would open the door to 100.82 (2023 low February 2) and finally 100.00 (psychological level). On the other hand, the next hurdle emerges at 103.37 (55-day SMA) followed by 104.23 (100-day SMA) and then 105.88 (2023 high March 8).

• EUR/GBP is looking vulnerable above 0.8770 amid BoE Bailey’s hawkish guidance.
• The European Banking Authority cited that rising interest rates by the ECB are weighing on financial markets.
• A confident breakdown of the H&S pattern will result in downside momentum.

The EUR/GBP pair looks vulnerable near day’s low around 0.8770 in the early Asian session. The cross is expected to deliver sheer weakness as hawkish guidance from Bank of England (BoE) Governor Andrew Bailey has underpinned the Pound Sterling. BoE Bailey reiterated on Monday that the central bank would continue to hike rates further if United Kingdom’s inflation remains persistent.

Financial instability inspired by the collapse of three mid-size United States banks and Swiss-second largest Credit Suisse is crossing boundaries. Jose Manuel Campa, Chairman of the European Banking Authority (EBA), warned in the German Handelsblatt newspaper, "The risks in the financial system remain very high." He further added, “Rising interest rates continued to weigh on financial markets”.

Going forward, the Euro will dance to the tunes of preliminary German Harmonized Index of Consumer Prices (HICP) (March) data, which will release on Thursday. According to the consensus, the annual German HICP will soften firmly to 7.5% from the former release of 9.3%.

EUR/GBP is on the verge of delivering a breakdown of the Head and Shoulder chart pattern formed on an hourly scale. The H&S chart pattern indicates a prolonged consolidation in which institutional investors transfer inventory to retail participants. The neckline of the chart pattern is plotted from March 22 low at 0.8772.

The 20-period Exponential Moving Average (EMA) at 0.8785 is acting as a barricade for the Euro bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00. The absence of divergence and oversold signals indicate more weakness ahead.

A confident downside move below March 22 low at 0.8772 would deliver a breakdown of the H&S pattern and will drag the cross toward March 17 low at 0.8745 followed by March 15 low at 0.8718.

Alternatively, a decisive break above March 24 high at 0.8827 will drive the cross toward March 23 high at 0.8865 and the round-level resistance at 0.8900.

EUR/GBP hourly chart

• WTI crude oil grinds near two-week high after rising the most since May 2022 the previous day.
• Clear break of 10-DMA, three-week-old descending trend line keeps buyers hopeful.
• 21-DMA, previous resistance line from December 2022 challenge upside momentum.
• Bullish MACD signals keep Oil buyers hopeful; one-week-old ascending trend line adds to the downside filters.

WTI crude oil prints mild losses below $73.00 as bulls tame a breather after the biggest daily jump in 10 months. In doing so, the Oil traders struggle to cheer the previous day’s upside break of the 10-DMA and three-week-old descending trend line.

However, the bullish MACD signals and sustained trading beyond the one-week-old ascending trend line enable WTI crude oil buyers to cross the immediate 21-DMA hurdle surrounding $73.40.

Even so, the previous support line from the last December, now resistance around $75.50, appears the key hurdle for the Oil bulls to cross before eyeing the driver’s seat.

Following that, a run-up toward the monthly high of around $81.00 can’t be ruled out.

On the contrary, the $70.00 restricts the immediate downside of the WTI crude oil before highlighting the 10-DMA support of $69.50.

Should the black gold price drop below $69.50, a convergence of the one-week-old ascending trend line and previous resistance line from March 07, close to $68.20, becomes crucial for the Oil bears to conquer.

Overall, Oil price regains buyers’ attention despite the latest inaction.

WTI: Daily chart

Trend: Further upside expected

FX option expiries for Mar 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0880 1.1b
• 1.0945 1.8b

- USD/JPY: USD amounts                     

• 128.50 875m

- AUD/USD: AUD amounts  

• 0.6500 575m
• 0.6750 652m

GBP/USD is now seen navigating the 1.2140-1.2340 range in the next few weeks, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “We expected GBP trade sideways between 1.2200 and 1.2300 yesterday. After dipping to a low of 1.2222, GBP rose to a high of 1.2294 in late NY trade. Upward momentum has improved, albeit not much. Today, GBP is likely to test the major resistance at 1.2340. A break of this level is not ruled out but GBP is unlikely to maintain a foothold above this level (next resistance is at 1.2400). Support is at 1.2265; a break of 1.2240 would indicate that GBP is not advancing further.”

Next 1-3 weeks: “Our update from yesterday (27 Mar, spot at 1.2240) is still valid. As highlighted, the recent GBP strength has ended. The current movement is likely part of a consolidation phase. From here, GBP could trade within a range of 1.2140/1.2340. Looking ahead, GBP has to break and stay above 1.2400 before a sustained advance is likely.”

Open interest in gold futures markets shrank by around 5.1K contracts after two consecutive daily builds on Monday, according to preliminary readings from CME Group. Volume followed suit and dropped by around 90.1K contracts.

Gold: Initial support is seen around $1935

Gold started the week on the defensive amidst shrinking open interest and volume, which warns against the continuation of the downtrend in the very near term. So far, the precious metal appears supported by weekly lows around the $1935 per ounce troy (March 21, 22).

• USD/CAD remains pressured around intraday low, drops for the second consecutive day as bears poke the key support.
• Risk-on mood, softer US Data weigh on US Dollar ahead of the key catalysts.
• Oil price struggles for clear directions after rising the most in 10 months.
• Risk catalysts, second-tier US data and Canada budget eyed for clear directions.

USD/CAD bears keep controls around 1.3640-35 heading into Tuesday’s European session, positing 0.17% intraday losses during a two-day downtrend. In doing so, the Loonie pair fails to justify the latest pause in the WTI Crude Oil price, as well as the US Dollar’s broad weakness.

It’s worth noting that the WTI Crude Oil prints mild losses near $72.80 while consolidating the biggest daily loss in 10 months, marked the previous day. While the commodity’s previous uptrend could be linked to the market’s cautious optimism, the latest pullback in the black gold appears linked to China-related headlines.

Elsewhere, the US Dollar Index (DXY) drops for the second consecutive day to 102.65, down 0.21% intraday by the press time.

While tracing the US Dollar’s weakness, the global policymakers’ efforts via stretched emergency credit lines to troubled banks and deposit insurance schemes underpin the firmer sentiment and weigh on the US Dollar. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

On Monday, US Treasury Department said that the US will keep using tools to prevent banking contagion as needed.  Before that, Federal Reserve Governor Philip Jefferson and Fed Vice Chair for Supervision Michael Barr showed readiness to tame the banking crisis while signaling ease in the inflation woes.

It’s worth noting that the recently downbeat US data weighed on the hawkish Fed bets, especially after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, which in turn exerted downside pressure on the US Dollar and USD/CAD prices. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

While portraying the mood, the US 10-year and two-year Treasury yields grind lower around 3.51% and 3.92% by the press time, paring the week-start rebound after witnessing a three-week downtrend. That said, the stocks in the Asia-Pacific zone remain firmer while S&P 500 Futures print mild gains at the latest.

Looking ahead, Canada’s Annual Budget Release will be the key event for the USD/CAD pair traders to watch, in addition to the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data.

Also read: US Consumer Confidence Preview: No good news for Americans

Technical analysis

A convergence of the 200-bar Exponential Moving Average (EMA) joins the 38.2% Fibonacci retracement level of the pair’s February-March upside, near 1.3630, appears a tough nut to crack for the USD/CAD bears to crack.

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang signal further consolidation is likely in EUR/USD in the next weeks.

Key Quotes

24-hour view: “We expected EUR to strengthen yesterday but we were of the view that ‘any advance is part of a 1.0740/1.0830 range’. EUR dipped to a low of 1.0743 in early London trade and then edged higher to 1.0799 before settling at 1.0796 (+0.34%). Upward momentum has improved somewhat but while EUR could break above 1.0830; it is unlikely to threaten the next resistance at 1.0870. Support is at 1.0775; a breach of 1.0750 would indicate the current upward pressure has eased.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (27 Mar, spot at 1.0775). As highlighted, EUR appears to have entered a consolidation phase and it is likely to trade between 1.0660 and 1.0870 for the time being.”

• USD/INR consolidation continues as pair struggles to break key resistance at 83.00 level.
• Indian Rupee lacks momentum despite strong economic fundamentals.
• Higher lows indicate a potential breakout for USD/INR.

USD/INR has been in a consolidation phase since October 2022, with the pair ranging between 81.00 and 83.00 levels. Despite four attempts on a daily timeframe, the pair has failed to break through the key psychological resistance of 83.00. Although India's strong economic fundamentals make it an attractive choice for investors seeking the next growth story, the Indian Rupee is lacking momentum.

Currently hovering around 82.21, USD/INR is capped by both the 21-Day Moving Average (DMA) and 51-DMA, which are both slightly above the 82.21 mark.

If the pair surpasses both DMAs, USD/INR will re-test the 83.00 mark for the fifth time. On the other hand, the first support is seen at the psychological 82.00 mark, which is just below the previous week's low. A decisive break below this level could send the pair towards the March low of around 81.60, followed by the yearly low at the 81.00 level. The last line of support is placed at 80.42, a level where resistance turned into support.

The pair is gradually moving upwards by forming higher lows, and strong bullish momentum in the US Dollar could potentially propel the pair to break the critical 83.00 mark.

The Relative Strength Index (RSI) signals a somewhat neutral midpoint, suggesting the pair could move either up or down. 

The US economic calendar will feature the Personal Consumption Expenditure (PCE) later this week, and the pair is likely to take cues from that release.

USD/INR: Daily chart

• EUR/USD is facing temporary hurdles around 1.0820, more gains are in pipeline amid weakness in the USD Index.
• US Treasury yields have rebounded again on optimism that the US banking crisis would ease further.
• German HICP is expected to soften firmly to 7.5% from the former release of 9.3%.

The EUR/USD pair has turned sideways after a firmer rally near 1.0820 in the Asian session. The major currency pair is struggling in extending its upside, however, more gains seem likely amid improved market sentiment. Fading United States banking jitters and rising hopes for an unchanged monetary policy by the Federal Reserve (Fed) have strengthened the risk appetite theme.

Fed’s advisor and Chief Economist at KPMG, Diane Swonk, told MNI on Monday, the “Fed’s decision showed the central bank is strongly considering a halt to monetary tightening including an end to balance-sheet runoffs because of what could prove a substantial drag on the economy and inflation from the recent banking crisis.”

The US Dollar Index (DXY) is attempting to defend the immediate support of 102.60. While odds are favoring further weakness as investors are anticipating a termination of a policy-tightening spell by the Fed. Meanwhile, S&P500 futures are withstanding gains loaded in the Asian session after a three-day winning streak, portraying firmer demand for risk-sensitive assets.

US Treasury yields have shown some rebound as easing US banking jitters have trimmed the safe-haven appeal for US government bonds. The 10-year US Treasury yields have rebound to near 3.52%.

On the Eurozone front, investors are shifting their focus toward German Harmonized Index of Consumer Prices (HICP) data, which will release on Thursday. As per the projections, the annual German HICP will soften firmly to 7.5% from the former release of 9.3%.

Contrary to expectations for German inflation, European Central Bank (ECB) policymaker Mario Centeno cited on Monday, We haven't seen de-anchoring inflation expectations," as reported by Reuters. He further reiterated that the ECB has the tools for "whatever-it-takes" action for banks.

Jose Manuel Campa, Chairman of the European Banking Authority (EBA), warned in the German Handelsblatt newspaper, "the risks in the financial system remain very high."

Additional takeaways

“Rising interest rates continued to weigh on financial markets.”

“The European Union regulator was monitoring unrealized losses in banks' balance sheets closely.”

Market reaction

EUR/USD Is unfazed by the EBA’s warning, as it holds 0.17% higher on the day at around 1.0815, as of writing.

• USD/CNH picks up bids to reverse early-day losses, grinds higher after two-day uptrend.
• Fears of shrink in China’s banking sector, downbeat data weigh on offshore Chinese Yuan.
• Market sentiment remains firmer amid easing fears of bank fallouts elsewhere.
• US CB Consumer Confidence eyed ahead of key China PMI, US inflation clues.

USD/CNH reverses the initial losses while marching towards 6.8850, around 6.8825 by the press time, during early Tuesday. In doing so, the offshore Chinese Yuan (CNH) fails to portray the broad US Dollar gains amid doubts surrounding China’s economic growth and banking sector’s strength, not to forget downbeat China data.

Earlier in the day, the Financial Times (FT) mentioned that China has significantly expanded its bailout lending as its Belt and Road Initiative blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption. The FT previously quoted global shipping giant Maersk to say, “China’s economic rebound weaker than expected.” On the same line is the news from Bloomberg quoting Chinese official Jin Zhongxia who said that China's creditors are hesitant to offer relief. Furthermore, global rating giant Moody's also said China's shadow banking sector continues to shrink.

On Monday, Chinese Industrial Profits marked -22.9% YTD figures for February versus the previous readings of -4.0%.

It should be noted, however, that China’s National Petroleum Corporation’s Economics and Technology Research Institute (ETRI) anticipates record energy import by the dragon nation while citing economic rebound.

On the contrary, global policymakers manage to propel the risk-on mood via stretched emergency credit lines to troubled banks and deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

Amid these plays, the US 10-year and two-year Treasury yields grind lower around 3.51% and 3.92% by the press time, paring the week-start rebound after witnessing a three-week downtrend. That said, the US Dollar Index (DXY) drops for the second consecutive day to 102.65, down 0.21% intraday by the press time. It should be noted that the stocks in the Asia-Pacific zone remain firmer while S&P 500 Futures print mild gains at the latest.

It’s worth observing that the risk-native headlines surrounding China and Russia put a floor under the USD/CNH prices. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) should be fully ready to use nuclear weapons at any time.” Recently, Russia was said to have test-fired an anti-ship missile in the Sea of Japan.

Moving on, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves of the USD/CNH pair. However, major attention will be given to the US inflation clues and China’s official PMI data.

Technical analysis

A convergence of the 21-day and 50-day Exponential Moving Average (EMA) restricts the short-term USD/CNH upside near 6.8850-70.

In an interview with MNI, a former Bank of Japan (BoJ) board member, Makoto Sakurai, said that “the fall in bond yields and more stable yen affords incoming Bank of Japan governor Kazuo Ueda time to consider modifications to yield curve control, but no change is likely before July as policymakers monitor domestic and global growth and the outcome of wage negotiations.”

Additional quotes

"The new governor Ueda well knows that he will lose everything if quick action spoils the economy and prices. So he will slowly go ahead with policy tweaks after properly ascertaining the outlook for the economy and prices, including the outlook for a virtuous cycle between wages and prices.”

"The most important issue is how Japan's economy and wages develop in the coming months and their outlook.”

“Underscoring the influential role wage negotiations will have in shaping the BOJ's thinking on whether the 2% inflation target can be achieved in a stable and sustainable manner.”

Related reads

• USD/JPY bears ignore BoJ’s Kuroda near 130.50 as yields retreat amid upbeat mood
• BoJ’s Kuroda: It’s premature to debate exit from easy monetary policy

• Silver price remains pressured for the second consecutive day, pressured intraday low of late.
• Eight-day-old bullish channel, 100-HMA challenge XAG/USD bears amid steady RSI.
• 200-SMA adds to the downside filters; two-week-old horizontal support is the key.

Silver price (XAG/USD) takes offers to renew intraday low around $23.00 as bear prod short-term key support heading into Tuesday’s European session. In doing so, the bright metal pokes the lower line of an upward-sloping trend channel from March 16.

It’s worth noting, however, that the steady RSI (14) line joins the 100-Hour Moving Average (HMA) to restrict the short-term Silver price downside.

Should the quote breaks the $23.00 support, also remain comfortably below the 100-HMA support surrounding $22.95, then the XAG/USD bears could challenge the last defense of the buyers, namely the 200-HMA level of $22.55.

In a case where the Silver price remains bearish past $22.55, a fortnight-long horizontal support area near $21.50 will gain the market’s attention.

On the flip side, recovery moves need validation from $23.30 to challenge the monthly high of $23.52.

Following that, the top line of an aforementioned bullish channel, close to $23.85, could restrict the bright metal’s further advances. It should be observed that the Silver price run-up beyond $23.85 enables the bulls to challenge the YTD tops marked in February at around $24.65.

To sum up, the Silver price is likely to decline further even if the road toward the south appears long and bumpy.

Silver price: Hourly chart

Trend: Further downside expected

• GBP/USD has scaled above the critical resistance of 1.2300 amid a cheerful market mood.
• The USD Index is likely to attract more offers in hopes that the Fed will keep interest rates steady.
• The Cable resumed its upside after a bullish hidden divergence.

The GBP/USD pair has extended its recovery above the round-level resistance of 1.2300 in the Asian session. The Cable has got strengthened amid weakness in the US Dollar Index (DXY) in hopes that the Federal Reserve (Fed) will keep interest rates steady in its May monetary policy meeting to contain the banking fiasco.

The USD Index is struggling in sustaining above 102.60 and is expected to attract more offers amid the improved risk appetite of the market participants. S&P500 futures are holding gains generated in the Asian session. The 500-US stocks futures basket has registered a three-day winning streak as United States banking jitters are fading after the US government promised to expand emergency liquidity assistance.

The Pound Sterling has been strengthened after hawkish guidance by Bank of England (BoE) Governor Andrew Bailey in his speech at the London school of Economics. BoE Bailey reiterated the need for more rate hikes if inflation continues to remain persistent.

GBP/USD resumed its upside journey after a bullish Hidden Divergence on a two-hour scale. The Cable formed a higher low while the Relative Strength Index (RSI) (14) formed a lower high, which indicated that the momentum oscillator got oversold in an uptrend and produced a bargain buy opportunity for the market participants.

Upward-sloping 20-and 50-period Exponential Moving Averages (EMAs) at 1.2279 and 1.2260 respectively, indicate more upside ahead.

The RSI (14) has scaled into the bullish range of 60.00-80.00, which warrants more gains.

Should the asset break above the horizontal resistance plotted from March 23 high at 1.2343, Pound Sterling bulls would drive Cable toward January 26 high at 1.2430. A break of the latter would expose the asset to a fresh nine-month high near the psychological resistance at 1.2500.

On the flip side, a downside move below March 24 low at 1.2190 would drag the asset toward February 24 high at 1.2143 and March 15 low at 1.2010.

GBP/USD two-hour chart

• XAU/USD prices retreat as banking sector concerns ease.
• First Citizens Bancshares acquires failed Silicon Valley Bank’s assets.
• US Treasury bond yields rally amid renewed investor confidence.

XAU/USD rebounded after reaching a low of $1,944 on Monday, following a significant decline from the $2,000 mark on Friday. Gold prices dropped by more than 1% on Monday as concerns about a banking crisis eased, leading investors to shift from safe-haven assets like Gold to riskier assets like equities and crude oil.

The unwinding of Gold trades occurred after regional U.S. lender First Citizens BancShares acquired the failed Silicon Valley Bank (SVB) assets on Monday. First Citizens announced that it would assume $110 billion in assets, $56 billion in deposits, and $72 billion in loans while expanding its presence in California. The Federal Deposit Insurance Corporation (FDIC) retains around $90 billion in securities held for disposal. 

Additionally, Bloomberg reported that US regulators are considering expanding an emergency lending facility for banks in a way that would provide First Republic Bank (FRC) more time to strengthen its balance sheet.

These developments in the banking sector have increased risk appetite and fostered a sense of calm among investors. Consequently, US Treasury bond yields have sense in a relief rally. This new development encourages the Federal Reserve (Fed) to focus on the inflation outlook and consider moving forward with rate hikes if necessary.

Recent Fed commentary from members such as Kashkari (a voter), uber-hawk Bullard, and Fed Vice-Chair of Supervision Barr indicates that they prioritize inflation over the banking crisis. Fed officials appear relatively resilient regarding banking stress, asserting that the underlying fundamentals of the US banking system remain strong.

Monday's rally in U.S. Treasury bond yields can be attributed to a relief rally, but it is too early to confirm it as a definitive shift in yields. Any further developments in the banking liquidity crisis could cause yields to fall and gold to reclaim the $2,000 mark again. All eyes will remain on the upcoming US Personal Consumption Expenditure (PCE) data release later this week. 

Levels to watch

• USD/JPY takes offers to refresh intraday low, reverses week-start gains.
• Yields remain pressured amid easing fears of banking crisis, inflation.
• Outgoing BoJ Governor Kuroda once again defends easy-money policy.
• US CB Consumer Confidence, banking headlines eyed for intraday moves.

USD/JPY pays little heed to Bank of Japan (BoJ) Governor Haruhiko Kuroda’s defense of easy-money policies as the Yen pair renews its intraday low near 130.50 while reversing the week-start gains during early Tuesday day. In doing so, the quote traces the recently downbeat US Treasury bond yields and the US Dollar amid cautious optimism in the market.

“It’s premature to debate an exit from easy monetary policy,” said BoJ Governor Kuroda during one of the last attempts to defend ultra-easy monetary policy before leaving the desk in April.

Also read: BoJ’s Kuroda: It’s premature to debate exit from easy monetary policy

That said, the US 10-year and two-year Treasury yields grind lower around 3.51% and 3.92% by the press time, paring the week-start rebound after witnessing a three-week downtrend. That said, the US Dollar Index (DXY) drops for the second consecutive day to 102.65, down 0.21% intraday by the press time.

While tracing the softer yields and US Dollar, the market’s optimism surrounding the banking sector and easing inflation seems to gain major attention. Behind the moves could be the US and European policymakers stretched emergency credit lines to the troubled banks and announced deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

Earlier in the day, US Treasury Department said that the US will keep using tools to prevent banking contagion as needed.  Before that, Federal Reserve Governor Philip Jefferson and Fed Vice Chair for Supervision Michael Barr showed readiness to tame the banking crisis while signaling ease in the inflation woes.

It’s worth noting that the recently downbeat US data weighed on the hawkish Fed bets, especially after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, which in turn exerted downside pressure on the USD/JPY prices. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

On the flip side, the geopolitical fears surrounding China and Russia challenge the market’s upbeat sentiment, as well as the USD/JPY bears. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) should be fully ready to use nuclear weapons at any time.” Recently, Russia was said to have test-fired an anti-ship missile in the Sea of Japan.

Against this backdrop, Japan’s Nikkei 225 prints mild gains while tracing the S&P 500 Futures.

Moving on, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves of the USD/JPY pair. However, major attention will be given to the US and Japan inflation clues, scheduled for release on Friday. Above all, the yields are crucial to aptly predict the Yen pair’s moves.

Technical analysis

A three-week-old falling wedge bullish chart formation keeps USD/JPY buyers despite the latest pullback. That said, the pattern currently occupies an area between 131.20 and 129.35.

Citing the Russian Defence Ministry on Tuesday, Reuters reported that "in the waters of the Sea of Japan, missile ships of the Pacific Fleet fired Moskit cruise missiles at a mock enemy sea target.”

"The target, located at a distance of about 100 kilometres (62.14 miles), was successfully hit by a direct hit from two Moskit cruise missiles,” the Russian Defence Ministry said.

Market reaction

Risk sentiment is steady in Tuesday’s Asian trading, as investors digest the latest talks from the global regulators on the banking crisis. The US S&P 500 futures are adding 0.15% on the day while the Asian stocks are trading mixed to higher.

• AUD/USD is aiming to recapture the 0.6700 resistance amid the improved risk appetite of the market participants.
• More than 50% of investors are advocating for the maintenance of a status quo by the Federal Reserve in its May policy meeting.
• Weak Australian Retail Sales data has provided some relief to the Reserve Bank of Australia.
• AUD/USD is marching towards the downward-sloping trendline of the Symmetrical Triangle chart pattern.

AUD/USD has displayed a sheer upside after climbing above the critical resistance of 0.6660 in the Asian session. The Aussie asset is now marching towards the round-level resistance of 0.6700 as the US Dollar index (DXY) is going through turbulent times. The USD Index has extended its correction to near 102.60 amid rising efforts by United States authorities to restore the confidence of households that their deposits are safe in mid-size banks. The US Dollar Index is likely to continue its downside momentum further amid the absence of recovery signals near 102.60.

S&P500 futures have generated more gains in the Asian session after a three-day winning spell on hopes that restored the confidence of households will also support more investment in risk-perceived assets, portraying a solid risk appetite of the market participants.

Demand for US government bonds has shown some rebound after an intense sell-off on Monday. Investors dumped US government bonds after back-to-back positive headlines from US authorities for providing liquidity assistance to small US banks after the fiasco of three banks. The 10-year US Treasury yields have dropped to near 3.51%.

United States government to bail out banking sector

The debacle of three mid-size banks resulted in the loss of confidence of households in mid-size banking organizations. Reuters reported on Monday that households have withdrawn their deposits heavily from small US banks and firms are heavily relying on advances from them, which has made them prone to meltdown.

To contain the same, the US government came forward with an expansion of emergency liquidity assistance to small lenders. The headline was followed by the announcement of the acquisition of deposits and loans from failed Silicon Valley Bank (SVB) by First Citizens BancShares. The idea of bailing out SVB is going to deliver a message that the overall banking system is strong, resilient, and sufficient enough to face turbulence. Apart from that, US Treasury Undersecretary for Domestic Finance Nellie Liang stated, “The US government will continue using its tools to prevent contagion in the banking sector, as warranted, to ensure Americans’ deposits are safe,” as reported by Reuters.

Positive steps from the US government for bailing out collapsed banks and restoring of confidence of investors and households have impacted the US Dollar.

Investors split about Federal Reserve’s interest rate decision

After an eight consecutive rate hike by the Federal Reserve (Fed), interest rates have knocked the 5% figure. Federal Reserve chair Jerome Powell showed bravery and hiked rates further by 25 basis points (bps) despite fears of a banking sector meltdown. However, the further road to inflation containment looks tricky.

The investing community is split about whether the Federal Reserve will keep policy unchanged or will continue its policy-tightening spell. As per the CME Fedwatch tool, more than 50% of investors are advocating for the maintenance of a status quo by the Federal Reserve (Fed) in its May monetary policy meeting as tight credit conditions approach by US banks would actively weigh on US inflation. The approach has heavily impacted the USD index.

Australian Retail Sales reveal weaker Retail Sales

In the morning of Asia, the Australian Bureau of Statistics reported that Retail Sales have expanded by 0.2%, lower than the consensus of 0.4% and the former release of 1.9%. A weaker-than-expected retail demand indicates that households are bearing the burden of higher inflation and are facing issues in offsetting the impact of inflated products with current paying capacity.

Although Australian households are going through a rough phase, weak retail demand is music to the ears for the Reserve Bank of Australia (RBA). The central bank has been working on softening Australian inflation, which is extremely stubborn and not responding well to higher interest rates.

Till now, Reserve Bank of Australia chair Philip Lowe has already pushed the Official Cash Rate (OCR) to 3.60%. Going forward, the monthly Consumer Price Index (CPI) will remain in the spotlight, which is scheduled for Wednesday.

AUD/USD technical outlook

AUD/USD has rebounded firmly after sensing strength near the upward-sloping trendline of the Symmetrical Triangle chart pattern, which is placed from March 10 low at 0.6564 on a two-hour scale. The downward-sloping trendline of the chart pattern is plotted from March 01 high at 0.6784.

The asset has delivered a sharp break above the 20-period Exponential Moving Average (EMA) at 0.6659, which indicates sheer momentum in the Australian Dollar.

In addition to that, the Relative Strength Index (RSI) (14) has climbed above 60.00, which indicates that the bullish momentum has been activated.

Bank of Japan (BoJ) Governor Haruhiko Kuroda said on Tuesday, it is too early to debate an exit from easy monetary policy.

Key quotes

“Sustainable inflation target has not yet been met.”

“Thus. it's premature to debate exit from easy monetary policy.”

“More time is needed to stably and sustainably hit the price target.”

Market reaction

The Japanese yen is holding the recovery momentum on Kuroda’s words, as USD/JPY is shedding 0.70% on the day to trade at 130.63.

• Natural Gas portrays corrective bounce off a five-week-old support line.
• Bullish RSI divergence adds strength to the bounce from short-term key trend line support.
• XNG/USD bears remain hopeful unless witnessing clear break of 100-SMA.

Natural Gas (XNG/USD) pares intraday gains around the lowest levels in five weeks, up 0.90% on a day near $2.28 by the press time of early Tuesday.

In doing so, the commodity price justifies the bullish divergence between the XNG/USD price and the Relative Strength Index (RSI) line, placed at 14, to bounce off a short-term key support line.

That said, the Natural Gas price refreshed a multi-day low the previous day but the RSI marked a higher low, which in turn portrays a bullish divergence while suggesting that the bears are running out of steam.

It’s worth noting, however, that a downward-sloping resistance line from March 14, close to $2.35 at the latest, challenges the XNG/USD rebound.

Even if the Natural Gas buyers manage to cross the $2.35 hurdle, the 50-bar Simple Moving Average (SMA) level of around $2.40 could restrict the commodity’s further advances. Above all, the 100-SMA hurdle of $2.52 acts as the last defense of the XNG/USD bears.

Meanwhile, Natural Gas sellers need a clear break of the aforementioned support line from late February, close to $2.25 by the press time, as well as witness further reduction in the RSI (14) line, to retake control.

Following that, the multi-month low marked in February around $2.13 and the $2.00 psychological magnet will gain the market’s attention.

To sum up, Natural Gas price appears to slip off the bear’s radar amid bullish RSI divergence. However, the XNG/USD buyers have a bumpy road towards the north.

XNG/USD: Four-hour chart

Trend: Bearish

• EUR/USD grinds near intraday top while keeping the week-start recovery.
• US Dollar remains pressured as recently softer data, policymakers’ comments underpin risk-on mood.
• Comparatively upbeat EU catalysts, versus the US factors, also keep Euro buyers hopeful.
• ECB President Lagarde’s speech, US CB Consumer Confidence eyed for intraday directions.

EUR/USD bulls take a breather around intraday high of near 1.0815 as traders seek more clues to extend the two-day run-up during early Tuesday. It’s worth noting that the comparatively upbeat catalysts from Eurozone versus the US joined risk-on mood to underpin the Euro pair’s latest run-up.

Recently, US Treasury Department said that the US will keep using tools to prevent banking contagion as needed.  Before that, Federal Reserve Governor Philip Jefferson and Fed Vice Chair for Supervision Michael Barr showed readiness to tame the banking crisis while signaling an ease in the inflation woes.

On the other hand, European Central Bank (ECB) policymaker Pablo Hernandez de Cos, Gediminas Šimkus, Isabel Schnabel and Mario Centeno were the latest officials who tried to convince markets of easing recession fears in the bloc, as well as hopes of overcoming the banking crisis. It’s worth noting, however, the Fed policymakers appeared slightly less hawkish than their ECB counterparts in the latest commentaries and hence allowed the EUR/USD bulls to rise further. Furthermore, Monday’s downbeat US Dallas Fed Manufacturing Business Index for March contrasted with Germany’s strong IFO data for the said month to offer additoinal strength to the EUR/USD bulls.

Meanwhile, the geopolitical fears surrounding China and Russia challenge the market’s upbeat sentiment, as well as the EUR/USD bulls. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) should be fully ready to use nuclear weapons at any time.” Recently, Russia said to have test-fired antiship missile in the Sea of Japan.

Against this backdrop, S&P 500 Futures print mild gains around 4,010 during the four-day uptrend whereas the US Treasury bond yields remain sidelined after snapping a three-day downtrend on Monday. It’s worth noting that the US 10-year and two-year Treasury yields grind higher around 3.53% and 3.93% by the press time. That said, the US Dollar Index (DXY) drops for the second consecutive day to 102.65, down 0.21% intraday by the press time.

Looking forward, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves of the EUR/USD pair. However, major attention will be given to ECB President Christine Lagarde’s speech and inflation clues for clear directions, which in turn highlights today’s statements from ECB’s Lagarde and  Harmonized Index of Consumer Prices (HICP) details for Germany and Europe, up for publishing on Thursday and Friday. Also important is the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Technical analysis

EUR/USD bulls justify the previous bounce off the 50-DMA, around 1.0735 by the press time, while aiming a two-month-old horizontal resistance around 1.0930.

• NZD/USD picks up bids to refresh intraday high, snaps two-day downtrend.
• Clear break of 100-EMA, 200-EMA convergence joins upbeat oscillators to favor Kiwi pair bulls.
• Sellers need validation from three-week-old ascending trend line to retake control.

NZD/USD bulls are back to the table, after a two-day absence, as the Kiwi pair renews its intraday high around 0.6220 during early Tuesday.

In doing so, the major currency pair justifies the previous day’s U-turn from a three-week-old ascending trend line, as well as the successful upside break of the key Exponential Moving Averages (EMAs). Also adding strength to the upside bias are the bullish MACD signals and the upbeat RSI (14) line, not overbought.

With this, the NZD/USD pair is well set for the upside momentum even if multiple hurdles around 0.6250 and 0.6270 could test the buyers before directing them to the monthly high of around 0.6295.

It’s worth noting that the Kiwi pair’s run-up beyond 0.6295 needs validation from the 0.6300 round figure before directing the bulls toward the mid-February swing high of around 0.6390.

On the contrary, a convergence of the 100-EMA and 200-EMA joins the 38.2% Fibonacci retracement level of the NZD/USD pair’s March 08-23 run-up to highlight 0.6215 as the strong downside support.

Following that, the aforementioned ascending trend line from March 08, close to 0.6185 by the press time, may challenge the NZD/USD bears.

NZD/USD: Hourly chart

Trend: Further upside expected

Japanese Economy Minister Shigeyuki Goto said on Tuesday, “we are going to use budget reserves to pay for a stimulus package worth 2.2 trillion yen.”

Meanwhile, the country’s Prime Minister Fumio Kishida said, “we actively monitor developments on banks and the general stability of Japan's financial system.”

Additional takeaways

“Japan's financial system remains stable overall, closely wathing developments on banks.”

“Risk aversion seen in financial markets.”

“Japan's financial institutions have ample liquidity and capital.”

Market reaction

Goto’s comments helped the Japanese yen catch a fresh bid, drowning USD/JPY to daily lows of 130.57. The pair is currently trading at 130.77, still down 0.60% on the day.

• USD/MXN marches lower, approaching a multi-year low at 17.93.
• Limited upside momentum for USD/MXN as Fed signals a pause. 
• Relative Strength Index signals further downside for USD/MXN.

The USD/MXN  experienced a multi-month corrective decline, bringing the price down to 18.40. The pair has been consistently heading lower after reaching a March high of 19.23, which intersects with the descending trendline starting from July’s high at around 21.00 on a daily timeframe.

Keeping downside bias intact, the pair is likely to be moving towards retesting the multi-year low at 17.93. The Federal Reserve (Fed) signaled a pause in their rate hiking path, combined with ongoing US Dollar liquidity injections and easing banking adversity, which could push the pair to break below the critical 17.93 mark.

Any upside momentum will likely be limited around the 21-Day Moving Average (DMA), which currently coincides with Monday's high at 18.44. A break above this level would lead the USD/MXN to face the 50 DMA, which aligns with multi-tested support turned into resistance at 18.57. 

Both DMA levels hammer the pair, and breaking above them would require significant bullish US dollar momentum to retest the March high at 19.23.

The Relative Strength Index signals lower lows, suggesting further downside potential for the pair. 

Market participants focus on the upcoming US Personal Consumption Expenditure (PCE) data release on Friday and the Banxico interest rate decision on Thursday.

USD/MXN: Daily chart

GBP/USD bulls move in and look towards 1.2320

GBP/USD is bid in Asia printing fresh corrective highs to 1.2317 and up 0.2% at the time of writing.  Investors sought clarity on the fallout from the recent collapse of two US lenders and the rescue of Credit Suisse while central bank sentiment simmers on the backburners.

The dollar index, DXY, which measures the currency against six rivals, was lower on the day and is extending the offer in Asia on Tuesday near the 7-week low of 101.91 touched on Thursday. Last week, the US Federal Reserve raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of the banking sector crisis. Markets are now pricing in around a 55% chance of the Fed standing pat on interest rates in its next meeting in May and anticipate a pivot as early as July. Read more...

GBP/USD Price Analysis: Extends bounce off 50-SMA towards 1.2330 support-turned-resistance

GBP/USD remains on the front foot as bulls attack the 1.2300 mark during Tuesday’s Asian session, following an upbeat start of the week.

In doing so, the Cable pair stretches the previous run-up from the 50-bar Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level of the quote’s January-March downside. Adding strength to the upside bias could be the impending bulls cross on the MACD. Read more..

• GBP/USD moves higher in Asia in a risk-on setting. 
• MPC will not be swayed by the concerns about the health of the global banking sector.

GBP/USD is bid in Asia printing fresh corrective highs to 1.2317 and up 0.2% at the time of writing.  Investors sought clarity on the fallout from the recent collapse of two US lenders and the rescue of Credit Suisse while central bank sentiment simmers on the backburners. 

The dollar index, DXY, which measures the currency against six rivals, was lower on the day and is extending the offer in Asia on Tuesday near the 7-week low of 101.91 touched on Thursday. Last week, the US Federal Reserve raised interest rates by 25 basis points, as expected, but took a cautious stance on the outlook because of the banking sector crisis. Markets are now pricing in around a 55% chance of the Fed standing pat on interest rates in its next meeting in May and anticipate a pivot as early as July.

Domestically, the British Pound Sterling was bid on the back of the Bank of England Governor Andrew Bailey signaling that interest rate-setters would focus on fighting inflation and would not be swayed by the concerns about the health of the global banking sector. Data released earlier Monday showed that UK Retail Sales conditions from the Confederation of British Industry declined modestly in March.

• Market sentiment remains firmer as decision-makers push back banking woes.
• S&P 500 Futures print four-day uptrend even as bulls struggle of late.
• US 10-year, two-year Treasury bond yields seesaw after printing the first daily gains in four.
• US CB Consumer Confidence, Fed talks eyed for intermediate clues ahead of Friday’s US Core PCE Price Index.

The risk profile remains firmer during early Tuesday as global policymakers remain optimistic about overcoming the banking crisis. Adding strength to the risk-on mood could be a lack of hawkish comments from the Federal Reserve (Fed) officials and mixed US data. It should be noted, however, that the latest geopolitical fears emanating from Russia, China and North Korea seem to challenge the optimists.

While portraying the mood, S&P 500 Futures print mild gains around 4,010 during the four-day uptrend whereas the US Treasury bond yields remain sidelined after snapping a three-day downtrend on Monday. It’s worth noting that the US 10-year and two-year Treasury yields grind higher around 3.53% and 3.93% by the press time.

Among the key headlines were the United States and European policymakers’ stretching of emergency credit lines to the troubled banks, as well as announcements of deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

US Treasury Department recently said that the US will keep using tools to prevent banking contagion as needed. Previously, Federal Reserve Governor Philip Jefferson said, “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains.” On the same line were comments from Federal Reserve Vice Chair for Supervision Michael Barr who said that they are prepared to use all of our tools for any size institution as needed to keep the system safe.

Not only the US officials but a show of readiness to act by the European Central Bank (ECB) and the Bank of England (BoE) policymakers, as well as Australia’s Assistant Treasurer and Minister for Financial Services Stephen Jones, also underpin the market’s optimism.

Furthermore, softer US data weighing on the hawkish Fed bets after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, also allow the traders to remain hopeful and weigh on the US Dollar while allowing the Gold price to grind higher. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Alternatively, the geopolitical fears surrounding China and Russia challenge the market’s upbeat sentiment. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) should be fully ready to use nuclear weapons at any time.”

Moving forward, the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, can direct intraday moves. However, major attention will be given to Wednesday’s Monthly Inflation for Australia and Friday’s Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Also read: US Consumer Confidence Preview: No good news for Americans

• USD/JPY has sensed immense pressure as US banking jitters have eased.
• US Treasury Liang reported the US government will use its tools to prevent contagion in the banking sector.
• Liquidity assurance from US authorities for a potential banking crisis has infused confidence among investors.

The USD/JPY pair has witnessed an intense sell-off after failing to sustain above 131.50 in the Asian session. The asset has observed significant offers led by an extended correction in the US Dollar Index (DXY). The USD Index has stretched its downside to near 102.60 quickly as banking instability in the United States has started easing.

After the expansion of emergency liquidity assistance and the announcement of the acquisition of deposits and loans of failed Silicon Valley Bank (SVB) by First Citizens BancShares, Treasury Undersecretary for Domestic Finance Nellie Liang stated, “The US government will continue using its tools to prevent contagion in the banking sector, as warranted, to ensure Americans’ deposits are safe,” as reported by Reuters.

Meanwhile, S&P500 futures have generated minimal gains after a positive Monday as liquidity assurance from US authorities for a potential banking crisis has infused confidence among the market participants, portraying a risk-on mood.

USD/JPY has sensed selling pressure from the upper portion of the Falling Channel chart pattern formed on a four-hour scale. In a Falling Channel chart pattern, every pullback is considered a selling opportunity by the market participants.

The 50-period Exponential Moving Average (EMA) at 131.80 is acting as a major barricade for the US Dollar bulls.

The Relative Strength Index (RSI) (14) is oscillating in the bearish range of 20.00-60.00 and has not shown any sign of a reversal yet.

A break below March 27 low at 130.50 would drag the asset towards March 24 low at 129.64 followed by the horizontal support plotted from February 02 low at 128.08.

In an alternate scenario, a confident break above March 27 high at 131.76 will drive the asset toward March 13 low at 132.29. A breach of the latter will drive the major toward March 22 high at 133.00.

USD/JPY four-hour chart

• USD/CHF extends the week-start fall, holds lower ground near intraday bottom of late.
• Impending bear cross on MACD, downbeat RSI strengthen downside bias for the Swiss Franc pair.
• Two-week-old support line precedes ascending trend line from early February to test bears.
• Bulls have a tough time on their return unless crossing 200-SMA.

USD/CHF remains depressed around 0.9150 as it keeps the week-start fall amid Tuesday’s sluggish Asian session. In doing so, the Swiss Franc (CHF) pair justifies the looming bear cross on the MACD indicator, as well as the downbeat RSI (14) line.

It’s worth noting that the failure of important Simple Moving Averages (SMAs) during the mid-month run-up adds strength to the bearish bias for the USD/CHF.

However, a fortnight-old ascending trend line, around 0.9135 at the latest, restricts the nearby downside of the USD/CHF pair.

Following that, an upward-sloping support line from early February, close to 0.9110 by the press time, appears the key to watch for the bears as it holds the key to the quote’s further weakness towards challenging the yearly low marked in February around 0.9060.

Alternatively, a one-week-long falling trend line restricts the immediate upside of the USD/CHF pair around 0.9185 ahead of highlighting the 61.8% Fibonacci retracement level of the pair’s February-March fall, near 0.9205.

Should the quote manage to cross the golden Fibonacci ratio, a convergence of the 50% Fibonacci retracement level, 100-SMA and a three-week-old bearish trend line together challenge the USD/CHF bulls near 0.9250.

Also acting as an upside filter is the 200-SMA hurdle surrounding 0.9280.

Overall, USD/CHF is likely to grind lower even if the road toward the south appears bumpy.

USD/CHF: Four-hour chart

Trend: Further downside expected

In recent trade today, the People’s Bank of China (PBOC) set the yuan at 6.8749 vs. the prev fix of 6.8714 and prior close of 6.8795.

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.

• Gold price picks up bids to prod two-day downtrend, mildly bid of late.
• United States Treasury bond yields rebound on receding bank woes but bond bears aren’t all in to favor XAU/USD bulls.
• Federal Reserve policymakers’ hesitance in backing rate hikes strengthens risk-on mood, pushes back Gold buyers.
• XAU/USD traders eye US Consumer Confidence for intraday directions but Core PCE Price Index will be crucial to watch.

Gold price (XAU/USD) grinds higher around $1,960 as it snaps a two-day downtrend during early Tuesday, despite upbeat United States Treasury bond yields and sluggish US Dollar. In doing so, the XAU/USD traders seem to portray the month-end positioning ahead of the key US data while struggling to justify the risk-on mood.

Gold price recovery fails to justify firmer United States Treasury bond yields

Gold price prints the first daily gain in three as it ignores the firmer United States Treasury bond yields amid the sluggish US Dollar. That said, the US 10-year and two-year bond coupons marked the first daily gains in four the previous day as market sentiment improved amid policymakers’ push for more reforms to tame the banking fears. It’s worth noting that the US 10-year and two-year Treasury yields grind higher around 3.53% and 3.93% by the press time. It’s worth noting that the US Dollar Index (DXY) remains pressured and underpins the corrective bounce of the XAU/USD.

Easing banking fears tease XAU/USD sellers

Market sentiment improves the United States and European policymakers stretch emergency credit lines to the troubled banks and announced deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

Also taming the banking fears, as well as challenging the Gold buyers, are comments from the US Federal Reserve (Fed) officials and the Treasury Department. “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains,” said Fed’s Jefferson.  Further, Federal Reserve Vice Chair for Supervision Michael Barr's prepared testimony to Congress also favored the firmer sentiment as it read, “We are prepared to use all of our tools for any size institution as needed to keep the system safe". On the same line were comments from the US Treasury stating that the US will keep using tools to prevent banking contagion as needed.

Geopolitical fears, hawkish central bank talks also weigh on Gold price

It should be noted, however, that the geopolitical fears surrounding China and Russia also exert downside pressure on the Gold price. That said, talks about China’s failure to keep the pace of growth promised, as well as Russia’s alleged readiness to use nuclear weapons against Ukraine. On the same line are the latest comments from North Korean Leader Kim Jong Un who recently stated, per KCNA news, “(They) Should be fully ready to use nuclear weapons at any time.”

US CB Consumer Confidence eyed for intraday XAU/USD forecast

Looking ahead, the Gold traders will observe the US Conference Board’s (CB) Consumer Confidence for March, as well as the second-tier housing and activity data, to forecast intraday moves. However, major attention will be given to Wednesday’s Monthly Inflation for Australia and Friday’s Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Also read: US Consumer Confidence Preview: No good news for Americans

Gold price technical analysis

Gold price fails to justify the previous day’s downside break of a one-week-old symmetrical triangle, while grinding higher past the 50-bar Exponential Moving Average (SMA). However, bearish signals from the Moving Average Convergence and Divergence (MACD) indicator, as well as an absence of the oversold Relative Strength Index (RSI) line, placed at 14, tease XAU/USD bears.

While the theoretical target of an aforementioned triangle breakdown highlights the $1,840 level, the 100-EMA and 61.8% Fibonacci retracement level of the Gold price run-up from late February to early March, respectively around $1,927 and $1,882, could prod the XAU/USD bears.

On the contrary, a corrective bounce needs validation from the stated triangle’s lower line, close to $1,973 to convince the Gold buyers.

Following that, a downward-sloping resistance line from March 20, forming part of the triangle near the $2,000 psychological magnet, will gain the Gold buyer’s attention.

Also acting as an upside filter for the XAU/USD price is the monthly high surrounding $2,010, a break of which could propel the precious metal towards the previous yearly top of near $2,070.

Gold price: Four-hour chart

Trend: Further downside

• USD/CAD slides to fresh lows for the week. 
• Risk-on is supporting the oil price and Loonie. 

The Canadian dollar has strengthened against its US counterpart in Asia in a continuation of the start of the week´s rally. It is printing a fresh high vs. the greenback with USD/CAD down to 1.3641 after notching up its biggest advance in two weeks on Monday. Signs of easing stress in the banking sector contributed to a surge in oil prices and risk appetite that combined are favoring the Loonie.

Turning to the question of near-term BoC policy, April looks like a pretty easy hold for the Bank at this point, analysts at TD Securities argued. ´´Even with a benign outcome, the residual impact on short-end pricing from recent financial market uncertainty is likely to linger well into Q2; more importantly, the Bank can credibly argue that the economy is unfolding in line with the forecast underpinning its conditional pause. We continue to look for the BoC to remain on hold for all of 2023.´´

Meanwhile, Canada's budget is due on Tuesday. It will introduce a system to lock in future carbon credit prices, a move meant to boost investments by giving businesses certainty to develop low-carbon technologies, a senior government source with knowledge of the document told Reuters.

As for positioning, speculators’ net short CAD positions increased notably last week, oil prices and the signaled pause in policy from the BoC are in view. 

• BoE Governor Bailey emphasizes vigilance against persistent inflation.
• Global bond yields, encouraging risk tone boost GBP/JPY rally.
• BRC reports inflation rise in UK, Japan plans JPY 2.2tn stimulus.

GBP/JPY took a pause after a sharp rally, reaching a weekly high of 161.80. This was due to an encouraging risk tone on Monday and rising global bond yields boosting the currency pair.

In a recent speech, Bank of England (BoE) Governor Bailey emphasized the need to stay vigilant for signs of persistent inflationary pressures. He noted that further monetary tightening might be necessary if such pressures materialize. While there are indications of economic resilience, Bailey warned that the inflation path may not be completely smooth. A key priority for monetary policy is to prevent externally-driven inflation from becoming permanent. Bailey also pointed out significant strains in parts of the global banking system, which could impact the broader global economy.

Bailey mentioned that the full effect of recent bank rate increases has yet to be felt, and early retirement-driven inactivity might have contributed to a rise in cyclical rates. In response to these factors, the Bank of England has significantly raised bank rates. Bailey cautioned that inflation might be more persistent than expected, so it is crucial to stay alert for inflationary pressure signs. If such pressures arise, further monetary tightening may be needed to keep inflation under control.

Overall, Bailey's speech underscores the Bank of England's dedication to maintaining price stability while promoting economic growth. Though there are risks, the BoE is proactively managing them to ensure inflation stays within the target range.

These remarks are worth noting since the March BoE meeting did not include a press conference. Most analysts predict the BoE will pause in May, but some expect additional tightening to be required as the central bank's priority remains controlling inflation over banking uncertainty.

Highlighting the inflationary pressure, the British Retail Consortium (BRC) reported that overall shop price inflation increased to 8.9% from 8.4% in February. On the other hand, Japan's Economy Minister Goto announced plans to spend JPY 2.2 trillion on a stimulus package.

Levels to watch

• AUD/JPY has dropped to near 87.20 on poor Australian Retail Sales data.
• Australian Retail Sales have expanded by 0.2%, lower than the consensus of 0.4% and the former release of 1.9%.
• BoJ Kuroda might reiterate the continuation of ultra-loose monetary policy to increase wages and the overall demand.

The AUD/JPY pair has slipped to near 87.20 as the Australian Bureau of Statistics has reported weaker Retail Sales data. The economic data has expanded by 0.2%, lower than the consensus of 0.4% and the former release of 1.9%. A weaker-than-expected retail demand indicates that households are facing issues in offsetting the impact of inflated products with the current paying capacity.

The headline might show deteriorating retail demand but is delightful for the Reserve Bank of Australia (RBA), which is working on containing elevated inflation.

This week, the Australian Dollar is expected to remain in the spotlight ahead of the release of the monthly Consumer Price Index (CPI) (Feb) data, which is scheduled for Wednesday. As per the expectations, the inflation data will soften to 7.1% from the former release of 7.4%.

RBA policymakers have already stated that there is evidence, which indicates that Australian inflation has started easing. And, the RBA could terminate its policy-tightening process from April’s monetary meeting as the current monetary policy is restrictive enough to tame the stubborn inflation.

Apart from that, China’s Manufacturing PMI by the National Bureau of Statistics (NBS) will be the key trigger for the Australian Dollar. The Chinese economy is focused on the path of economic recovery after dismantling pandemic controls. Therefore, a decent performance is expected in the scale of manufacturing activities. It is worth noting that Australia is the leading trading partner of China and a higher Chinese PMI will also strengthen the Australian Dollar.

On the Tokyo front the speech from Bank of Japan (BoJ) ex-Governor Haruhiko Kuroda will remain in focus. BoJ Kuroda might reiterate the continuation of ultra-loose monetary policy to increase wages and the overall demand in the Japanese economy.

• AUD/USD stays firmer for the second consecutive day, picks up bids after upbeat data.
• Australia Retail Sales grew 0.2% MoM in February, versus 0.4% expected and 1.9% prior.
• Aussie buyers also cheer upbeat comments from Australian diplomat, US Treasury as they amplify banking optimism.
• RBA’s Ellis, US CB Consumer Confidence eyed for intraday directions, Aussie/US inflation clues are the key.

AUD/USD fails to justify softer Australia Retail Sales growth, amid firmer sentiment, as it renews its intraday high near 0.6660 during early Tuesday. In doing so, the risk barometer pair cheers from the broad US Dollar weakness ahead of the key Aussie and US data.

Australia’s seasonally adjusted Retail Sales growth for February came in at 0.2% versus 0.4% market forecasts and 1.9% prior.

Also read: Aussie Retail Sales in line, AUD/USD prints session high

Contrary to the downbeat data, receding fears of banking fallouts allow the AUD/USD pair to remain firmer for the second consecutive day.

Market sentiment initially improved after the US and European policymakers stretched emergency credit lines to the troubled banks and announced deposit insurance schemes. Recently adding strength to the risk-on mood were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, Australia’s Assistant Treasurer and Minister for Financial Services Stephen Jones tried to restore the market sentiment in the Aussie banks early Tuesday while speaking on local radio. The policymaker said, “Australia’s banking system is resilient,” while also adding that Australia's financial system is well-equipped to deal with challenges in the global economy.

On the other hand, the latest comments from Federal Reserve Governor Philip Jefferson and the US Dollar’s safe-haven demand could be linked to the AUD/USD pair’s run-up, not to forget downbeat US data. “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains,” said Fed’s Jefferson.  Further, Federal Reserve Vice Chair for Supervision Michael Barr's prepared testimony to Congress also favored the firmer sentiment as it read, “We are prepared to use all of our tools for any size institution as needed to keep the system safe". On the same line were comments from the US Treasury stating that the US will keep using tools to prevent banking contagion as needed.

It should be noted that the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Amid these plays, S&P 500 Futures print mild gains while the US Treasury bond yields recover after a three-week downtrend.

Having witnessed the initial reaction to Australia’s Retail Sales, AUD/USD pair traders may wait for comments from Assistant Governor (Economic) at the Reserve Bank of Australia, Luci Ellis for the further run-up. Should the policymaker praises the latest data and push back the dovish concerns, the Aussie pair may have further upside to trace.

On the other hand, the US Conference Board’s (CB) Consumer Confidence for March will join the second-tier housing and activity data to entertain the pair traders. However, major attention will be given to Wednesday’s Monthly Inflation for Australia and Friday’s Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index.

Also read: US Consumer Confidence Preview: No good news for Americans

Technical analysis

Despite the latest rebound, a 12-day-old previous support line around 0.6675 restricts the immediate upside of the AUD/USD pair ahead of highlighting the 200-DMA hurdle surrounding 0.6755. Pullback moves, however, remain elusive unless the quote offers a daily closing beyond the 0.6600 round figure.

The Retail Sales released by the Australian Bureau of Statistics has been released as follows:

• Australian Retail Sales MoM final actual 0.2% (forecast 0.2%, previous 1.9%).

AUD/USD is making session highs of 0.6663 so far.

About Retail Sales

The primary gauge of Australia’s consumer spending, Retail Sales, is released by the Australian Bureau of Statistics (ABS) about 35 days after the month ends. It accounts for approximately 80% of total retail turnover in the country and, therefore, has a significant bearing on inflation and GDP. This leading indicator has a direct correlation with inflation and the growth prospects, impacting the Reserve Bank of Australia’s (RBA) interest rates decision and AUD valuation. The stats bureau uses the forward factor method, ensuring that the seasonal factors are not distorted by COVID-19 impacts.

• EUR/JPY has failed to sustain above 142.00 ahead of German inflation.
• Evidence of de-anchoring Eurozone inflation expectations is not available and it cements further rate hikes from ECB.
• Dovish rate guidance is expected from BoJ Kuroda as Japan’s inflation has been basically fueled by international forces.

The EUR/JPY pair has slipped after failing to sustain above the critical resistance of 142.00 in the early Asian session. The cross has shown exhaustion in the upside momentum as investors are shifting their focus toward preliminary German Harmonized Index of Consumer Prices (HICP) (March) data, which will release on Thursday.

As per the projections, the annual German HICP will soften firmly to 7.5% from the former release of 9.3%. An expected decline in German inflation would relieve some pressure from the European Central Bank (ECB), which is hiking rates extensively to tame persistent inflation. Higher inflation in Germany is running on a tight labor market, which has not shown any sign of weakening yet, stated ECB Governing Council member Isabel Schnabel on Monday.

Despite a sheer decline in German inflation, ECB President Christine Lagarde might continue hiking rates further as the road to the desired level of 2% is far from over. ECB policymaker Mario Centeno cited on Monday, We haven't seen de-anchoring inflation expectations," as reported by Reuters. He further reiterated that the ECB has the tools for "whatever-it-takes" action for banks.

On the Japanese Yen front, investors are keenly awaiting the speech from Bank of Japan (BoJ) ex-Governor Haruhiko Kuroda. Dovish rate guidance is expected from BoJ Kuroda as Japan’s inflation has been basically fueled by international forces. Japan’s administration is entirely focused on increasing wages to multiply inflation with domestic forces and keep the Japanese Yen competitive against other currencies.

• EUR/USD bulls are above 1.0770 with 1.0820 eyed.
• Bears target 1.0700 on break of micro trendline.

As per the prior analysis, EUR/USD Price Analysis: Gearing up for the Fed at 1.0800 resistance, support eyed at 1.0770, where it stated, ´´so long as the support structure holds between 1.0700 and 1.0750/60, there will be prospects of a bullish continuation for the foreseeable future,´´ the bulls have stuck to the course and took on 1.0900.

EUR/USD prior analysis

EUR/USD update

The price has rallied towards prior highs, but the correction took place into support.

The bulls now need to stay above 1.0770 and then get over 1.0820 or face pressures with 1.0700 eyed. 

• US Dollar Index renews intraday low while extending the week-start fall.
• Risk-on mood weigh on US Dollar’s haven demand, especially when Fedspeak lacks hawkish rhetoric.
• Easing fears from banking fallouts add strength to the risk profile ahead of top-tier US data.
• US CB Consumer Confidence could direct intraday moves but Core PCE Price Index is the key.

US Dollar Index (DXY) bears the burden of the market’s risk-on mood, as well as the absence of hawkish comments from the Federal Reserve (Fed) policymakers, during early Tuesday. In doing so, the greenback’s gauge versus the six major currencies drops for the second consecutive day while renewing the intraday low near 102.70 by the press time.

An active battle with the banking turmoil by the US and European policymakers seems to have triggered the latest risk-on mood. Among the major catalysts are the respective authorities’ extension of credit services to a larger umbrella of banks. On the same line were comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, the latest comments from Federal Reserve Governor Philip Jefferson and the US Dollar’s safe-haven demand could be linked to the DXY’s fall, not to forget downbeat US data. “Inflation ‘has started to come down’ with some of that due to tighter monetary policy and some due to other factors such as improving global supply chains,” said Fed’s Jefferson.

Further, Federal Reserve Vice Chair for Supervision Michael Barr's prepared testimony to Congress reads, “We are prepared to use all of our tools for any size institution as needed to keep the system safe".

It should be noted that Fed Chairman Jerome Powell tried to push back the doves in the last monetary policy meeting but could not and hence the hawks appear to lose control.

Talking about the data, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Against this backdrop, Wall Street closed mixed, losing some of the intraday gains in the late hours, whereas yields rebound after a four-week downtrend.

Moving forward, the US Conference Board’s (CB) Consumer Confidence for March will join the second-tier housing data to entertain DXY traders as they seek clues of more inflation pushing the Fed policymakers towards further rate lifts.

Technical analysis

A failure to cross the 50-DMA hurdle during the previous week’s run-up, around 103.50 by the press time, directs the US Dollar Index bears towards the monthly low of 101.91.