EURUSD
Industrial production in the US remain unchanged at 0.0% in February, below market consensus of a 0.2% MoM rise.
EURUSD is rather unimpressed by today’s data. The pair continues to trade around 1.0620 level.
US100
- Markets remained nervous on the final trading day of the week with major European and US indices pulling back
- Top blue chips indices from Europe dropped over 1% lower while major Wall Street indices, like S&P 500 and Nasdaq, are trading around 1.0-1.5% lower on the day
- Flight to safety can be spotted on the markets with money flowing to precious metals and bonds
- Gold is trading over 3% higher on the day as short- and long-term US yields plunge with psychological $2,000 level being just 1% away
- Markets are pricing around 60% chance of Fed hiking rates by 25 basis points next week and around 40% of keeping them unchanged
- USD is one of the worst performing G10 currencies today
- In spite of yesterday’s liquidity boost from major central banks, share price of First Republic Bank saw only short-lived relief and is plunging 25% today
- Credit Suisse remains in the center of attention in Europe with bank calling its CFO teams to work over the week and look for ‘scenarios for the bank’
- Also, media reports saying that major banks are limiting trading with Credit Suisse are mounting. Deutsche Bank and Societe Generale are said to be the latest to restrict trading with CS
- Energy commodities are pulling back amid an overall increase in risk aversion. Brent and WTI are trading 2% lower and is heading for the biggest weekly drop since April 2022 while US natural gas prices plunge 7%
- Downward pressure on US natural gas prices is further magnified by new weather forecast for the United States that hint at near- or above-average temperatures in key heating regions over the next 2 weeks
- University of Michigan consumer sentiment for March missed expectations significantly, dropping from 67.0 to 63.4 (exp. 67.0). Both current situation and expectations subindices missed estimates significantly
- In spite of risk-off moods seen across most financial markets, cryptocurrencies are having a great day. Bitcoin jumps 6% and trades in the $26,500 area
Nasdaq-100 (US100) failed to sustain bullish momentum and break above the 12,750 pts resistance zone. The index is pulling back today as concerns over the condition of the US and European continue to linger over markets. However, Nasdaq-100 drops the least among major Wall Street indices due to an almost non-existent share of the banking sector in the index.
US500
Concerns over the condition of the banking sector triggered a sell-off on the global stock markets this week and now investors hope that FED will ease its hawkish rhetoric at a meeting scheduled for next week… We will get to know what Fed’s response is the coming Wednesday at 6:00 pm GMT. However, rate decisions from the Bank of England and Swiss National Bank will also draw attention, and so will flash PMIs for September from Europe and US. Be sure to watch US500, DE30 and GBPCHF next week!
US500
FOMC rate decision is a key event of the week. The market anticipates the Fed will hike rates by just 25 basis points, in light of easing inflationary pressures and the recent banking turmoil. However, some expect that the central bank can reverse course if the financial system is in distress. We will see whether those expectations are met on Wednesday, 6:00 pm GMT and any deviation away from a 25 bp move could potentially trigger additional volatility on the markets. The meeting will also be closely watched as a new set of economic forecasts will be provided.
DE30
While central banks will draw the most attention next week, release of flash PMI indices for March may also trigger a jump in volatility. German manufacturing and services indices are expected to rise slightly compared to February releases and weaker-than-expected print could provide some fuel for DE30 bulls. As usual, focus in Europe will be primarily on releases from France (Friday, 8:15 am GMT) and Germany (8:30 am GMT).
EURUSD
The EURUSD pair shows calm positive trades to gradually towards our waited target at 1.0745, getting good support by the EMA50, to keep the bullish trend suggested for the upcoming period.
It is important to monitor the price when reaching the targeted level, as breaching it will extend the bullish wave to reach 1.0920 areas as a next main station, while consolidating against the bullish wave will press on the price to rebound bearishly to test the minor support areas around 1.0635 initially. On the other hand, we should note that breaking 1.0635 will stop the expected rise for today and push the price to turn to decline to visit 1.0515 level as a first station.
GBPUSD
The GBPUSD pair provided new positive trades to test 1.2200 barrier, waiting to get positive motive that assists to push the price to continue the price and achieve our positive targets that start at 1.2260 and extend to 1.2440 after surpassing the previous level.
The EMA50 continues to support the expected bullish wave, which depends on the price stability above 1.2060, as breaking it will put the price under negative pressure that targets testing 1.1940 before any new attempt to rise.
Gold
Precious metals gain amid increase in risk-aversion and pullback in US yields
Strong upward move launched on the gold market on March 8, 2023 is continuing at the beginning of a new week. Risk-off moods can be spotted on the financial markets at the beginning of a new week and it is providing support for safe haven assets, like for example gold. UBS will buy troubled Swiss lender, Credit Suisse, in a government-brokered deal. However, this failed to ease market concerns as the deal will include write down of Credit Suisse’s AT1 bonds and this may turn out to be a hit to banks and other institutions with exposure to Credit Suisse. Apart from that, Fed and 5 other central banks (ECB, BoJ, BoE, BoC and SNB) will switch from weekly to daily USD swap auctions in order to boost USD liquidity. US yields pulled back providing even more support for precious metals.
As a result of those market moves, gold is trading over 1% higher on the day. Gold price climbed above $2,000 per ounce this morning, reaching the highest level since March 2022.
Oil
Oil launched a new week’s trading lower amid an overall increase in risk aversion. WTI drops below $65 per barrel and trades at the lowest level since November 2021! Declines accelerated after price dropped below a key $70-72 price zone last week. The $60-65 area is a demand zone marked with local lows from 2021 and local highs from 2019 and 2020.
There are few reasons behind a drop in oil prices:
- Concerns over conditions of banking and financial systems in the United States and Europe. UBS will acquire Credit Suisse but it failed to ease market concerns
- Demand in China remains weak - imports stay low, run rates in refineries drop but at the same time Chinese exports of oil derivatives are increasing, what may hint at oversupply in the country
- Lack of interest from speculators - end-February data shows oil being extremely net oversold by speculators
- Goldman Sachs - one of the world’s largest institutional bulls when it comes to oil - slashed Brent price 12-month ahead forecast from $100 to $94 per barrel
WTI (OIL.WTI) drops below $65 per barrel. Price dropped to a key zone, marked with local highs and lows from previous years, as well as with the range of two largest downward impulses in recent year (2014 and 2020).
EURUSD
Euro continues to recover against the dollar at the beginning of this week, after a sharp crash in the last week - that was motivated by the worries around Credit Suisse that put the European banking sector under pressure and heavily penalized the euro.
Daily Time Frame EUR/USD
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On the daily chart, we can see that the price is once again testing the upper limit of the range, close to 1.0695.
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This will be a decisive zone for the price to understand the next momentum in the currency pair.
Dollar Index Daily Time Frame
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On the dollar index chart, we can see that the bullish movement slowed down after the price tested the 50 period exponential moving average (EMA).
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As long as the price remains below this zone, we should expect the bearish movement to continue over the next few sessions.
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USD index, Daily time frame chart.
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JPY leads the gains this trading session.
DE30
European indices had a poor start to a new week with major indices from the Old Continent launching today’s cash trading session with significant bearish price gaps. This came after a government-brokered deal for UBS to acquire Credit Suisse failed to shore up market sentiment. Issue of Credit Suisse’s AT1 bonds being written down to zero sparked concerns that it may be a problem for banks and financial institutions with exposure to those bonds. However, indices began to regain ground as the session progressed and all of the earlier losses have been erased already. Indices from Western Europe trade 0.5-1.0% higher on the day with German DAX adding 0.7% and French CAC40 jumping 0.9%.
Taking a look at the DE30 chart at H4 interval, we can see that another attempt at breaking below the 14,750 pts support zone was made today and once again it turned out to be a failure. Index caught a bid later on and rallied towards the psychological 15,000 pts mark. While the index managed to break above this hurdle, bulls failed to break above the 15,050 pts swing area. However, the index remains close to this resistance and another attempt to break above it later into the day cannot be ruled out.
BTC
- Weaker sentiment on stock exchanges did not prevent cryptocurrencies from rising
- The correlation of the price of BTC with the major indices has dropped noticeably recently
- Bitcoin price is approaching overbought levels and 61.8 Fibonacci retracement
The recent weakness of banks has caused capital to flow into cryptocurrencies for two reasons. The main beneficiary of the rally - decentralized Bitcoin - is not directly dependent on the centralized financial sector. Second, in the face of escalating bank problems, the chances of a Federal Reserve pivot have increased. Since the collapse of SVB, the Fed has already hinted twice at supporting market liquidity, which investors have taken as a positive prognosticator. It’s still unpredictable which way the crisis will unfold but its hold on UBS’s takeover of Credit Suisse coupled with a potentially dovish Fed could provide a catalyst for upside for risk assets.
On Wednesday at 8 pm GMT, markets will see if indeed Jerome Powell will be willing to go easy on Wall Street and change to a more dovish stance. If investors sense that the Fed is softening under the pressure of systemic concerns, the rally in cryptocurrencies is likely to be prolonged. At the same time, it is difficult to imagine the price of BTC continuing to rise if the scale of the current crisis were to increase significantly.
The price drop following the collapse of the SVB bank did not last long. Bitcoin surprised the markets and has since risen nearly 30%.
The largest of the cryptocurrencies has had one of its best weeks in the past few years, with the price rising more than 20%
The inverted head-and-shoulders formation pattern may herald bullish attempt to btrak the main psychological resistance level of $30,000.
Markets see more than 43% chance that the Federal Reserve will not raise interest rates on Wednesday. Just two weeks ago, the markets saw a 50bp hike as a chance. That’s a drastic change.
The amount of stored BTC in the so-called ‘cold wallets’ of the largest BTC holders of so-called whales (above 1,000 BTC) is at levels last seen in mid-2020. This may indicate that if the BTC price maintains momentum, the amount of BTC in whale portfolios will increase again. For the moment, however, the amount of cryptocurrency in the whales’ wallets continues to fall, which could indicate their sending BTC to exchanges and continued risk aversion among the largest holders. A change in this trend would be a sign of the growing strength of the largest of cryptocurrencies.
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Bitcoin, D1 interval. The price has approached $28,700, which coincides with the 61.8 Fibonacci abolition of the upward wave initiated in the spring of 2020. The RSI indicator indicates an overbought level signaling a possible correction.
S & P
Also news that JPMorgan CEO Jamie Dimon is leading discussions with other CEOs of other large US banks in an effort to provide further support, including potentially converting their $30 billion in deposits into a capital injection, only slightly calmed investors’ nerves. According to Wall Street Journal, preliminary discussions have been focused on ways that the banks can boost the beleaguered banks capital. Also in play is a potential investment by the banks themselves.
Also according to CNBC, JPMorgan Chase is advising First Republic Bank on strategic alternatives, one of which is capital raise which could dilute current shareholders. A sale of the bank is also taken into consideration.
First Republic (FRC.US) stock has been in free fall recently. Last week alone, a troubled San Francisco-based lender lost nearly 70.0% of its market value. Sell-off accelerated in pre-market, however sellers failed to retest all-time low at $9.00 and buyers managed to erase some of the losses in the evening. Nevertheless, the main sentiment remains bearish and only a break above the local resistance zone around $42.25 could let to a bigger upward correction.
AUDUSD
Yesterday’s trading on Wall Street and in Europe ended higher, making up for losses from earlier in the day initiated by the uncertainty surrounding the takeover of Credit Suisse by UBS. Better sentiment fueled Asian markets today. Stock exchanges in Japan are closed due to a national holiday.
- AUDUSD pair breaks back below the 0.6700 level. The case for a pause in the rate hike cycle by the RBA at its 4 April meeting has strengthened. According to the RBA minutes released today, the Board agreed to reconsider the case for pausing rate hikes and to closely examine incoming data from the economy.
- The ECB’s Holzmann is softening his previous calls for three consecutive 50 basis point rate hikes.
- From the US, there was some news affecting the stock market. The US Treasury is looking at unlimited deposit guarantees (via the FDIC) if the banking crisis worsens.
- On the political front, investors are looking at the Putin-Xi meeting in Moscow, which may bring new threads in the realm of the Ukraine conflict and other geopolitical-economic relations.
- PIMCO lost $340 million on the redemption of Credit Suisse Bank’s AT1 bond. Lawyers from Switzerland, the United States and the United Kingdom are talking to Credit Suisse’s AT1 bondholders about possible legal action after up to $17 billion in losses related to the redemption.
- Goldman Sachs commented on the current state of the equity market this way - “valuations don’t look particularly attractive”.
- Bill Ackman, founder and hedge fund manager of Pershing Square Capital commented that the FOMC should consider holding off on rate hikes for tomorrow’s Committee decision. Today marks the start of the Fed’s two-day meeting in Washington.
- Citi predicts a 25bp rate hike on Wednesday, and notes that the tone of the press conference will now be particularly important.
- Citadel and Trafigura traders believe that the turmoil in the banking market is temporary and unlikely to cause far-reaching perturbations in the global economy. Demand for oil should strengthen.
Quotations:
Futures in Europe point to a bullish opening to the session on the Old Continent. US contracts are also gaining, however the scale of the increases is minimal. On the FX market, the USD is currently performing best. NZD and AUD are the worst performers. Energy commodities are down, extending the wave of uncertainty in the economy. Gold and silver are correcting recent gains and recording slight declines. Bitcoin is currently losing 0.4 per cent and slipping towards $27,800.
The AUDUSD pair is currently trading in a structure bounded by important support and resistance levels. The upcoming FOMC decision and ongoing banking uncertainty could create additional volatility on the pair.
US500
The key event of the month, the FOMC interest rate decision, is ahead of us. Although the Fed’s decision is always referred to as the event of the month, tomorrow’s decision will be even more closely scrutinized by the market due to the lingering spectre of the banking crisis in the background. The mood on Wall Street is a veritable rollercoaster at the moment, but let us try to take a look at where the US500 benchmark has been moving and what might happen in the coming days.
As we can see on the chart of the US500 contracts on the D1 interval attached below, the instrument’s quotations have been moving in a very interesting technical structure for almost 2 years. The US500 broke out above the long-term downtrend line and successfully defended its outer extension, which encouraged the bulls to rise. However, we are inexorably approaching the next limitation, namely the resistance set by the uptrend initiated in the last quarter of 2022.
What will happen next? To answer this question, we need to consider the factors that are shaping current market sentiment, namely tomorrow’s FED decision and the specter of a banking crisis. At the moment, the money market is pricing in an 83.4% chance of a 25 basis point hike, which seems market neutral at the moment. However, the key factor will be Powell’s comments after the meeting regarding the hike cycle in the context of banking uncertainty. The risk of worsening problems in the sector will go a long way to curbing the hawkish enthusiasm of the Fed, which, remember, is in an advanced stage of tightening and seeing positive developments in the economy, such as last week’s good PPI inflation reading. Today, equity market sentiment was bolstered by further comments from the US Treasury, which was reported to be looking at providing unlimited deposit guarantees (via the FDIC) if the banking crisis worsens. In the event of a dovish FED, stock markets could eagerly extend the current upward momentum and break out above resistance near 4080 points. On the other hand, if the FED maintains a firm monetary stance, a downward impulse could be initiated towards support near 3870 points.
ZEW Sentiment Index Below Expectations
- 10:00 am GMT - Germany, ZEW sentiment index for March. Actual: 13.0. Forecast: 15.0. Previously: 28,1
- Current conditions: Actual: -46.5. Forecast: -44.3. Previously: -45.1
- ZEW says the international financial markets are under strong pressure. Assessment of the earnings development of banks and insurance sector have deteriorated considerably.
DE30 did not react to the below expectation reading of the ZEW index.
USDCAD
12:30 am GMT - Canada, CPI inflation report for February.
- Headline. Actual: 5.2% YoY. Forecast: 5.4% YoY. Previously: 5.9% YoY
- MoM. Actual: 0.4%. Forecast: 0.6%. Previously: 0,5%
- Core. Actual: 4.7% YoY. Forecast: 4.8% YoY. Previously: 5.0% YoY
- Core MoM. Actual: 0,5%. Previously: 0,3%
The USDCAD pair gained slightly shortly after Canada’s CPI inflation reading.
EURUSD
US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.
US home sales data for February was released at 2:00 pm GMT today and it turned out to be a massive beat. Data came in at 4.58 million, up from 4.00 million in January and significantly above 4.20 million expected by the market. The release trigger an uptick on equity markets with S&P 500 (US500) reaching a fresh daily high near 4,030 pts. USD, on the other hand, was muted with EURUSD barely moving in the first minutes following the release.
Oil
Alexander Novak, Russian deputy prime minister for fuel energy complex, said that the 500k barrels per day oil output cut that was ordered for March will remain in force through June. Novak said that production has not been slashed by the announced half a million barrels yet but Russia is close to achieving this target cut.
Brent (OIL) and WTI (OIL.WTI) ticked higher on the news. Oil prices jumped around 1% after Novak’s comments hit headlines.
GBPUSD
Inflation Rate in the United Kingdom increased to 10.40% YoYin February from 10.10% in January, above market estimates of 9.9% YoY.
The largest upward contributions came from restaurants and cafes, food, and clothing, partially offset by downward contributions from recreational and cultural goods and services (particularly recording media), and motor fuels. Core CPI rose 6.20% in February over the same month in the previous year, well above analysts’ estimates of 5.7%. Fresh data may suggest that the BoE may not necessarily be approaching the end of the tightening cycle. Tomorrow a 25 bp rate hike is expected.
GBPUSD is trading higher today and fresh CPI data provided more fuel for bulls. The currency pair is moving further away from support zone in the 1.2215 area.
JAP225
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US indices finished yesterday’s session higher amid expectations that the Fed will tighten policy less aggressively in the evening. S&P 500 added 1.30%, Dow Jones moved 0.98% higher and Nasdaq rose 1.58%. Russell outperformed and managed to finish 1.88% higher
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Indices from Asia-Pacific traded higher today - Nikkei jumped 1.94%, S&P/ASX 200 moved 0.87% higher while Kospi and Nifty 50 rose 1.12% and 0.20% respectively
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Indices from China traded 0.2-0.45% higher
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DAX futures point to a lower opening of today’s European cash session
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ECB’s Nagel said that policymakers have to be “even more stubborn” in inflation fight. In his opinion Eurozone banking system is resilient, not facing repeat of 2008
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First Republic Bank could potentially receive government backing, according to Bloomberg
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API report pointed to a 3.262 million barrel build in US oil inventories (exp. -1.448 mb)
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RBC analysts believe that OPEC would intervene if oil prices dropped substantially.
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Russia’s Deputy Prime Minister Novak said that the country’s current curtailed level of crude oil output would be in place through June 2023.
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Commerzbank lowered its 2023 midyear Brent crude oil forecast to US$80 a barrel (from $95)
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Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.5%, Ethereum adds 0.4%
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Energy commodities are lower - oil drops 1.0% while US natural gas prices fell over 2.6%
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Precious metals little changed - silver rose 0.16%, gold trades 0.8% higher
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AUD and NZD are the best performing major currencies while USD and CHF lag the most
Nikkei (JAP225) was one of the best performing Asian indices today. Index returned to crucial resistance at 27200 pts, which is marked with previous price reactions and 23.6% Fibonacci retracement of the upward wave launched in March 2020.
EURUSD
The most popular currency moved higher on Wednesday morning following a set of hawkish comments from ECB President Lagarde. In her opinion policymakers are neither committed to raise further nor are yet finished with hiking rates. ECB does not see clear evidence that underlying inflation is trending downwards. The underlying inflation dynamics remain strong. Lagarde emphasized that the ECB is ready to act and provide liquidity support.
EURUSD jumped above major resistance at 1.0765 following Lagarde comments, which paves the way towards net key resistance at 1.0900. This level coincides with 50.0% Fibonacci retracement of the downward wave started in June 2021.