• EUR/USD is eyeing more downside as DXY strengths on discussions of restoration to neutral rates.
• The shared currency has failed to capitalize on hawkish ECB minutes and decent Retail Sales.
• Members of the UN Human Rights Council voted in favor of ceasing Russia as an associate.

The EUR/USD pair has displayed a six-day losing streak and is likely to extend losses on Friday amid expectations of escalation in the Ukraine crisis after Russia ceases to be a member of the United Nations (UN) Human Rights Council. The members of the UN Human Rights Council voted in favor of stripping Russia from the members' list after the Russian rebels committed war crimes in Bucha, Ukraine. As world nations are isolating Russia from major communities, Russian leader Vladimir Putin could de-escalate progress talks with Ukraine, and the Ukraine crisis may continue to elevate further.

Meanwhile, the hawkish European Central Bank (ECB) minutes of March’s monetary policy meeting have failed to cushion the shared currency. Most of the ECB policymakers have favored immediate action through monetary policy to corner the galloping inflation.  Apart from that, the ECB should halt the Asset Purchase Programme (APP) as the stated objective behind its launch has been achieved.

Along with the hawkish ECB minutes, the shared currency has also failed to capitalize upon the outperformance of the Euro Retail Sales. The Eurostat reported Retail Sales at 5%, higher than the preliminary estimate of 4.8% but significantly lower than the previous print of 8.4%.

On the dollar front, the US dollar index (DXY) is eyeing a trigger, which will drive the asset towards the much-awaited resistance of the 100.00 figure. Federal Reserve (Fed) policymakers have started favoring the restoration of policy rates to neutral amid rising inflation and an objective of self-dependent economy.

• The AUD/JPY edges higher in the Asian session, up some 0.19%.
• Market participants disregard Russia-Ukraine woes, as shown by Asian equity futures rising.
• AUD/JPY Price Forecast: Despite a negative divergence in the daily chart, the pair might consolidate as the RSI’s slope turns horizontal.

The AUD/JPY recovers some ground after falling for two consecutive days as the Asian Pacific session begins. The AUD/JPY is trading at 92.81 amidst an upbeat market mood, portrayed by Asian equity futures trading in the green.

US equities ended the session in a mixed mood, contrary to the Asian market futures, which point to a higher open. So far, market players have put aside Russia-Ukraine woes, despite Russian Foreign Minister Lavrov complaining that Ukraine’s new draft agreement presented to Russia does not fulfill Russia’s demands on Crimea and Donbas. Also, late reports stated that Russia is regrouping troops as they prepare to launch another offensive aiming to seize the Eastern regions of Ukraine, Donetsk, and Luhansk.

AUD/JPY Price Forecast: Technical outlook

The AUD/JPY is upward biased, but failure at 94.00 exposed the pair to selling pressure. Additionally, momentum indicators like the Relative Strength Index (RSI) at 70.745 made a successive series of lower highs, contrarily to AUD/JPY price action, with subsequent series of “quasi” same highs, forming a “double-top” chart pattern. Moreover, a negative divergence between price action and RSI would send the pair lower.

Even though the Relative Strength Index (RSI) at 70.76 remains in overbought levels, it portrays a horizontal slope, meaning that the AUD/JPY might consolidate as traders assess the direction of the pair

That said, the AUD/JPY first resistance would be 93.00. A breach of the latter would expose the R2 daily pivot at 93.60, followed by the 94.00 mark. On the flip side, the AUD/JPY first support would be 92.26. A decisive break would expose the 91.00 mark, followed by the “double-top” neckline at 90.76.

Technical levels to watch

• A pullback likely near ascending triangle formation will contact sellers to take the charge.
• The 20- and 200-period EMAs have displayed a bear cross, which adds to the downside filters.
• The RSI (14) needs to tumble below 40.00 for validating a bearish setup.

The USD/CAD pair has witnessed a firmer upside move in the last three trading sessions, which has driven the asset near 1.2600 after hitting a low of 1.2403 on Tuesday. The asset has managed to close above the 20-period Exponential Moving Average (EMA) on Thursday, which is trading at 1.2570 and is near to the mighty 200-EMA.

On the daily scale, a pullback attempt by the greenback bulls has sent the asset near to the lower boundary of the ascending triangle formation whose horizontal resistance is placed from 20 August 2021 high at 1.2950 while the ascending trendline is plotted from June 2021 low at 1.2007.

A bear cross of 20- and 200-period EMAs adds to the downside filters. However, the Relative Strength Index (RSI) (14) has climbed above 40.00-60.00 area, which advocates consolidation.

Should the asset test the lower boundary of ascending triangle formation at 1.2630, pullback sellers may attack the asset and will send it towards the psychological support at 1.2500, followed by Tuesday’s low at 1.2403.

On the flip side, greenback bulls may regain strength if the asset overstep March 17 high at 1.2699, which will push the pair towards the March 16 high at 1.2778. Breach of the latter will drive the asset towards the March 14 high at 1.2827.

USD/CAD daily chart

• The USD/JPY is advancing in the week by some 1.26%.
• A positive market mood lifts the greenback as investors shrug off geopolitical jitters.
• USD/JPY Price Forecast: Upward biased as bulls, eye the YTD high at 125.10.

USD/JPY records further gains in the week on broad US dollar strength as the Asian Pacific session begins. At 124.15, the USD/JPY remains buoyant, despite been trading in a narrow 55-pip range in the last three days, as the Eastern Europe conflict between Russia-Ukraine, extends for the sixth consecutive day.

Asian market futures trade with gains, shrugging off the Russia-Ukraine conflict woes

US equities ended the session in a mixed mood, contrarily to the upbeat tone of Asian market futures, which point to a higher open. On Thursday, investors shrugged off Russia-Ukraine chatters, despite Russian Foreign Minister Lavrov complaining that Ukraine’s new draft agreement presented to Russia does not fulfill Russia’s demands on Crimea and Donbas. Meanwhile, late reports said that Russia is regrouping troops as they prepare another offensive aiming to reclaim the Eastern regions of Ukraine, Donetsk, and Luhansk.

Thursday’s North American session witnessed Fed speaking, led by St. Louis Fed President James Bullard, who said that the Fed remains behind the curve trying to tame inflation. Bullard added that he would like to see the Federal Funds Rate (FFR) at 3.5% by the second half of the year.

Later on the day, Chicago’s Fed President Charles Evans stated that we [Fed] will going to get to neutral setting by the end of this year or early next.

The Japanese docket would feature the Current Account for February,  and Consumer Confidence for March, as the highlights of economic data being reported. On the US front, Wholesale Inventories for February on a monthly basis will be unveiled.

USD/JPY Price Forecast: Technical outlook

The USD/JPY remains upward biased, but in the last three days, the Average Daily Range (ADR) has been 55-pips. The daily moving averages (DMAs) residing below the spot price further confirm the uptrend, and it’s worth noting that the 100-DMA at 109.48 is about to cross over the 200-DMA at 109.60.

That said, the USD/JPY first resistance would be 124.00. A breach of the latter would expose March’s 29 daily high at 124.30, followed by the YTD high at 125.10.

• USD/CHF remains stuck around 0.9350 as the US Treasury yields rebound sharply.
• The DXY is aiming at 100.00 on raising bets on an aggressive interest rate hike.
• Russia ceases to be a member of the UN Human Rights Council.

The USD/CHF pair is oscillating in a narrow range of 0.9318-0.9348 since Thursday as the Federal Reserve (Fed) policymakers have started dictating a reversion to neutral rates from the ultra-loose stances on the monetary policy.

After commenting on the extent of an interest rate hike by the Fed in coming monetary policies, Fed’s Monetary Policy Committee (MPC) members have shifted to advocating a move back to the neutral policy. The ultra-loose monetary policy and helicopter money to spurt the growth rate after the Covid-19 pandemic has done its job now and it would be better to resort to a situation of normal rates and a self-dependent economy. Atlanta Fed President Raphael Bostic on Thursday cited that it is fully appropriate that the Fed move policy closer to a neutral position, it should do so in a cautious way, reported Reuters.

On the Russia-Ukraine front, Russia ceases to be a member of the United Nations (UN) Human Rights Council as the members have voted against the Kremlin after its war crimes in Bucha, Ukraine. Also, US lawmakers have voted to ban oil, gas, and coal imports from Moscow. Adding to that, the former has also decided to strip its tag of ‘most Favored nations’ trade status, which will result in higher tariffs for Moscow.

Meanwhile, the US dollar index is aiming to tap the magical figure of 100.00 on expectations of higher US Consumer Price Index (CPI) numbers next week. The 10-year US Treasury yields have reclaimed a three-year high at 2.66% as rate hike fears renew.

• AUD/USD has failed to break and hold territory to the upside and is under pressure.
• AUD/USD bears are seeking a break from daily support.

AUD/USD suffered another down day on Thursday and is set to break to fresh lows below the 0.7450s. As per the prior longer-term analysis, AUD/USD Price Analysis: Bulls coming up for their last breath?, while the October highs were broken, they have not been ''well and truly cleared''.

AUD/USD monthly chart

Therefore, the Monthly W-formation, a reversion pattern, remains in the picture.

This analysis is based on the need for the mitigation of the imbalance of price since the bullish impulse over the past couple of months. The neckline of the 'W' has a confluence with the 50% mean reversion level near 0.7315. 

AUD/USD daily chart

From a daily perspective, the price is heavy following the start of the week's strong rejection from the daily highs, followed by a bearish engulfing candle and subsequent follow-through on Thursday:

• The EUR/JPY is barely advancing some 0.03% as the Asian Pacific session begins.
• Risk sentiment fluctuated as US equities finished mixed on Thursday’s session.
• EUR/JPY Price Forecast: Range-bound, but about to break upwards.

The EUR/JPY cross-currency pair remains subdued in choppy trading, as low-yielder currencies, the euro and the Japanese yen, lack the catalyst to stir the exchange rate beyond the narrow trading range. At the time of writing, the EUR/JPY is trading at 134.89.

US equities ended the session mixed, reflecting the market mood. Investors shrugged off Russia-Ukraine chatters, despite Russian Foreign Minister Lavrov complaining that Ukraine’s new draft agreement presented to Russia does not fulfill Russia’s condition on Crimea and Donbas. Meanwhile, late reports said that Russia is regrouping troops as they aim to seize the Eastern regions of Ukraine, Donetsk, and Luhansk.

Aside from this, the EUR/JPY stood within the 134.40-135.50 range in overnight trading, seesawing in the latter for the last three days. It is worth noting that the Relative Strenght Index (RSI) remains in bullish territory as its reading at 62.35 portrays. However, its slope is almost horizontal, depicting the neutral bias of the EUR/JPY.

EUR/JPY Price Forecast: Technical outlook

The 1-hour chart depicts that the EUR/JPY sustained for the last three days, successive series of higher highs and higher lows. However, the 50, 100, and 200-hour simple moving averages (SMAs) above the spot price exert downward pressure on the pair, as EUR/JPY sellers lean on those when opening fresh short bets on the pair.

To the upside, the EUR/JPY’s first resistance would be the confluence of the 50 and 100-SMAs, lying within the 134.95-135.00 area. A breach of the latter would open the door towards the convergence of the 200-SMA and the R1 daily pivot around the 135.34-42 range. Once cleared, it would open the door towards the R2 daily pivot at 136.00, followed by March 30 daily high at 136.84.

On the downside, the EUR/JPY’s first support would be an upslope trendline that passes near 134.50. A break would expose the confluence of the S1 daily pivot and April’s five daily low at 134.30, followed by the 134.00 mark, and then the S2 daily pivot at 133.82.

Technical levels to watch

• US oil under pressure below $100bbls spot.
• The supply of oil is kicking in and weighing the price into fresh lows for the week. 

West Texas Intermediate (WTI) crude oil has been pressured this week and it carved out a fresh low on Thursday for the same period at $93.84c after falling from a high of $98.80c. The price of crude oil has fallen for a second straight day on Thursday.

Supply is back with yesterday's announcement of the release of 60-million barrels of strategic reserves from members of the International Energy Agency. Also, a drop in Chinese demand as it quarantines the commercial centre of Shanghai to check the spread of a Covid-19 outbreak is weighing on prices. When coupled with higher US oil inventories, it has made for a bearish recipe.

Meanwhile, analysts at TD Securities explained that the physical oil markets are showing signs of softening amid dual blows from significant Chinese lockdowns and a massive SPR release, but energy supply risks will likely remain elevated nonetheless.

''After all, while our tracking of Chinese mobility had indicated a 10% slump in road traffic, we now see a sign of stabilization in Chinese mobility according to a weighted average of congestion indicators for the 15 largest cities by vehicle registrations.''

''However,'' the analysts added, ''changes in Chinese demand pale in comparison to the persistent underproduction from OPEC+, with spare capacity split between a few 'Haves' and a larger contingent of 'Have-Nots'.''

Ukraine crisis risks

Sanctioning has been a theme in the markets this week as the EU and US announced the proposed plans that include a ban on imports of Russian coal by the EU while the US plans to ban all new investment in Russia. European Council President Charles Michel told the European Parliament Wednesday that “measures on oil and even gas will also be needed sooner or later,” as he condemned reports of atrocities by Russian forces in Ukraine.

''Further, self-sanctioning continues to have a significant impact on Russian oil exports as highlighted by their flagship Urals crude trading at a record discount. And yet, the right tail remains fat in energy markets as the European Commission continues to debate on how to tackle Russian oil,'' analysts at TD Securities explained.

''The war in Ukraine is further driving up the cost of trading energy products across the world, creating additional frictions for commodity traders and thereby providing an additional channel for energy supply risks to rise.''

• US equities rose on Thursday, as dip-buying helped shield the major indices from negative geopolitical newsflow and further Fed hawkishness.
• The S&P 500 rose 0.4% to close at the 4500 level amid big gains in some large US healthcare names.
• Focus is already turning to next week’s US inflation data and the unofficial start to the Q1 2022 earnings season.

US equities gained across the board on Thursday, with the S&P 500 rebounding from weekly lows in the 4450 area to close bang on the 4500 mark, a gain of 0.4% on the session. The index was propped up by big gains in some of the largest US healthcare names and managed to close back to the north of its 200-Day Moving Average, with traders largely ignoring downbeat news on the geopolitics front.

The US Senate voted to strip Russia of its “most favoured nation” trading status and the UN general assembly voted to kick Russia out of the human rights council, a day after the US, UK and EU toughened sanctions on Russia’s economy. Meanwhile, the Russian Foreign Minister was pessimistic about the state of Russo-Ukrainian peace talks.

Elsewhere, with equities having already seen a substantial dip since the start of the week, dip-buying helped shield the market from further downside as a result of more hawkish Fed chatter. Specifically, Fed’s James Bullard called for rates to hit 3.5% by the year’s end. While the equity market didn’t react to these comments, US yields, particularly at the long end, continues to press higher.

This capped the rebound in the growth/tech stock heavy Nasdaq 100 index, which mustered a more modest 0.2% rebound back above the 14,500 level. The Dow Jones Industrial Average, meanwhile, also rose about 0.2% to back above 34,500. The CBOE S&P 500 Volatility Index or VIX remained not too far above 20.00, its long-run average.

A record strong US weekly initial jobless claims figure of 166K was shrugged off by equities, but does underpin the idea that the US labour market is red hot, which should bolster Fed confidence that the economy can handle aggressive monetary tightening. US inflation data (Consumer and Producer Price Indices) out next week should further bolster the idea that aggressive Fed tightening is very much needed, with MoM inflation rates expected to surge thanks to the outbreak of the Russo-Ukraine war. Another key risk for investors to watch next week will the unofficial start to the Q1 2022 earnings season, which kicks of as the big US banks start reporting.

• GBP/USD bears are in control, for now, and aim for a monthly support area. 
• The daily chart's M-formation's neckline is important. 

GBP/USD is performing on the bid on Thursday afternoon US session, trying to resurface from the recent lows around 1.3050 following a strong move in the greenback. Meanwhile, however, the pair remains vulnerable to further losses from a longer-term perspective and the following illustrates the market structures across the monthly, weekly and potentially, from a daily point of view also. 

GBP/USD monthly chart

The monthly chart is highly bearish following a restest into the 50 EMA, followed by the Tweezer Top and a bearish Fractal. The pair has subsequently continued south and broken support that now would be expected to act as resistance on a subsequent retest of the structure. 

GBP/USD weekly chart

Meanwhile, the weekly chart's M-formation, a reversion pattern, has seen the price revert towards the neckline in a 38.2% Fibonacci retracement. This is potentially far enough to lure in the bears at a discount and thus see prices extend lower in the coming weeks towards the monthly support area. 

GBP/USD daily chart

From a daily point of view, however, there could still be some upside to come as the price is drawn to the M-formation's neckline. This will need to hold on a retest and bears will need to protect this area if the downside is going to play out in the foreseeable future. If the price breaks the neckline, then the bulls could well take back control in the meantime. 

What you need to take care of on Friday, April 8:

The market’s mood remained sour as the focus remained on central banks’ hawkishness and tensions between Russia and the western world. The US has widened its actions against Moscow, hitting Russian Sberbank and Alfa Bank and prohibiting investment in the country by American companies. The EU, in the meantime, backed a Russian coal embargo, although without officially confirming it. The dollar remained strong.

On Thursday, Ukraine has presented a new agreement proposal, although it includes discussing the situation of Crimea and Donbass, something that Russia considers unacceptable.

The European Central Bank released the Accounts of its latest meeting. The document showed that policymakers believe the bond-buying program has now fulfilled its objective, and by ending it in the summer, it would clear the way for a 3Q rate hike.

Asian and European equities closed in the red, but Wall Street managed to recover some ground after two days of sharp losses. At the same time, government bond yields held at the upper end of the range, with the 10-year US Treasury note yielding 2.65% by the end of the day.

 The EUR/USD pair trades around 1.0870, while GBP/USD stands at 1.3070. The dollar appreciated against its safe-haven rivals, with USD/CHF trading at 0.8340 and USD/JPY near 124.00.

Commodity-linked shed some ground, with AUD/USD down to 0.7470 and USD/CAD up to 1.2585.

Cardano price ready to breakout with the arrival of bonds on the Ethereum-killer’s blockchain

• NZD/USD fell under 0.6900 on Thursday as the US dollar gained ground across the board amid surging US yields.
• Bond markets are reacting to recent Fed hawkishness, while the kiwi has been hurt by lower equity and commodity prices.
• But the longer-term technicals remain positive for the kiwi, with an uptrend from late January still in play.

NZD/USD fell for a second straight session on Thursday and dipped below its 200 and 21-Day Moving Averages, both of which reside just to the north of the 0.6900 level, as well as dipping below the big figure. The selling pressure has eased in recent hours, with NZD/USD bottoming out in the 0.6880s, with some buying ahead of late March lows in the 0.6875 area offering some support.

Kiwi underperformance versus the US dollar on Thursday was roughly in line with that of its risk appetite/commodity-sensitive G10 peers the Aussie and the loonie, all of which have suffered amid declining equity/commodity prices in recent days. But NZD/USD dip back under 0.6900 isn’t just a kiwi story. With US yields (particularly at the long-end) continuing to surge higher as traders react to hawkish rhetoric from the Fed this week, the US dollar is on the front foot across the board.

From a technical perspective, things are far from catastrophic for NZD/USD. The pair remains in an uptrend that has been in play since the late January lows under 0.6600, and would have to fall all the way to the mid-0.6800s to test this uptrend. And before getting that far, the pair would have to break below a key balance area in the 0.6875 region.

If sentiment in commodity and equity markets stabilises next week, that would be a plus for the kiwi, which might also get a lift if the RBNZ comes out firing with a 50 bps rate hike and hawkish rate guidance at its upcoming meeting. But NZD/USD traders should also be on notice for US Consumer and Producer Price inflation figures which, if ugly (as many expect), will exert further pressure on the Fed to tighten monetary policy rapidly.

Atlanta Fed President Raphael Bostic said on Thursday that while it is fully appropriate that the Fed move policy closer to a neutral position, it should do so in a cautious way, reported Reuters. It's going to take longer than initially thought for supply chain issues to resolve, he added, noting that the Fed's goal is to try to have sustained growth that extends for as long as possible. 

Market Reaction

Bostic is on the dovish end of the Fed spectrum nowadays, as demonstrated by his emphasis on getting rates "closer" to neutral in a "cautious" way (rather than other Fed members who want to actually get to neutral or above it in a more rapid way). Markets did not react to his comments.  

Chicago Fed President and FOMC member Charles Evans on Thursday said that the Fed will probably get rates to neutral by the end of this year or early next, reported Reuters. I'm optimistic that the Fed can get to neutral, look around and think there's not much more going on, he added.  

• The USD/CAD grinds higher in the North American session, up some 0.38%.
• The Russian-Ukraine war weighs significantly on sentiment, as NATO/US officials warned that the conflict could extend for years.
• USD/CAD Price Forecast: The pair remains downward biased, but a daily close above 1.2600 would add upward pressure on the USD/CAD.

The USD/CAD is recovering some ground and aims to break above the 200-DMA, but retreated late in the North American session, amidst a risk-off market sentiment that dragged the pair below the 1.2600 mark. At the time of writing, the USD/CAD is trading at 1.2589.

Easter Europe geopolitical issues, particularly the Ukraine-Russo war, keep weighing on the mood. Nevertheless, risk appetite increased, with US equities fluctuating, as the US Senate unanimously backed a legislation banning oil imports from Russia.

Meanwhile, NATO and US officials warned that the war in Ukraine might last for weeks or even years, while Kyiv’s Foreign Minister pleaded for urgent military assistance so that Ukraine could make a difference in its fight with Russia.

Reports from the Kremlin reported that Russian President Putin discussed peace talks with the Russian security council and the military operation in Ukraine, as reported by RIA.

An absent Canadian economic docket keeps USD/CAD traders adrift to US Data. However, Canadian employment figures would grab the headlines on Friday, with the Employment Change for March expected at 80K. The Unemployment Rate for the same period is likely to drop toward 5.3%.

On the US front, the economic docket revealed Initial Jobless Claims for the week ending on April 2, which came at 166K less than the 200K expected.

USD/CAD Price Forecast: Technical outlook

The USD/CAD entered the Thursday session as neutral-downward biased, but after the Fed minutes, it reacted upwards. During the session, the USD/CAD briefly tested the 200-day moving average (DMA) at 1.2617, retreating afterward back below the 1.2600 figure. On its way south, USD/CAD bears reclaimed the March 3 daily low-turned-resistance at 1.2587, and it’s worth noting that the Relative Strength Index (RSI) at 49.43 remains below the 50-midline, despite the steeper 131-pip USD/CAD rally.

The USD/CAD first support level would be 1.2532. A breach of the latter would expose the 1.2500 mark, followed by March 25 daily low at 1.2465.

Upwards, the USD/CAD first resistance would be 1.2600. Once cleared, the next resistance would be the 200-DMA at 1.2617, followed by the February 10 daily low turned resistance at 1.2636, followed by the confluence of the 50 and 100-DMAs at 1.2667 and 1.2687, respectively.

• AUD/USD bears stepping in as the bulls throw in the towel. 
• Bears eye the 50% monthly mean reversion level in the W-formation. 

AUD/USD remains pressured into the closing session so the week as a firm US dollar persists surrounding the hawkish US central bank narrative. After sliding from a high of 0.7518, at 0.7478, during the time of writing, AUD/USD is losing some 0.37% and is in close proximity to the day's lows at 0.7466. 

AUD/USD has been driven back by the bears this week following a brief spell up at 0.7661. These were the highest levels seen since June 2021 and were reached on the back of a hawkish twist at the Reserve Bank of Australia. ''Just as the Aussie lost some of its commodity price support, the RBA discarded its 'patient' outlook, stoking a fresh wave of yield support for the currency,'' analysts at Westpac explained. ''Yet 10-month highs were soon reversed as hawkish Fed rhetoric ratcheted up even further.''

We have a series of Fed hawkish themes this week that started with a speech from Lael Brainard who said Tuesday that the central bank could start reducing its balance sheet as soon as May and would be doing so at “a rapid pace.”

She also indicated that interest rate hikes could come at a more aggressive pace than the typical increments of 0.25 percentage points. The central bank has already increased rates in a 0.25% hike at the March meeting, the first in more than three years and likely one of many to occur this year.

Then along came the Fed minutes on Wednesday. In these, it was noted by the markets that the Fed officials reached consensus at their March meeting that they would begin reducing the central bank balance sheet by $95 billion a month, likely beginning in May. The minutes also underpinned a notion that 50 basis point interest rate increases are ahead. 

On Thursday, St. Louis Fed president James Bullard added to the hawkishness by saying that the Fed remains behind the curve despite increases in mortgage rates and government bond yields. As a consequence, the US dollar is rallying and has reached fresh two-year highs as measured by the DXY index.

At the time of writing, DXY is trading at 99.780, a touch below the highs of 99.821 from the lows of 99.399. The 25 May 2020 weekly highs are located at 99.975. Next week's US inflation data seems likely to keep the US dollar on the boil as well. 

AUD/USD monthly chart

As per the prior longer-term analysis, AUD/USD Price Analysis: Bulls coming up for their last breath?, while the October highs were broken, they have not been ''well and truly cleared''. Therefore, the Monthly W-formation, a reversion pattern, remains in the picture:

• GBP/JPY is set for a fifth straight session of gains, though continues to struggle to push above 162.00.
• The yen remains out of favour due to the ongoing rise in global yields following this week’s Fed/ECB hawkishness.
• But doubts are creeping in that the BoE will live up to tightening expectations, capping GBP/JPY upside for now.

GBP/JPY’s steady upside grind that has been in motion for the whole week so far has continued on Thursday, with the pair now on course to post a fifth successive daily gain. Global yields continue to move higher, with notable breaks higher seen in US yields on Thursday against the backdrop of hawkish commentary from Fed policymakers all week, plus recent Fed and ECB minutes releases, both of which were hawkish.

This is not a good environment for the highly rate differential sensitive Japanese yen, which is at present suffering from the fact that the BoJ looks intent on maintaining its Yield Curve Control policy (keeping 10-year yields within 25 bps of zero). As global yields rise, this makes holding the yen less attractive.

But GBP/JPY’s on the week gains aren’t that impressive at just 0.8% at the time of writing. The pair continues to struggle to push to the north of the 162.00 level, which looks like it might be in the early stages of forming a double top (on the four-hour candlesticks).

The pullback in global equity markets isn’t helping the risk-sensitive pair, and neither is the comparatively modest moves higher recently in UK yields (versus US yields, for comparison). The tone of the BoE has shifted as of late to be more concerned about an expected growth slowdown from Q2 onwards, rather than being worried about inflation.

As a result, doubts about the bank’s conviction for further rate hikes are creeping in and denting pound sterling’s appeal. Many analysts are of the view that, especially in light of stagflationary events in Ukraine, the BoE will not live up to currently priced rate hike expectations for 2022. If this is the case, UK yields may not have much further to run to the upside.

While it is probably too early to bet on a GBP/JPY reversal lower given the yen remains very much out of favour, it's hard to see the pair progressing much higher. Late March highs above 164.00 will likely act as a ceiling in the next few weeks and a pullback to test support in the form of 2021 and early 2022 highs in the 158.00 area in the coming months seems a decent bet, assuming the BoE doesn’t live up to the hawkish hype.

• The gold price is stuck between familiar ranges and awaits a catalyst one way or the other.
• The fundamental bias remains to the downside in the absence of escalation over the Ukraine crisis.

The gold price is stuck in familiar ranges, bouncing around between a daily resistance and support channel. However, like a coil, the build-up of energy and maintained force could be about to set off an almighty breakout, one way or the other. At the time of writing, XAU/USD is trading at $1,934.09, higher by some 0.43% and has travelled between a range of $1,920.62 and $1,937.85. 

The gold price has been extremely resilient to the most hawkish Federal Reserve in a generation. Instead, the gold price is elevated due to protection against the fog of war and could also be associated with the inflationary and/or recession narratives playing out in markets. 

It is worth taking note of positioning in the futures markets. ''Money managers cut their gold long exposure and increased short positioning, as rates along the yield curve continued to move higher. Specs also reacted to the hope that the Russia-Ukraine tensions may ease, lower crude oil prices and moderate inflation expectations,'' analysts at TD Securities explained. 

''The combination of somewhat less geopolitical risk and the general view that the Fed is behind the curve, prompted speculation that the US central bank has the runway to aggressively tighten policy, an impression which was supported by statements from Fed officials. Given that March payrolls were strong, the belief that there may be several 50 bps Fed Funds increases in the cards drove crude lower on Friday, which suggests that investors may continue to reduce long exposure in the yellow metal,'' the analysts concluded. 

This would indicate that the bias is to the downside in absence of an escalation in the Ukraine crisis. As the analysts at TD Securities warn, due to the lack of shorts in the market, leaves gold vulnerable to de-escalation in the war ''or a change in the market's focus as the fear of trade subsidies, given that there are no shorts in sight.''

Meanwhile, in today's markets, US equities have dropped while the benchmark US Treasury yields remain bid on due to the narrative surrounding the US central bank. The minutes released yesterday from the Fed's March meeting underpin the worries of higher prices and reinforce the prospect that the US central bank's balance sheet reduction is imminent.

St. Louis Fed president James Bullard amplified these risks by saying the Fed remains behind the curve despite increases in mortgage rates and government bond yields. As a consequence, the US dollar is back on the bid and reaching fresh two-year highs as measured by the DXY index. At the time of writing, DXY is trading at 99.770, a touch below the highs of 99.821 from the lows of 99.399. The 25 May 2020 weekly highs are located at 99.975.

Gold technical analysis

The outlook, from a technical picture, is consolidation until either a clean break of $1,960 or $1,915 with firm daily closes above or below respectively. If the price is unable to break below $1,900, given the longer-term bullish trajectory, a run into the $2,000s is the more likely outcome of the build-up in this phase of consolidation. 

• The EUR/USD slides during the North American session, some 0.09%.
• ECB minutes lifted the EUR/USD above 1.0900, but a risk-off sentiment and Fed’s minutes dragged the pair under the former.
• EUR/USD Price Forecast: The break of a rising wedge opened the door towards 1.0700.

The shared currency is almost flat in the North American session after reaching a daily high at 1.0938, courtesy of hawkish than expected European Central Bank (ECB) March meeting minutes, despite broad risk aversion in the market. Nevertheless, of late, the EUR/USD dipped below the 1.0900 mark and is trading at 1.0879 at the time of writing.

ECB minutes perceived as hawkish

On Thursday, the ECB unveiled its March 10 minutes. The Governing Council (GC) said that it could afford to be patient, with measures of long-term inflation expectations at around 2%. Regarding the Ukraine-Russia War, the GC added that the initial effects of the war on the EU economy would be upwards on inflation and downwards on economic growth and noted that it could have inflationary/disinflationary impacts in the longer term.

Concerning inflation, a large number of ECB members noted that inflation is high and persistent, so-called for immediate further steps toward monetary policy normalization.

The EUR/USD reacted upwards on the release. However, a dismal market sentiment courtesy of the continuation of the Russia-Ukraine war, and Wednesday’s hawkish Federal Reserve minutes, exerted downward pressure on the common currency, dragging the pair back under the 1.0900 mark.

• Breaking: FOMC minutes say participants judged it appropriate to move policy towards neutral expeditiously

The EU economic docket revealed Retail Sales for February. The monthly reading expanded by 0.3%, at a slower pace than the 0.6% estimated. But, the year-over-year figure rose by 5%, higher than the 4.8% foreseen though trailed by January’s 8.4% increase.

The US docket revealed Initial Jobless Claims for the week ending on April 2, which came at 166K less than the 200K expected.

EUR/USD Price Forecast: Technical outlook

The EUR/USD bias remains downwards and further cemented it when on April 4, the EUR/USD broke the upslope trendline of a rising wedge, which opened the door towards 1.0700, but first would need to overcome some hurdles on its way down.

The EUR/USD first support would be 1.0848. A breach of the latter would expose the 2022 YTD low at 1.0806, followed by April 2020 swing lows around 1.0727, and then the abovementioned 1.0700 mark.

• Silver prices are broadly flat on Thursday near their 50DMA at $24.40, thus remaining sandwiched between major support/resistance at $24.00/$25.00.
• Despite rising US yields amid hawkish Fed rhetoric, silver remains underpinned, perhaps amid ongoing demand for inflation protection.

Spot silver (XAG/USD) prices have flatlined near their 50-Day Moving Average at $24.40 on Thursday, as the ongoing focus on the Russo-Ukraine war and related developments takes the spotlight and distracts from the ongoing shift higher in US yields. The 50DMA has been acting like a magnet for the past two sessions, with XAG/USD traders seemingly happy to keep the precious metal trading in the mid-$24.00s per troy ounce, rather than pushing it towards the 21DMA at $25.00 or the 200DMA just below $24.00. Both of these levels have in recent weeks offered support and resistance.

Silver’s resilience in the face of the ongoing push higher in yields across the US treasury curve, which continues to be spurred by hawkish Fed rhetoric (and Wednesday’s hawkish minutes), has surprised some. Fed uber hawk James Bullard even went as far as calling for rates to hit 3.5% by the end of 2022. Normally moves higher in bond yields and the idea of higher rates weighs on precious metals given the increased “opportunity cost” of holding non-yielding precious metals.

Some market commentators have suggested that demand for inflation protection ahead of the release of US Consumer Price Inflation figures for March next week could be at play. The preliminary estimate of Eurozone inflation in March showed a big jump to even higher levels beyond the ECB’s target and expectations are for next week’s US inflation figures to show the same. While silver certainly remains vulnerable to higher interest rates, given elevated inflation, real rates remain deeply negative.

Given the war in Ukraine putting downwards pressure on already highly negative near-term real rates, it perhaps shouldn’t come as a surprise to see XAG/USD remain resilient in the $24.00s. For now, as markets await further major macro updates, it would make sense to see silver continue ranging within $24.00 to $25.00 parameters.

Despite more hawkish central banks around the world, analysts at Wells Fargo still see the “aggressive tightening from the Federal Reserve” as supportive of the US dollar over the medium to longer term. They expect the Fed to remain at the forefront of major central bank tightening, and they see two 50 bps hikes and a more pronounced tightening cycle compared to last month. 

Key Quotes: 

“Despite more hawkish foreign central banks, we maintain our view that aggressive tightening from the Federal Reserve should support the U.S. dollar over the medium to longer term. We expect the Fed to remain at the forefront of major central bank tightening, and now expect two 50 bps hikes from the Fed and a more pronounced tightening cycle compared to last month.”

“In our view, the Fed will likely be one of the more hawkish central banks in the world, which could boost the U.S. dollar. While the greenback should remain strong, we nonetheless believe the extent of U.S. dollar strength and foreign currency weakness may be mitigated to some extent by foreign central banks also raising policy rates faster and by more than previously expected.”
 

• The USD/CHF falls in the North American session, down 0.05%.
• USD/CHF Price Forecast: Range-bound, but if the 0.9349 is broken, a move towards 0.9400 is on the cards.

The USD/CHF remains subdued amid a choppy trading session, as the pair seesaws around the 0.9300-47 range, unable of breaking above Wednesday’s high at 0.9349, meaning that consolidation might lie ahead. At the time of writing, the USD/CHF is trading at 0.9332.

Investors’ sentiment is negative, as shown by European and US equities falling. Factors like the Russo-Ukraine war, the global central bank’s tightening monetary conditions in the middle of an elevated inflation scenario, and China’s March PMIs contracting below 50 paint an ugly outlook for Q2 2022.

Nevertheless, the greenback holds to gains, boosted by its safe-haven status on Thursday. The US Dollar Index, a gauge of the buck’s value against its peers, edges up 0.07% and sits at 99.692. The 10-year US Treasury yield rises three basis points, up to 2.633%.

Overnight, the USD/CHF clung to the daily pivot point around 0.9323 and hovered up/down that level, though trendless as USD/CHF traders assessed the pair’s direction.

USD/CHF Price Forecast: Technical outlook

The USD/CHF uptrend remains intact. The daily moving averages (DMAs) reside well below the spot price, though almost horizontally, but sitting beneath the 0.9263 50-DMA.

The 4-hour chart shows that a bullish flag, drawn since March 14 highs around 0.9460, was broken, opening the door for further upside on the USD/CHF pair but consolidated within the central daily pivot at press time the R1 resistance level.

That said, the USD/CHF first resistance would be 0.9349. A clear break would expose March 27 and 29 highs area around the 0.9370-80 region, which, once broken, might send the pairs towards March 16 daily high at 0.9460, but first would need to reclaim the 0.9400 mark once broken.

Technical levels to watch

In the wake of recent developments, analysts at Wells Fargo now expect earlier and more rapid monetary tightening (and specifically Deposit Rate increases) from the European Central Bank (ECB) than previously. Their outlook for the ECB to end its quantitative easing program by July remains unchanged.

Key Quotes: 

“The Eurozone economy has had an unsettled start to 2022, as a temporary surge in COVID cases and Ukraine-related uncertainties have weighed on activity. From a longer-term perspective there also appears to be some softening in consumer fundamentals, and we have lowered our Eurozone GDP growth forecast for 2022 slightly to 3.1%.”

“In contrast, Eurozone headline CPI inflation has moved sharply higher, and core inflation has also firmed, though to a much lesser extent. Still, even if price gains do not become broad-based, persistently elevated energy prices and headline CPI inflation could still prompt a response from the European Central Bank (ECB).”

“We now expect earlier and more rapid monetary tightening from the ECB than previously. We forecast an initial 25 bps increase in the Deposit Rate at the September 2022 meeting (compared to December previously). Beyond that, we expect a steady series of 25 bps increases at the December 2022, March 2023 and June 2023 meetings, which would lift the Deposit Rate to +0.50% by the middle of next year.
 

Key Canadian data will be released on Friday with the March employment report. Analysts at TD Securities expect jobs to grow by 35.000. They consider the number will have little impact on the near term path of the Bank of Canada (BoC).  

Key Quotes: 

“The March Labour Force Survey will provide the last major data point ahead of next week's Bank of Canada meeting. TD looks for job growth to slow to 35k, below the market consensus for +80k, following an exceptionally strong performance in February. A 35k print should help nudge the unemployment rate lower to 5.4%, while wage growth should push higher towards 3.8% y/y.”

“USDCAD is mostly trading where it should, with high-frequency fair value sitting near 1.25. We would look to fade rallies ahead of 1.27 but think more of the action for CAD lies on the crosses.”

“With 50bps hikes well in play, this print should have little impact on the near-term BoC path, we need to see a string of deterioration to do so.”

The United General Assembly has voted to suspend Russia from its Human Rights Council following accusations that the country's military have committed widespread atrocities against Ukrainian civilians in occupied parts of the country. 

• US dollar remains firm as US yields continue to rise.
• GBP/USD unable to recover, challenges the 1.3050 area.
• Risk aversion also weighs on GBP/USD, Dow Jones falls by 0.72%.

The GBP/USD reversed after hitting 1.3106, and during the American session printed a fresh daily low at 1.3051. It is testing the critical support of 1.3050, moving with a bearish bias amid a stronger US dollar across the board.

Greenback up, Treasuries down

More comments from Fed official, plus the recent FOMC minutes, point to a more aggressive policy. James Bullard, St. Louis Fed President, called on Thursday for more rapid rate hikes to curb inflation. Data released on Thursday, showed US initial jobless claims dropped more than expected to 166K, the lowest since 1968.

The DXY bounced and is back in positive ground for the day supported by higher US yields. The 10-year stands at 2.63% and the 30-year at 2.68%. Both reached new multi-year highs on Thursday. At the same time, the Dow Jones drops by 0.62% and the S&P 500 falls 0.47%.

Short-term outlook

Risks remain tilted to the downside for GBP/USD after begin unable to hold above 1.3100. The crucial area around 1.3050 is being challenged since Wednesday. A recovery above 1.3100 could alleviate the pressure and above 1.3180 the pound should gain momentum.

“Sterling remains heavy just below $1.31 after having an outside down day earlier this week.  We still look for an eventual test of last month’s cycle low near $1.30.  After that is the November 2020 low near $1.2855 and then the September 2020 low near $1.2675.  Between the likely return of risk-off impulses and the even more hawkish Fed outlook for tightening, we believe the dollar uptrend remains intact”, wrote analysts at BBH.

Technical levels

• The Russian ruble keeps strengthening vs. the greenback, as the USD/RUB falls 4.17%.
• Risk-aversion, and the further duration of the Ukraine-Russia war, weigh on the market mood.
• USD/RUB Price Forecast: Upward biased, but downside risks remain as it is probing the 200-DMA.

The Russian ruble keeps rallying vs. the greenback and is pushing through the 200-DMA as portrayed by the USD/RUB pair, which is falling 4.20% during the North American session amidst a dismal market mood. At the time of writing, the USD/RUB is trading at 78.6855.

In the North American session, the sentiment turned sour. The Ukraine/Russia war continues to weigh on sentiment, as Ukraine’s President Zelenskiy will meet EU Commission President von der Leyen, on Friday in Kyiv. Meanwhile, Moscow said that the US sending weapons to Ukraine does not contribute to peace talks and added that it would retaliate against current sanctions.

Elsewhere on Wednesday, the Federal Reserve revealed its March minutes. The central bank said that most participants were eager to hike rates 50 bps if not for Ukraine. The Fed agreed to cap its balance sheet by an amount of $95 billion, $60 billion on US Treasuries, and $35 billion on mortgage-backed securities (MBS).

The FOMC added that participants expect the Quantitative Tightening to begin by May, following the May 4 meeting, where market participants, as shown by STIRS, are pricing in an 80% chance of a 50 bps hike.

Meanwhile, the US Dollar Index, a gauge of the greenback’s measure against a basket of its rivals, retreats from YTD highs, down 0.04%, sitting at 99.586. Contrarily, the US Treasury yields are rising, as depicted by the 10-year benchmark note sitting at 2.652%, gaining five basis points, reflecting the aggressive tightening of the Fed.

USD/RUB Price Forecast: Technical outlook

The USD/RUB upward bias is being tested, as the price is probing the 200-day moving average (DMA) at 78.2696. On Wednesday, I noted that “a daily close under the 80.3254 level would further extend losses, and the USD/RUB could aim toward the 200-day moving average (DMA).” On Thursday, that is happening, and a break could pave the way towards February 11 swing low at 74.2631.

That said, the USD/RUB first support would be 78.0000. A breach of the latter would expose March 31, a daily low at 75.5500, followed by the February 11 swing low at 74.2631.

Upwards, the USD/RUB first resistance would be 82.7882. Breach of the latter would expose essential resistance levels. The next supply zone would be 85.00, followed by the 50-DMA at 88.7789.

• AUD/USD has continued to pull lower despite the recent hawkish shift in RBA tightening expectations and is now around 0.7475.
• That’s a near 200 pip reversal from Tuesday’s highs in the 0.7660s.
• AUD/USD has been weighed by falling commodity and equity prices plus hawkish Fed vibes (policymaker comments plus Wednesday’s minutes).

A significant hawkish shift in the market’s expectations for RBA policy since Tuesday’s policy announcement where the reference to “patience” regarding rate hikes was dropped has not been able to prevent AUD/USD from continuing its reversal back from multi-month highs. Having been as high as the 0.7660s earlier in the week in the immediate hawkish RBA aftermath, the pair has now reversed nearly 200 pips lower and at current levels in the 0.7475 area, trading with losses of about 0.4% on the day. That means the pair now trades lower by about 0.3% on the week.

The reversal in AUD/USD fortunes comes as a pullback in broader commodity prices and global equities weigh on the commodity and risk-sensitive Australian dollar, whilst hawkish rhetoric from Fed policymakers/in the recently released minutes spurs a buoyant US dollar. Traders will now be eyeing the next key support zone in the 0.7440-50s area. So long as the recent pullback in commodities/equities doesn’t worsen, some might be inclined to buy the dip.

Indeed, the RBA now seems to be only two months away from implementing its first-rate hike, if the calls from the four largest Australian banks are anything to go by. But analysts don’t expect the RBA to hike interest rates anything like as aggressively as the Fed (Westpac forecast 125 bps of tightening in 2022). This may be a key reason why Tuesday’s post-RBA gains didn’t last and could continue to weigh on AUD/USD in the months ahead.

St Louis Fed President James Bullard on Thursday said that he would like to see the Federal Funds rate hit 3.5% in the second half of 2022, reported Reuters. Bullard said he would "lean into" a 50 bps rate hike at the May meeting, though he is watching the data. Most of the balance sheet decisions are already priced in, he added, noting that there is no reason for that to influence the pace of interest rate increases. 

Bullard commented that sales of mortgage-backed securities are "not imminent", with the Fed wanting to get the passive runoff started before later assessing things. The geopolitical schism from the Ukraine war is likely to last, he noted, and this would realign global markets. 

Increases in the Federal funds rate to neutral should be relatively cost-free in terms of any hit to the economy, or increase in recession risk, he said, adding that, as it stands, he does not think the Ukraine war should be a reason to avoid action in the US on inflation.   

• Oil prices fell on Thursday, hitting fresh multi-week lows in the mid-$95.00s, as bears eye a run lower towards $90.
• First prices must break below March’s lows in the $93.00s.
• Massive oil reserve release announcements from the IEA plus technical selling seem to be weighing on sentiment for the moment.

Oil prices pushed lower on Thursday, with front-month WTI futures failing an attempt earlier in the session to push back higher towards $100 again and with prices subsequently sliding to fresh lows since 17 March under $95.50. At current levels in the $96.00s, WTI trades with on-the-day losses of slightly more than $1.50, with bears eyeing a test of March lows in the mid-$93.00s.

Non-US IEA nations on Wednesday announced that they would release a further 60M barrels of crude oil, which comes on top of the 180M barrel reserve release announcement made by US authorities last week. 15M of those barrels will come from Japan, the Foreign Minister there revealed on Thursday. The prospect of all these added barrels in the near-term is clearly weighing on crude oil, as it reduces the acute threat of a near-term supply shortage as Russian output falls due to sanctions.

Technicians noted that WTI made bearish moves on Thursday, confirming a break below a key long-term pennant that had been squeezing the price action over the last few weeks. Technical selling could carry WTI all the way lower to the next key support area around $90 per barrel. But analysts have noted that while the announced reserve releases from the IEA (the largest in history) are significant, they are unlikely to make up for the more than 2M barrels per day in output expected to be lost from Russia.

A push even lower than $90 thus might be a great difficulty. Indeed, should concerns about global supply continue (which seems very likely), a dip back to these levels is likely to be viewed as a buying opportunity. Some analysts pointed out that recent reserve release announcements have put upward pressure on crude oil futures scheduled for delivery further than six months out, given expectations that, following massive reserve releases in the coming months, nations will need to restock.

This diminishes the prospect of a pullback in oil prices later in the year. Meanwhile, other analysts said that recent reserve release announcements make OPEC+ less likely to open the taps, despite increased calls from major oil consumers for more output. All the while, indirect US/Iran talks to rekindle the 2015 nuclear deal and remove sanctions capping the latte’s crude oil exports remain at an impasse, with political decisions reportedly needed in Washington and Tehran to move things forward.

Aside from massive oil reserve releases, the only other factor that could ease the global supply squeeze is the state of lockdowns in China. As the lockdown in Shanghai enters its eleventh day, high-frequency flight data showed traffic at its lowest since early 2020. With the highly virulent Omicron Covid-19 variant proving difficult to contain, if lockdowns further spread, that presents a major threat to Chinese oil demand. China is the world’s largest consumer of more than 14M barrels of crude oil per day.

• USD/JPY climbed back closer to the one-week high, though struggled to conquer the 124.00 mark.
• The formation of an ascending channel favours bulls and supports prospects for additional gains.
• Sustained break below the trend-channel support is needed to negate the constructive outlook.

The USD/JPY pair attracted some dip-buying near the 123.45 region on Thursday and climbed to a fresh daily high during the early North American session. Bulls, however, struggled to capitalize on the move and now seem to wait for sustained strength beyond the 124.00 round-figure mark.

The FOMC meeting minutes released on Wednesday reinforced market bets for a 50 bps rate hike at the upcoming meetings. Investors also seem concerned that surging commodity prices would put upward pressure on the already high inflation. This, along with more hawkish comments from St. Louis Fed president James Bullard, remained supportive of elevated US Treasury bond yields.

Conversely, Bank of Japan board member Asahi Noguchi said that the central bank should maintain its ultra-easy monetary policy despite rising inflationary pressures. This points to a major divergence in the central bank policy outlooks, which, in turn, acted as a tailwind for the USD/JPY pair. That said, the risk-off impulse drove some haven flows towards the JPY and capped the upside.

From a technical perspective, the USD/JPY pair has been trending along an upward sloping channel over the past one week or so. This points to a well-established short-term bullish trend and supports prospects for a further appreciating move. Hence, a subsequent move towards testing the trend-channel resistance, currently around the 124.30 region, remains a distinct possibility.

Some follow-through buying will mark a fresh bullish breakout and set the stage for a move back towards reclaiming the 125.00 psychological mark, or the multi-year high touched in March. The momentum could further get extended towards the 125.25-30 region (August 2015 peak), above which the USD/JPY pair could climb to challenge the 2015 yearly swing high, around the 125.85 zone.

On the flip side, the 123.45 region seems to have emerged as immediate strong support and should protect the immediate downside ahead of the 123.30-123.25 region. The latter marks confluence support comprising of 100-hour SMA and the lower end of the aforementioned channel, which should act as a pivotal point for traders. 

A convincing break below would negate the near-term positive outlook and prompt aggressive long-unwinding trade around the USD/JPY pair. The corrective pullback could then drag spot prices to the 123.00 round figure. This is followed by the 122.80-122.75 region and the next relevant support near the 122.35-30 zone and the 122.00 mark.

USD/JPY 1-hour chart

Key levels to watch

• USD/TRY extends the weekly rebound to the 14.75 area.
• The lira depreciates despite the weaker dollar.
• Turkey Treasury Cash Balance comes up next in the docket.

The lira loses further ground and lifts USD/TRY to the area of weekly highs in the 14.70/75 band on Thursday.

USD/TRY remains broadly side-lined

USD/TRY fades Wednesday’s small pullback and resumes the weekly upside in spite of the offered stance in the greenback and the better mood in the risk-linked galaxy.

The weekly retracement in the Turkish currency appears to be underpinned by the sour sentiment among investors after inflation figures in the country saw the CPI rise to 20-year highs above 61% in March. On this, finmin N.Nebati said on Wednesday that “if the exchange rate has come stable and interest rate are off the agenda, we will bring down inflation together sooner or later”.

It is worth recalling that Nebati pledged to bring down inflation to single digits during 2023. Good luck with that…

Later in the session, Turkey’s Treasury Cash Balance figures are due ahead of Friday’s End Year CPI Forecast.

What to look for around TRY

The lira keeps the range bound theme unchanged vs. the greenback, always in the area below the 15.00 neighbourhood for the time being. So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: End Year CPI Forecast (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is gaining 0.24% at 14.7387 and faces the next hurdle at 14.9889 (2022 high March 11) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a drop below 14.6150 (monthly low April 1) would expose 14.5136 (weekly low March 29) and finally 14.0920 (55-day SMA).

USD/JPY is creeping up again. Economists at ING expect the pair to climb towards the 130 levels by end-2022.

The biggest risk is that the Bank of Japan becomes less dovish

“We think a front-loaded Fed tightening cycle, a dovish BoJ and a deteriorating Japanese balance of payments position on the back of the fossil fuel spike will keep USD/JPY bid for most of the year – and it should be nearing 130 by year-end.” 

“The biggest risk is that the BoJ becomes less dovish – as evidenced by it allowing 10-year JGB yields to trade above 0.25%. That is not what we forecast.”

Sterling’s multiple failures to break firmly through 1.31 during yesterday’s session have left the cable trading in a narrow channel over the past two sessions. Economists at Scotiabank believe that GBP/USD could test the 1.30 level on a dip below the mid-1.30s.

Resistance past 1.3100/10 aligns at 1.1350

“A drop below the mid-1.30s leaves the GBP at clear risk of testing the 1.30 low of mid-March after which point only the next figure level stands as psychological support.”

“Resistance past 1.3100/10 is the 1.3150 area and ~1.3165.”

The S&P 500 Index has come under pressure over the past couple of sessions, however key support at 4455/50 is still holding for now. Only a break below here would turn the short-term risks back lower in the range, according to analysts at Credit Suisse.

S&P 500 set to test resistance at 4663/68 whilst above key support at 4455/50

“S&P 500 is holding around its key 63 and 200-day moving averages at 4490/50 and short-term MACD momentum stays outright positive, even if is starting to roll over. We, therefore, stay directly biased higher whilst above 4455/50 and look for a test of the 78.6% retracement of the 2022 fall and price resistance at 4663/68.” 

“Above 4663/68 would open the door to a move to 4707/12 next, then what we look to be tougher resistance, starting at 4744/49. We expect a cap around this zone, in line with our broader medium-term view that the market is set to stay trapped in a broader mean-reverting phase.”

“Key support is seen at the 63-day average, price lows and 38.2% retracement of the recovery from the March low, which all coincide at 4455/50. Only a break below here would turn the short-term risks back lower within the range, with next supports then seen at 4376, then 4252.”

Ukrainian Negotiator Mykhailo Podolyak on Thursday dismissed comments made by Russian Foreign Minister Sergey Lavrov earlier in the day that Ukraine's recent draft peace deal proposal to Russia contained "unacceptable" elements, reported Reuters. 

Podolyak told Reuters that Lavrov is not directly involved in the negotiations process and therefore his statements are "of purely propagandistic significance". Lavrov's comments should be seen in the light of Russian attempts to divert global attention from recent events in Bucha, he added.

The Russian military stands accused of committing widespread war crimes against civilians in Bucha, Ukraine and many other parts of the country. 

The US Dollar Index (DXY) is up for the sixth straight day and made a new cycle high near 99.821. Economists at BBH expect DXY to test the the March 2020 high near 103 after breaking the 100 level.

The dollar uptrend remains intact

“After the psychological 100 level, the March 2020 high near 103 is the next big target.”

“Between the likely return of risk-off impulses and the even more hawkish Fed outlook for tightening, we believe the dollar uptrend remains intact.”

Tensions are mounting in France’s presidential election race. A Le Pen victory could drag the EUR/USD down to the 1.05 level, economists at ING report.

Add French politics to the euro’s other challenges

“While Frexit is less of a risk today than it was back in 2017, concerns of a Le Pen victory and what it would mean for the unity of EU policy response are just adding another bearish layer for EUR/USD.”

“A strong performance from Le Pen in the first round and a surprise win in the second would see EUR/USD trade 1.05 sooner rather than later.”

In prepared remarks at the University of Missouri, St Louis Fed President and FOMC member James Bullard said on Thursday that even with financial market tightening, the Fed remains behind the curve in its fight against inflation. Even a "generous" reading of monetary policy rules shows that the Federal Funds rate of around 3.5% is needed to fight high inflation, he continued, much higher than the current 0.25-0.5%. Bullard added that it's important that the Fed now "ratifies" the guidance it has given with interest rates at upcoming meetings.

USD/CAD gains have extended to the upper 1.25s. Economists at Scotiabank expect the key resistance at 1.2590 to cap the pair.

USD/CAD to correct lower towards 1.2485/75 on a dip below 1.2540

“We had anticipated gains through the upper 1.25s – which might include a retest of key resistance (former support) at 1.2590. That may still happen but we expect strong resistance there and note that intraday price action is suggesting a minor top/reversal may be developing. 

“Intraday losses below 1.2540 should see USD gains over the past couple of sessions correct a little more (back to 1.2475/85).”

• EUR/USD manages to finally reverse the downtrend.
• Further downside could see the 2022 low retested.

EUR/USD posts a moderate rebound after bottoming out in fresh lows near the 1.0860 region on Thursday.

That said, immediately to the upside comes the temporary resistance at the 55-day SMA, today at 1.1156 ahead of the 1.1230 region, where the 100-day SMA and the 8-month line coincide. Beyond this area, the selling bias is expected to subside and allow for extra gains in the short-term horizon.

The ongoing recovery is seen as temporary, leaving the prospects for further downwide well in place for the time being. Against that, there is still the probability that the pair could drop further and test the 2022 low at 1.0805 (March 7) in the not-so-distant future.

The medium-term negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1465

EUR/USD daily chart

• Gold has remained within recent ranges in the $1920-$1935 area despite recent hawkish ECB and Fed minutes.
• Geopolitics remains in focus and supportive, but rising global yields could send XAU/USD lower towards $1900. 

Spot gold (XAU/USD) prices continue to chop within recent ranges and, thus far on Thursday have largely stuck within $1920-$1935ish bounds, having largely ignored the recent release of surprisingly hawkish ECB meeting minutes and mixed US weekly jobless claims figures. Upside potential, for now, remains capped by the presence of weekly highs and the 21-Day Moving Average in the $1940 area, while recent lows in the mid-$1910s continue to offer support ahead of the 50DMA just below at $1906.

The hawkish ECB minutes, which showed policymakers becoming increasingly uneasy with the bank’s current ultra-easy stance in the face of high inflation, come on the back of Wednesday’s even more hawkish Fed minutes. These showed that a large number of the bank’s members were chomping at the bit for a 50 bps rate hike at the most recent meeting, only to be deterred by Russia’s invasion of Ukraine.

As a result, it's not too surprising to see that bond yields in both the US and Europe are moving higher again this Thursday and this could weigh on gold prices and push it back towards weekly lows in the mid-$1910s. Higher yields raise the “opportunity cost” of holding non-yielding assets. Of course, geopolitics remains in focus and stagflation risks are rising as the US and EU further toughen sanctions, though the EU isn’t yet banning Russian oil and gas imports.

But in the absence of fresh alarming geopolitical developments and against the backdrop of hawkish central bank-driven upside in global bonds, a bearish break in XAU/USD seems more likely than an upside push. Gold bears continue to eye recent lows under $1900 as a potential target.

The Swedish krona has been propelled to the top of the G10 performance table on a one-day. That said, it continues to languish second to last, after the JPY, in the year to date. Economists at Rabobank have revised lower their three-month EUR/SEK forecast from 10.30 to 10.20. 

Sweden’s non-NATO position could still result in increased volatility

“Despite the inflationary risks, wage rises in Sweden are still modest. This gives policy-makers breathing room. Another factor that Riksbank policymakers are likely to consider is the relatively high level of household debt. This suggests the potential for a heightened degree of sensitivity to higher interest rates. This factor on top of the uncertainties generated by the war in Ukraine argue for an increment pace of tightening from the Riksbank and a relatively low peak compared with previous economic cycles.” 

“A more hawkish stance from the central bank coupled with Sweden’s low dependency on Russia oil imports is supportive for the SEK vs. the EUR. However, Sweden’s non-NATO position could still result in increased volatility.”

“We have moved our three-month EUR/SEK forecast lower from 10.30 to 10.20.”

• USD/CAD gained positive traction for the third straight day and shot to a near two-week high.
• Oil prices languished near the multi-week low and undermined the commodity-linked loonie.
• The Fed’s hawkish outlook continued acting as a tailwind for the USD and remained supportive.

The USD/CAD pair maintained its bid tone during the early North American session and was seen hovering near the top end of its daily trading range, around the 1.2570 region.

The pair build on the previous day's breakout momentum through the 1.2500 psychological mark and gained traction for the third successive day on Thursday. With the latest leg up, the USD/CAD pair has now recovered over 150 pips from the YTD low, around the 1.2400 mark touched on Tuesday. Crude oil prices languished near the three-week low touched on Wednesday, which, in turn, undermined the commodity-linked loonie and acted as a tailwind for the major.

On the other hand, a softer tone around the US Treasury bond yields capped the recent US dollar rally to a near two-year high and did little to provide any additional lift to the USD/CAD pair. That said, the Fed's hawkish outlook favours the USD bulls and supports prospects for a further near-term appreciating move for the major. Hence, a subsequent move towards testing last week's swing high, around the 1.2590-1.2595 region, remains a distinct possibility.

On the economic data front, the US Weekly Initial Jobless Claims dropped to over a five-decade low level of 166K in mid-April. Adding to this, the previous week's reading was also revised down to 171K, pointing to strong higher and the lowest layoffs on record. This adds credence to the near-term constructive outlook and pushed the USD/CAD pair to a near two-week high. Meanwhile, any meaningful pullback should now be seen as a buying opportunity and remain limited.

Technical levels to watch

UOB Group’s Head of Research Suan Teck Kin, CFA, and Senior Economist Alvin Liew comment on the recent inversion of the US yield curve and the likeliness of a recession in the US economy.

Key Takeaways

“The recent flattening of sections of the US Treasury yield curve and “inversion” in a key part of the yield curve has flagged concern given the track record of yield curve inversion foreshadowing US economic recessions.”

“While the yield curve has a reliable track record of preceding US recessions, it had given false signals before and the length of time before the occurrence of a US recession varied significantly from months to years, thus there is a need to treat this with caution.”

“Based on the factors we examined, we think that recession risks remain low in the next 6-12 month horizon. As such, we are maintaining our US growth projections at 3.3% in 2022 and 2.3% in 2023 and we expect the US Fed to continue with its rate hikes in the remaining 6 meetings in 2022.”

There were 166,000 Initial Jobless Claims in the US in the week ending on 2 April, the latest release from the US Department of Labour on Thursday showed, a record low. That was well below the median economist forecast for a reading of 200,000 and a steep drop from the prior week's 202,000. That meant the four-week average fell to 170,000 from 178,000 the week before. 

Continued Claims, meanwhile, rose to 1.523M in the week ending on 26 March, well above the consensus forecast for 1.311M and a small jump from the prior week's 1.506M reading, which had been revised significantly higher from 1.307M. That meant the insured unemployment rate came in at 1.1%, unchanged versus the prior week (though this was revised higher from 0.9%).  

Market Reaction

FX markets did not seem to react to the latest mixed US jobless claims figures, which showed initial claims dropping to a fresh record low, but saw continued claims coming in a massive 2M higher than expected. 

Bank of England Chief Economist Huw Pill said on Thursday that it cannot be taken for granted that monetary policy tools like QE are the right too to address market dysfunction, reported Reuters. 

• Silver gained some traction on Thursday and is now looking to build on the overnight recovery.
• Repeated failures near the $25.00 mark and the 200-hour SMA resistance favours bearish traders.
• Sustained break below the $24.00 round figure will set the stage for additional near-term losses.

Silver attracted some dip-buying near the $24.25 region on Thursday and climbed to a fresh daily high during the mid-European session. The white metal was last seen trading around mid-$24.00s and is now looking to build on the previous day's bounce from over a one-week low.

From a technical perspective, the recent repeated failures near the $25.00 psychological mark and the emergence of fresh selling around the 200-hour SMA favours bearish traders. The latter, currently around the $24.65-$24.70 region, should continue to act as an immediate barrier.

Given that technical indicators on hourly charts have recovered from the negative territory, some follow-through buying might prompt some short-covering move. The XAG/USD might then aim to surpass the $25.00 mark and accelerate the momentum towards the $25.35-$25.40 resistance zone. Bulls might eventually aim to test the next relevant hurdle around the $25.75-$25.80 area and push the XAG/USD further towards the $26.00 round-figure mark.

On the flip side, the $24.25-$24.20 region now seems to protect the immediate downside ahead of the $24.00 level. The said handle coincides with the very important 200-day SMA, which if broken decisively will set the stage for a further near-term depreciating move. The XAG/USD would then turn vulnerable to accelerate the fall towards the next relevant support near the $23.60 region and slide further to the $23.20-$23.15 support zone.

Silver 1-hour chart

Key levels to watch

• EUR/USD jumped in wake of the latest hakwish ECB minutes and is back above 1.0900.
• However, the even more hawkish Fed minutes on Wednesday means the pair failed to sustain a lasting rally.
• As the Fed/ECB policy divergence widens, traders may view a retest of the 1.0950 area as a sell zone.

Following the release of a resoundingly hawkish set of ECB minutes on Thursday, the euro is trading on the front foot. EUR/USD has jumped about 20 pips from around 1.0890 to around 1.0910 in wake of the release, which said a large number of governing council members viewed the high level and persistence of inflation as warranting immediate steps towards policy normalisation. The minutes revealed that members also argued that the central bank’s three criteria for rate hikes had been met.

The net result is that Eurozone yields are moving higher again as traders up their bets that the ECB starts hiking interest rates in the latter half of the year, a short-term positive for the euro. However, the pair has not been able to rest earlier session highs in the 1.0930 area, nor mount a meaningful challenge of Wednesday’s highs just above it in the mid-1.0930s.

Fed hawkishness, both in the form of recent public remarks from policymakers and in the form of Wednesday’s release of FOMC meeting minutes, is likely making EUR/USD traders reluctant to pile into further longs. Rallies back towards resistance in the 1.0950s area (late March lows) likely remain a sell in the eyes of most traders. Even if the ECB is pivoting hawkishly in moving towards rate hikes, it remains well behind the Fed.

Ahead, more Fed speak, this time from St Louis Fed President James Bullard (one of the Fed’s most hawkish members), is scheduled for 1400BST shortly after the release of US weekly jobless claims figures. There will then be a barrage of further Fed commentary from the likes of Charles Evans, Raphael Bostic and John Williams in the later hours of US trade. EUR/USD traders will thus remain focus on central bank divergence plans, but should also note US Treasury Secretary Janet Yellen will be on the wires from 1530BST.

Ukrainian Finance Minister Serhiy Marchenko said on Thursday that Ukraine has asked the International Monetary Fund and World Bank to stop lending to Russia and that he hoped they default, reported Reuters. We are working on an international front to solve the fall in the Ukrainian government's budget revenue and that Ukraine is in talks for international financing of around EUR 7B, of which EUR 3B has already been delivered. 

• DXY comes under pressure after hitting new cycle highs.
• Immediately to the upside comes the 100.00 mark.

DXY faces some downside pressure soon after clocking new tops in the 99.80/85 band, levels last seen back in May 2020.

Despite the ongoing knee-jeer, price action around the index continues to suggest further upside in the very near term. That said, the next hurdle of note now emerges at the psychological 100.00 yardstick followed by the May 2020 high at 100.55.

The current bullish stance in the index remains supported by the 6-month line near 96.30, while the longer-term outlook for the dollar is seen constructive while above the 200-day SMA at 95.01.

DXY daily chart

The accounts of the European Central Bank's March policy meeting, released on Thursday, said that a large number of the central bank's governing council members held the view that the current high level of inflation and its persistence called for immediate further steps towards monetary policy normalisation, reported Reuters. 

Additional Takeaways as summarised by Reuters

• Inflation was projected to remain above target in 2023 and it was argued that the baseline inflation projection for 2024 could be assessed to be already effectively on target.
• It was argued that, for all practical purposes, the three forward guidance conditions have been met.
• It was argued that even if the forward guidance criteria could be assessed as being met, uncertainty was high and a longer period of above-target inflation would lead to an increased risk of an upward unanchoring.
• In such circumstances, the governing council could no longer afford to look through higher inflation.
• The view was taken that Asset Purchase Programme (APP) purchases had by now fulfilled the stated objective.
• Some argued that it was no longer evident that the pace of net purchases previously agreed continued to be proportionate.
• It was nonetheless seen as wise to keep some two-sided optionality.

Market Reaction

The euro has been picking up in recent trade in wake of the hawkish leaning minutes. Statements such as "for all practical purposes, the three forward guidance conditions (for rate hikes) have been met" are likely to further spur ECB tightening bets.  

A Senior Ukrainian Military official on Thursday said that Russia plans for a renewed attack on Kyiv if it can first take control of Donbas, reported Reuters. Russian forces have started using old tanks, the official added, a sign that its resources are being exhausted. 

Separately, Ukraine's Foreign Minister Dmytro Kuleba said on Thursday on Twitter that he met with G7 ministers and told them that Ukraine can defeat Russia if the world provides the necessary support. "Ukraine proposes a fair deal: the world provides us with all the support we require; we fight and defeat Putin in Ukraine," he said. 

Russian Foreign Minister Sergey Lavrov said on Thursday that the Ukrainians had presented Russia with a new draft agreement on Wednesday which is different from the one they proposed in Istanbul, reported Reuters citing Russia's Interfax.

Ukraine's proposal is to discuss Crimea and Donbass at a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy, which Lavrov called unacceptable. Lavrov accused Ukraine of seeking to draw out and undermine talks and said that the US is pushing Zelenskyy to continue fighting. 

However, Lavrov noted that Russia will continue talks with Ukraine and will promote its own draft agreement. 

• EUR/JPY extends the choppy trading on Thursday.
• The 134.40 region keeps supporting the downside.

EUR/JPY trades on a volatile fashion in the lower bound of the weekly range so far on Thursday.

Further consolidation remains likely in the very near term, while the underlying upside momentum in the cross should be unchanged. EUR/JPY therefore, is expected to keep the range bound theme for the time being before further gains to, initially, the 2022 high at 137.54 (March 28) ahead of a probable visit to the August 2015 peak at 138.99 (August 15) and prior to the round level at 140.00.

In the meantime, while above the 200-day SMA at 130.15, the outlook for the cross is expected to remain constructive.

EUR/JPY daily chart

• GBP/JPY struggled to capitalize on its modest intraday gains back closer to over a one-week high.
• The cautious market mood underpinned the safe-haven JPY and capped the upside for the cross.
• Subdued USD demand benefitted the GBP and extended some support, at least for the time being.

The GBP/JPY cross surrendered its modest intraday gains and was last seen trading in the neutral territory, around the 161.80-161.75 region.

The cross attracted some dip-buying near the 161.40 area on Thursday and climbed back closer to over a one-week high touched the previous day, though the uptick lacked bullish conviction. The European equity markets recovered from the overnight selloff, which undermined the safe-haven Japanese yen and extended some support to the GBP/JPY cross.

Apart from this, comments from Bank of Japan board member Asahi Noguchi, saying that the central bank must stick to its ultra-easy policy despite rising inflationary pressures, also weighed on the JPY. On the other hand, some cross-driven strength stemming from the fall in the EUR/GBP cross benefitted sterling amid subdued US dollar price action.

The combination of factors did provide an intraday lift to the GBP/JPY cross, through the prevalent cautious market mood kept a lid on any meaningful upside, at least for the time being. The market sentiment remains fragile amid fading hopes for a diplomatic solution to end the war in Ukraine and the prospect of more Western sanctions on Russia.

Hence, the focus will remain on new developments surrounding the Russia-Ukraine saga amid absent relevant market moving economic releases from the UK on Thursday. The incoming geopolitical headlines would influence the risk sentiment, which, in turn, will drive demand for safe-haven assets, including the JPY, and provide impetus to the GBP/JPY cross.

Technical levels to watch

• Gold price wavers within a familiar trading band around $1,925.
• US dollar cheers hawkish Fed, risk-aversion. Falling yields cap gold’s downside.
• Gold Price Forecast: Defending $1,915 is critical for XAU/USD after hawkish Fed minutes.

Gold price remains driven by the Fed sentiment, especially after the hawkish FOMC minutes pointed to aggressive tightening this year. The US dollar resumes its previous uptrend, in light of the Fed’s tightening expectations, which fuelled risk-off trading in global stocks. Meanwhile, escalating Russia-Ukraine conflict, with the West punishing Russia with more sanctions, help provide a floor under gold price. Gold traders await clarity on the Ukraine crisis for a fresh direction. In the meantime, the yields’ price action could play a pivotal role in influencing gold price.  

Read: Aggressive Fed shocks stocks

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price is struggling in a tight range, lacking a clear directional bias, as of now.

The immediate upside barrier is seen at $1,930, which is the convergence of the SMA5 one-day and Fibonacci 23.6% one-day.

Gold bulls will then gear up to take out strong resistance around $1,934, where the previous day’s high coincides with the SMA10 one-day and the Fibonacci 61.8% one-week.

Further up, the SMA200 four-hour at $1,939 could give a hard time to gold buyers.  

On the flip side, daily closing below $1,925 is needed to yield a sustained move lower. That level is the confluence of the SMA10 four-hour and Fibonacci 61.8% one-day.

A breach of the latter will expose the $1,920 round level.

The next critical cushion is envisioned at $1,916 aligns at $1,925, the intersection of the previous day’s low, pivot point one-day S1 and the Fibonacci 38.2% one-week.

The line in the sand for gold optimists is the powerful cap at $1,907. At that level, the pivot point one-day S2 and Fibonacci 23.6% one-week merge.

Here is how it looks on the tool

About Technical Confluences Detector

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

• USD/CHF was seen consolidating its recent gains recorded over the past four trading sessions.
• The Fed’s hawkish outlook continued underpinning the USD and acted as a tailwind for the pair.
• A softer risk tone benefitted the safe-haven CHF and capped gains amid retreating US bond yields.

The USD/CHF pair extended its sideways consolidative price move through the first half of the European session and was last seen trading around the 0.9330-0.9325 region, nearly unchanged for the day.

Following the recent strong rally of over 150 pips from sub-0.9200 levels, the USD/CHF pair now seems to have entered a bullish consolidation phase and oscillated in a range on Thursday. The prevalent cautious market mood underpinned safe-haven assets, which benefitted the Swiss franc and acted as a headwind for spot prices. That said, the downside remains cushioned amid the underlying bullish sentiment surrounding the US dollar, bolstered by the Fed's hawkish outlook.

In fact, the latest FOMC minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps as inflation was well above target and risks were to the upside. The minutes also showed general agreement over the need to reduce the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions. This, in turn, pushed the USD to a nearly two-year high and continued lending some support to the USD/CHF pair.

Meanwhile, the anti-risk flow was reinforced by modest pullback in the US Treasury bond yields. This held back the USD bulls from placing any aggressive bets and kept a lid on any meaningful gains for the USD/CHF pair. Nevertheless, the fundamental backdrop supports prospects for an extension of the short-term uptrend witnessed over the past one week or so. Traders now look forward to the US Weekly Initial Jobless Claims data for some impetus during the early North American session.

Apart from this, the US bond yields will influence the USD price dynamics and produce some short-term trading opportunities around the USD/CHF pair. Traders will further take cues from developments surrounding the Russia-Ukrain saga. The incoming geopolitical headlines would play a key role in driving the broader market risk sentiment and demand for traditional safe-haven assets.

Technical levels to watch

Economist at UOB Group Barnabas Gan reviews the latest release of retail sales in Singapore.

Key Takeaways

“Singapore’s retail sales unexpectedly contracted 3.4% y/y in Feb 2022, disappointing market estimates for a 5.6% y/y expansion. Retail sales excluding motor vehicles fell 1.8% y/y in the same month.”

“The decline in retail sales was partly due to lower receipts as compared to Feb 2021, during which sales were supported by pre-Chinese New Year (CNY) expenditure. For this year, pre-CNY spending occurred mainly in Jan 2022.”

“For the year ahead, we expect that domestic retailers will likely see some support as borders continue to reopen, while further economic recovery would be a lynchpin for domestic retail demand. Barring the exacerbation of COVID-19-related risks in Singapore and around the region, we pencil retail sales to expand by 6.0% in 2022.”

• AUD/USD added to the previous day’s heavy losses and dropped to a fresh weekly low.
• The Fed’s hawkish outlook, a softer risk tone underpinned the USD and exerted pressure.
• Retreating US bond yields capped the upside for the USD and helped limit deeper losses.

The AUD/USD pair maintained its offered tone through the first half of the European session and was last seen hovering near the weekly low, around the 0.7475 region.

The pair witnessed some follow-through selling for the second successive day on Thursday and extended this week's sharp retracement slide from the highest level since June 2021, around the 0.7660 area. The US dollar stood tall near a two-year high touched on Tuesday amid the Fed's hawkish outlook, which, in turn, was seen as a key factor that exerted downward pressure on the AUD/USD pair.

In fact, the minutes from the March 15-16 FOMC meeting released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps amid concerns that inflation had broadened through the economy. The minutes also showed general agreement over the need to reduce the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions.

The Fed's aggressive plans, along with fading hopes for a diplomatic solution to end the war in Ukraine, weighed on investors' sentiment. This was evident from a fresh leg down in the equity markets, which further benefitted the safe-haven buck and drove flows away from the perceived riskier Australian dollar. That said, retreating US Treasury bond yields capped the upside for the greenback.

Apart from this, a hawkish commentary by the Reserve Bank of Australia, along with rising commodity prices, helped limit deeper losses for the resources-linked aussie, at least for now. It is worth recalling that the RBA dropped its pledge to be patient on tightening policy and noted that the domestic economy remains resilient, and spending is picking up following the omicron setback.  

Nevertheless, acceptance below the 0.7500 psychological mark favours suggests that the AUD/USD pair has topped out in the near-term and supports prospects for an extension of the corrective slide. Traders now look forward to the US Weekly Initial Jobless Claims data, which, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair.

Technical levels to watch

• Eurozone Retail Sales rose by 0.3% MoM in February vs. 0.6% expected.

• Retail Sales in the bloc arrived at 5% YoY in February vs. 4.8% expected.

Eurozone’s Retail Sales rose by 0.3% MoM in February versus 0.6% expected and 0.2% last, the official figures released by Eurostat showed on Thursday.

On an annualized basis, the bloc’s Retail Sales came in at 5% in February versus 8.4% recorded in January and 4.8% estimated.

FX implications

The euro is holding lower ground on the mixed Eurozone Retail Sales data.

At the time of writing, the major is trading at 1.0875, lower by 0.15% on the day.

About Eurozone Retail Sales

The Retail Sales released by Eurostat are a measure of changes in sales of the Eurozone retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales. The changes are widely followed as an indicator of consumer spending. Usually, the positive economic growth anticipates "Bullish" for the EUR, while a low reading is seen as negative, or bearish, for the EUR.

FX option expiries for April 7 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 1.0800 1.5b
• 1.0875 902m
• 1.0900 3b       
• 1.0925 3b
• 1.0965 417m
• 1.1000 2.2b
• 1.1025 1.9b
• 1.1050 552m
• 1.1100 1.1b

- GBP/USD: GBP amounts        

• 1.3150 357m
• 1.3200 293m

- USD/JPY: USD amounts                     

• 123.50 440m

- USD/CHF: USD amounts        

• 0.9265 590m
• 0.9400 536m
• 0.9500 310

- AUD/USD: AUD amounts

• 0.7335 446m
• 0.7350 616m
• 0.7575 449m

- USD/CAD: USD amounts       

• 1.2500 685m
• 1.2535 590m
• 1.2575 609m
• 1.2590 300m
• 1.2600 405m

- EUR/GBP: EUR amounts

• 0.8375 431m

China’s Foreign Ministry said in a statement on Thursday that it opposes all forms of official interactions between the US and Taiwan.

“If Pelosi visits Taiwan, it will severely impact relations,” the Ministry noted.

This comes after FNN reported earlier that US House speaker, Nancy Pelosi, is scheduled to visit Taiwan on Sunday, April 10.

Read: US House speaker Pelosi, is to visit Taiwan on Sunday

Market reaction

AUD/USD is testing lows near 0.7475, down 0.49% on the day. The renewed upside in the US dollar and broad risk-aversion continue to weigh down on the aussie.

Citing a source familiar with the matter, Reuters noted a ban on Russian coal that the European Union is set to approve on Thursday would take full effect from mid-August.

Initially, the ban was proposed to take effect from mid-July.  

The source said this comes after pressure from Germany to delay the proposed measure. Germany is the EU's main importer of Russian coal.

If the bank gets approved on Thursday, it will be the EU's first ban on any import of energy from Russia since the start of Russia’s invasion of Ukraine.

The EU Commission has estimated the coal ban could cost Russia 4 billion euros ($4.36 billion) a year in lost revenue.

Market reaction

EUR/USD is back under the 1.0900 barrier, as the US dollar resumes its post-Fed minutes led upsurge towards the 100.00 level,

The spot is currently trading at 1.0882, down 0.08% on the day.

• GBP/USD gained some positive traction on Thursday, though struggled to capitalize on the move.
• The Fed’s hawkish outlook, a softer risk tone underpinned the safe-haven USD and capped gains.

The GBP/USD pair retreated a few pips from the daily high touched during the early European session and was last seen trading with modest intraday gains, around the 1.3080-1.3085 region.

The pair gained some positive traction during the first half of the trading on Thursday and moved away from the three-week low, around the 1.3045 area touched the previous day. The uptick, however, lacked bullish conviction or find acceptance above the 1.3100 round-figure mark amid the emergence of fresh buying around the US dollar, bolstered by the Fed's hawkish outlook.

In fact, the March 15-16 FOMC meeting minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps amid concerns that inflation had broadened through the economy. The minutes also showed general agreement about reducing the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions.

The Fed's aggressive plans, along with fading hopes for a diplomatic solution to end the war in Ukraine, took its toll on the global risk sentiment. This was evident from a generally weaker tone around the equity markets, which further drove some haven flows towards the buck and contributed to keeping a lid on any meaningful upside for the GBP/USD pair.

There isn't any manor market-moving economic data due for release from the UK, suggesting that the USD price dynamics will play a key role in influencing the GBP/USD pair. Later during the early North American session, traders will take cues from the US Weekly Initial Jobless Claims data. This, along with the risk sentiment, would drive the USD demand and provide some impetus.

Technical levels to watch

The euro is continuing to trade on a weaker footing. Barring a hawkish surprise from the Euroeapn Central Brank (ECB), the EUR/USD pair looks poised to test the the low from 7th March at 1.0806, economists at MUFG report.

Ukraine conflict remain weight on EUR 

“The price action continues to suggest strongly that some form of de-escalation of the Ukraine conflict will be required to trigger a reversal of the current bearish trend for the euro.” 

“In current conditions the euro should continue to remain weak in the near-term absent a significant hawkish policy surprise from the ECB that brings forward rate hike expectations earlier into Q3.” 

“The next important technical support level to watch on the downside is the low from 7th March that comes in at 1.0806.” 

“The release today of the account from the March ECB policy meeting is the key event to watch today that poses some upside risk for the euro although it is not normally a big market mover.”

USD/INR is likely to remain elevated over the near term as higher oil prices hit the INR via worsening twin deficits, in the view of economists at HSBC.

Three developments could support the rupee

“We remain cautious towards the INR, as persistently higher oil prices mean that the INR will be challenged by wider twin (current account and fiscal) deficits, slower growth, lower real yields, and dimmer prospects of portfolio inflows.”

“Developments that can support the INR include: (1) potential equity inflows from diversification; (2) if the Reserve Bank of India turns more hawkish; and (3) talks about including Indian government securities in global bond indices.”

See – RBI Preview: Forecasts from eight major banks, CPI forecast revision and guidance watched

With the Federal Reserve prepared to hike interest rates by 50 bps at upcoming meetings, economists at Westpac expect the USD/JPY pair to try another move above the 125 level.

Hard to imagine that we have seen the highs for USD/JPY

“With the Fed set to execute a series of 50bp moves, and commence an aggressive QT program in May, it’s hard to imagine that we have seen the highs for USD/JPY.”

“We await clearer signs that a top is in place and tend to think that we will see a final move above 125 for USD/JPY and 138 for EUR/JPY before starting to think about selling.”

• NZD/USD edged lower for the second successive day and retreated further from the YTD peak.
• The Ukraine crisis weighed on investors’ sentiment and undermined the perceived riskier kiwi.
• Modest pullback in the US bond yields kept the USD bulls on the defensive and extended support.

The NZD/USD pair remained depressed through the early European session and was last seen trading around the 0.6900 mark, just a few pips above the one-and-half-week low touched earlier this Thursday.

The pair witnessed selling for the second successive day and has now retreated nearly 150 pips from the highest level since November 2021, around the 0.7035 area touched earlier this week. The market sentiment remains fragile amid fading hopes for a diplomatic solution to end the war in Ukraine and the prospect of more Western sanctions on Russia over its alleged war crimes. This, in turn, was seen as a key factor that weighed on the perceived riskier kiwi.

The anti-risk flow was reinforced by modest pullback in the US Treasury bond yields, which kept a lid on the recent US dollar rally to a nearly two-year peak and extended some support to the NZD/USD pair. That said, any meaningful upside seems elusive amid the Fed's hawkish outlook, which should continue to act as a tailwind for the greenback. In fact, the FOMC minutes showed that policymakers were prepared to hike interest rates by 50 bps at upcoming meetings.

The minutes also showed general agreement about reducing the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions. This supports prospects for the emergence of some USD dip-buying, suggesting that the NZD/USD pair's attempted recovery move is more likely to attract fresh selling at higher levels. Traders now look forward to US Weekly Jobless Claims data for some impetus later during the early North American session.

Apart from this, the US bond yields will influence the USD price dynamics and produce some meaningful trading opportunities around the NZD/USD pair. Traders will further take cues from developments surrounding the Russia-Ukraine saga, which should continue to play a key role in driving the broader market risk sentiment.

Technical levels to watch

Here is what you need to know on Thursday, April 7: 

The dollar rally continued late Wednesday and the US Dollar Index (DXY), which tracks the greenback's performance against a basket of six major currencies, reached its highest level in nearly two years at 99.77. Ahead of the US weekly Initial Jobless Claims data and speeches of FOMC policymakers, the DXY is staging a downward correction. The market mood stays upbeat early Thursday with US stock futures indexes posting modest gains. The European economic docket will feature the European Central Bank's (ECB) Meeting Accounts and February Retail Sales data.

The minutes of the Federal Reserve's March policy meeting revealed on Wednesday that many participants noted that they would have preferred a 50 basis point increase in the target range for the federal funds rate at that meeting. The publication also confirmed that the Fed is planning to start reducing the balance sheet after the May meeting. With the initial market reaction to the hawkish FOMC statement, the 10-year US Treasury bond yield climbed to its strongest level since April 2019 at 2.66% before retreating below 2.6% early Thursday.

Meanwhile, the UK announced that it will freeze the assets of Sberbank and ban Russian coal imports. Additionally, both the US and the UK said they will ban outward investments in Russia.

EUR/USD fell to its weakest level in a month at 1.0874 and closed the fifth straight day in negative territory on Wednesday. The pair was last seen posting small recovery gains near 1.0900.

GBP/USD dropped below 1.3050 on Wednesday but managed to erase a small portion of its weekly losses early Thursday. As of writing, the pair was up nearly 0.3% on the day at 1.3100.

Despite the surging US T-bond yields, USD/JPY struggled to gain traction. The pair continues to trade in a relatively tight channel below 124.00 in the European morning. Commenting on the currency valuations, "the merits of a weak yen on Japan’s economy outweigh the demerits," Bank of Japan (BOJ) policy board member Asahi Noguchi said on Thursday.

Gold stayed relatively resilient amid risk aversion on Wednesday and ended up closing the day virtually unchanged above $1,920. XAU/USD is moving sideways below $1,930.

Bitcoin suffered heavy losses on the hawkish Fed tone and lost more than 5% on Wednesday. BTC/USD is fluctuating below $44,000 early Thursday. Ethereum is already down nearly 10% this week but stays above $3,000.

In the opinion of economists at UBS, investors can seek to benefit from the diverging pace of central bank rate rises and its impact on foreign exchange rates. Consequently, the US dollar, the British pound and the Australian dollar are their preferred currencies.

Chinese yuan to weaken moderately against the USD

“The US Dollar Index has climbed by 3.6% so far this year amid expectations that the Fed will tighten policy faster than the ECB and Bank of Japan. We also like the British pound and the Australian dollar, given that their central banks are in the vanguard of the tightening cycle.”

“The Swiss franc and the euro are our least preferred currencies. We also expect the Chinese yuan to weaken moderately against the USD amid diverging US-China monetary policy dynamics.”

The US Dollar Index (DXY) is finally breaking out to new highs as the FOMC minutes show “many” officials favour one or more 50bp hikes and an aggressive pace of balance sheet reduction. A move above 100 is on the cards in coming days, potentially extending to the 100.50-100.90 zone, economists at Westpac report.

USD yield support rebuilding back toward highs

“FOMC minutes show “many” officials favour one or more 50bp hikes and an aggressive pace of balance sheet reduction, amounting to $95bn per month, to be phased in over three months starting May.”

“With the focus now shifting to balance sheet reduction, yield differentials further out the curve should start to move more materially in the USD’s favour too.” 

“DXY 100+ on the cards in coming days; clean break there has it eyeing off a thicket of resistance extending back to 2020 in the 100.50-100.90 zone.”

EUR/CAD losses resume. The pair could tumble as low as the 1.30 level, in the view of economists at Scotiabank.

Decline risks extending significantly

“Sustained losses below the 1.38 area leaves the cross without any major sources of technical support until the March 2015 low at 1.3030.”

“Trend oscillators are aligned bearishly for the EUR across short, medium and long term DMIs, implying only limited scope for counter-trend corrections at this point. By ‘limited’ we mean EUR rebounds could perhaps extend to the 1.38/1.39 region but we do think the EUR will struggle to rebound in a significant or sustained way.” 

“1.30 looks a long way away but it is reachable in the next few months.”

• EUR/USD now posts decent gains past the 1.0900 barrier.
• German Industrial Production expanded 0.2% MoM in February.
• Weekly Claims, Fedspeak next of note in the US docket.

EUR/USD partially reverses the recent intense selloff and manages to return above the 1.0900 hurdle on Thursday.

EUR/USD supported near 1.0870

EUR/USD regains some composure after five consecutive daily retracements on the back of the renewed selling bias in the greenback.

Indeed, the dollar gives away part of the recent strong advance to fresh cycle tops near 99.80, as investors cash up part of those gains and continue to digest the release of the FOMC Minutes late on Wednesday.

No news from the Minutes, as they leant towards the hawkish side after providing further details on the unwinding of the bond-purchase programme, while they also showed many participants’ preference for a larger rate hike.

In line with Thursday’s performance of cash markets overseas, the German 10y bund yields drift lower following recent tops and they now navigate the 0.62% region.

In the domestic data sphere, Germany Industrial Production expanded at a monthly 0.2% in February. Later in the session EMU Retail Sales are due seconded by the ECB’s Accounts. Across the Atlantic, Initial Claims and Consumer Credit Change will be published while FOMC’s Bullard, Evans, Bostic and Williams are also due to speak.

What to look for around EUR

EUR/USD remains under pressure, although it manages to rebound from the 1.0870 region and retake the 1.0900 hurdle so far. The recent negative performance of the pair came in response to the firmer pace of the greenback and renewed geopolitical concerns. As usual, pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a rebound in the euro.

Key events in the euro area this week: Germany Industrial Production, EMU Retail Sales, ECB Accounts (Thursday) – France Presidential Election (Sunday, April 10).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.09% at 1.0901 and the next up barrier emerges at 1.1156 (55-day SMA) followed by 1.1184 (weekly high March 31) and finally 1.1226 (100-day SMA). On the flip side, a breakdown of 1.0874 (monthly low April 6) would target 1.0805 (2022 low March 7) en route to 1.0766 (monthly low May 7 2020).

Silver now trades out of March, typically the second worst month for silver longs on seasonality studies – hence downside pressure should recede. Any near-term dip can now count on the support of key pivotal moving average located at 23.89, Benjamin Wong, Strategist at DBS Bank, reports.

March is typically the second worst month for silver longs

“Considering seasonality studies, this takes silver out of the month of March. March typically is the second worst month to own silver, if one back tests 10 years of seasonality studies. This makes the risk-reward of trading long silver more palatable.”

“The weekly chart is seeing a basing process. The 21.42 low has fashioned itself as a workable intermediate double bottom. Take note of the pivotal 40-week moving average around 23.89 – recall that this moving average level capped silver at 25.40 in mid-November before yielding to an upside break on the Russian invasion of Ukraine.”

“An overhead resistance runs in at 26.72 but a break opens up the Fibonacci extension zone of 28.45-29.38.”

Strategists at ANZ Bank have revised their short-term oil price forecast to $115 from $135. On the other hand, they have lifted their 12-month target to $115 from $85, previously.

Global oil market balance to be less tight in the next six months

“We expect the global oil market balance to be less tight in the next six months. In particular, stock withdrawals in the third quarter will be less pronounced and result in a much lower average drawdown for the quarter vs the 1.5 mb/daverage drawdown before the SPR release. Therefore, we have trimmed our short-term (0-3M) price target to $115/bbl from $135/bbl.”

“Assuming the SPR will need to be replenished over the course of Q4 2022 and most likely 2023, we should expect an increase in crude demand. However, global inventories will significantly decrease. This is likely to sow the seeds for a future price rally. The market will be hamstrung in responding to future supply shortages, likely leading to significantly higher volatility. That has led us to increase our 12-month target from $85/bbl to $115/bbl.”

• USD/JPY attracted dip-buying near the 123.45 area on Thursday, though lacked follow-through.
• The risk-off mood benefitted the safe-haven JPY and capped gains amid retreating US bond yields.
• The Fed-BoJ policy divergence favours bullish traders and supports prospects for additional gains.

The USD/JPY pair recovered its modest intraday losses and climbed back closer to the daily high, around the 123.75-123.80 region during the early European session.

Having struggled to find acceptance above the 124.00 round-figure mark, the USD/JPY pair witnessed some selling on Thursday and was pressured by a combination of factors. The prevalent cautious market mood drove some haven flows towards the Japanese yen and exerted some downward pressure on spot prices amid a softer tone surrounding the US dollar. Bearish traders further took cues from retreating US Treasury bond yields, which kept a lid on the recent USD rally to a nearly two-year high.

That said, a combination of factors extended some support and assisted the USD/JPY pair to attract some dip-buying near the 123.45 region. Bank of Japan board member Asahi Noguchi said that the central bank must maintain its ultra-easy monetary policy, even as rising commodity prices are expected to push inflation higher. Conversely, the March 15-16 FOMC policy meeting minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps at upcoming meetings.

The minutes also showed general agreement about reducing the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions. The resultant Fed-BoJ policy divergence should support prospects for a further near-term appreciating move for the USD/JPY pair. Even from a technical perspective, the recent move up witnessed over the past one week or so has been along an ascending channel, which further points to a well-established short-term uptrend.

Sustained strength beyond the 124.00 round-figure mark will reaffirm the constructive outlook and allow the USD/JPY pair to build on its gains recorded over the past four trading sessions. Bulls might then aim back to conquer the 125.00 psychological mark, or the highest level since August 2015 touched in March. Traders now look forward to the US Weekly Initial Jobless Claims data. This, along with the US bond yields, will influence the USD and produce some meaningful trading opportunities.

Technical levels to watch

FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang noted USD/CNH could still trade between 6.3450 and 6.3850 in the next weeks.

Key Quotes

24-hour view: “We highlighted that ‘there is scope for USD to move to 6.3900 but a clear break of this level is unlikely’. USD subsequently rose to 6.3870 before staging a surprisingly sharp drop (low has been 6.3580). Downward momentum has improved, albeit not by much. USD could dip to 6.3550 but a sustained decline below this level is unlikely (next support is at 6.3450). Resistance is at 6.3700 followed by 6.3750.”

Next 1-3 weeks: “Yesterday (06 Apr, spot at 6.3800), we highlighted that upward momentum is beginning to improve and a clear break of 6.3900 suggests USD could advance to 6.4000. We added, ‘a breach of the strong support at 6.3630 would indicate that the build-up in momentum has eased’. USD subsequently rose to 6.3870 before dropping sharply to 6.3580. The breach of our ‘strong support’ at 6.3630 indicates that the build-up in momentum has fizzled out. From here, the outlook is mixed and USD could trade within a range of 6.3450/6.3850.”

USD/SGD remains anchored around 1.36 pending the MAS decision. Economists at OCBC Bank expect the pair to drift lower toward 1.33 but that move requires the MAS to open up more upside room.

Further downside for the USD/SGD may not be forthcoming for now

“The SGD NEER stands marginally above the top end of our estimated policy band. In this context, further downside for the USD/SGD may not be forthcoming for now.”

“Our expectation is for further USD/SGD downside toward 1.3300, but this move will require the MAS to open up more upside room in the April decision.” 

March Federal Open Market Committee (FOMC) minutes show that were it not for the war in Ukraine, the Fed would have kicked off its tightening cycle with a 50bp hike. The fact that the Fed wants to move to a neutral posture 'expeditiously' and that even tighter policy may be warranted, should keep the dollar bid, economists at ING report.

Expeditious Fed to keep dollar supported

“It seems clear that the Fed would have opted to start the cycle with a 50bp hike were it not for the war in Ukraine. Some clarity was also provided on quantitative tightening. It looks like the Fed will start shrinking its balance sheet after the May meeting, at a rate of $95bn per month. All points to the Fed applying a heavy foot to the brakes, which should be positive for the dollar.” 

“Few central banks will be able to match the pace of Fed tightening this year and the dollar should stay strong – especially against the low yielders of the Japanese yen and the euro.”

“We feel the dollar can play catch-up with some of the recent rise in short-dated US yields and see the US dollar index launching a test of 100 shortly.”

The Indian rupee is performing lackluster ahead of the monetary policy from the Reserve Bank of India (RBI) on Friday. The RBI is likely to ignore the alarming inflation and will keep the benchmark rates unchanged considering a pause in the growth rates. Economists at Commerzbank expect the INR receive a tailwind from the pullback in oil prices.

RBI to emphasize downside risks to growth to justify continued accommodative stance

“RBI is expected to leave rates unchanged at 4%. They are likely to emphasize the downside risks to growth to justify a continued accommodative stance. They can’t ignore the inflation risks but will note that inflation is due to cost-push rather than demand-pull factors. As such, they may need to rely on other tools. One of which could be to ensure a relatively stable INR or at least mitigate INR’s weakness in order not to exacerbate import inflation.”

“USD/INR has eased back from the high of 77.00 last month and the pullback in oil prices could provide a further reprieve for INR.”

See – RBI Preview: Forecasts from eight major banks, CPI forecast revision and guidance watched

• DXY corrects lower after hitting tops around 99.75.
• US yields also abandon the area of recent peaks.
• Initial Claims, Fedspeak next on tap in the NA session.

The greenback, when tracked by the US Dollar Index (DXY), sheds part of the recent gains and return to the 99.50 region on Thursday.

US Dollar Index keeps targeting 100.00

After five consecutive daily advances, the index now comes under some pressure following Wednesday’s peaks in the 99.75/80 band, always against the backdrop of a mild improvement in the risk complex and a bout of weakness in US yields.

DXY kept the bid bias unchanged on Wednesday, although it retreated from fresh highs after the FOMC Minutes failed to surprise market participants, as the hawkish tone was in line with the one of the statement of the March 16 meeting.

On the latter, the FOMC Minutes unveiled further details regarding the unrolling of the QE programme. Starting in May, the Committee will now reduce the balance sheet by $60B of bonds and $65B of MBS. In addition, many participants favoured a 50 bps rate hike last month, although they finally decanted for a smaller raise in response to the uncertainty from the war in Ukraine.

Later in the NA session, usual weekly Claims are due seconded by February Consumer Credit Change. In addition, St. Louis Fed J.Bullard (voter, hawkish), Atlanta Fed R.Bostic (2024 voter, centrist), Chicago Fed C.Evans (2023 voter, centrist) and NY Fed J.Williams (permanent voter, centrist) are all due to speak later in the session.

What to look for around USD

The dollar remains bid and gradually approaches the psychological 100.00 barrier. So far, the near-term price action in the greenback continues to be dictated by geopolitics, while the case for a stronger dollar remains well propped up by the current elevated inflation narrative, a potential more aggressive tightening stance from the Fed, higher US yields and the solid performance of the US economy.

Key events in the US this week: Initial Claims, Consumer Credit Change (Thursday) – Wholesale Inventories (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is retreating 0.13% 99 49 and faces initial contention at 97.68 (weekly low March 30) seconded by 97.38 (55-day SMA) and then 96.77 (100-day SMA). On the flip side, a break above 99.76 (2022 high April 6) would open the door to 100.00 (psychological level) and finally 100.55 (monthly high May 14 2020).

Recent euro weakness has seen EUR/GBP drift lower again. Economists at ING expect the pair to tumble towards the 0.82 level.

EUR/GBP can probably continue to bounce around the 0.83-0.84 range

“We have a target over the coming months near 0.82 – though that may be the extent of the GBP rally this year. The challenge for GBP will be if and when year-end market expectations for the Bank of England's (BoEs) bank rate adjust closer to 1.00/1.25% (our house call) versus the 2%+ currently priced. That adjustment is probably a 2H22 story for sterling.”

“For today, look out for a speech from BoE chief economist Huw Pill. Given high inflation that will go higher he may not want to issue a rate protest today. Thus, EUR/GBP can probably continue to bounce around the 0.83-0.84 range.”

EUR/USD is consolidating under 1.10. For today, we will get to see the release of the European Central Bank (ECB) minutes for March. Economists at ING expect the world’s most popular currency pair to have a quiet day around the 1.0900/1.0950 region.

Look out for ECB minutes today

“ECB minutes are typically less exciting than the Fed's. Look out for any mention of the euro. The ECB has recently been expressing a little concern with EUR/USD under 1.10 and what it means for imported energy prices. Yet unless the ECB is prepared to hike more aggressively, any EUR/USD rally on ECB FX-linked comments looks unlikely to last.”

“EUR/USD may have a quiet day near 1.0900/1.0950, though our multi-day bias is lower and our multi-month bias for a 1.05-1.10 trading range.”

The Bank of England (BoE) does not really seem to have managed to dampen the market’s rate hike expectations. Consequently, the British pound is at risk of suffering a significant fall, economists at Commerzbank report.

BoE seems to have been unable to convince the market

“So as long as the economic weakening is not reflected in the data the market will probably continue to bank on the BoE hiking its key rate from the current 0.75% to above 2% by the end of the year due to high inflation levels.” 

“We see the risk of the market having to lower its rate hike expectations, which is likely to put pressure on sterling.”

The Federal Reserve hiked by 25bp in March from extraordinarily accommodative policies set during the unprecedented COVID-19 lockdown. Hikes are triggering recession concerns. Recessions remain part of the future landscape, but the immediate inflation risk is real, and the Fed has room to proceed with hikes and balance-sheet run-off in the coming months, economists at Société Générale report.

Fed hawkish but recession calls premature

“We change our call to a 50bp hike in May, now with even faster inflation trends. Energy prices soared from already high levels in March and the CPI to be released 12 April is expected to show headline inflation up more than 8% YoY. Fed officials may be pre-empting the next CPI release with more hawkish comments.”

“There is no doubt the Fed is moving faster to tighten policy. A 50bp hike, plus more hikes should lift the fed funds rate above 2% by year-end. The median outlook of Fed participants for the fed funds at the end of 2023 was 2.8%.”

“Minutes of the 15-16 March FOMC meeting offered guidance on balance sheet run-off. Now to make it official in May. The minutes confirmed that the pace of run-off will be faster, but otherwise the process will be the same as in the 2017-19 period.”

“We believe concerns on the business cycle are premature. The Fed’s rate guidance is not cause for near-term concern. Rather than the rate outlook alone, our bigger concern is the mix of rate hikes and balance sheet shrinkage. The combination of tightening efforts may push policy to be tighter than it seems just looking at rates alone.”

The latest Reuters poll of analysts and fund managers showed Thursday, bearish bets on the Asian currencies eased as the regional central banks shifted to a hawkish pivot.

Short bets on the Indian rupee hit the lowest in over a month, as traders gear up for the Reserve Bank of India (RBI) monetary policy decision due to be announced this week.

Key findings

“Investors turned bullish on Singapore dollar for the first time in over a month.”

“Long positions on the Chinese yuan firmed despite increasing vulnerability from COVID-19 lockdowns.”

“Bearish positions on the Indian rupee, Philippine peso and the Thai baht eased marginally.”

“Bets on the Indonesian rupiah turned marginally long for the first time since late February, while the short position on the Malaysian ringgit solidified to its highest since mid-December on the weak growth outlook.”

‘Short bets on the Indian rupee were at their lowest since Feb. 24. The Reserve Bank of India (RBI) on Friday is expected to hold its key interest rates, even as inflation held above the central bank’s upper end of the forecast range.”

Related reads

• RBI Preview: Forecasts from eight major banks, CPI forecast revision and guidance watched
• USD/INR Price News: Sees upside capped near 76.00 on a tepid rebound in oil prices

The Australian dollar remains the strongest currency in the G10 since the invasion, followed by fellow commodity-linked currencies. Although AUD/USD has been through intense selling pressure in the last couple of days, the current pullback is set to be short-lived, economists at Westpac report. 

AUD/USD gains to cap in the 0.7650/0.7700 area near-term

“This pullback should find support at around 0.7460.”

“Clearly the extraordinary surge in energy and metals prices strengthens Australia’s already large trade surpluses. Still, the RBA’s slow shuffle towards finally commencing tightening contrasts with an FOMC openly considering 50bp hikes.” 

“CFTC positioning data shows many AUD shorts have now been unwound. This should help cap AUD/USD in the 0.7650/0.7700 area near-term, though we expect dips to be modest multi-month.”

The National Bank of Poland surprised to the upside yet again with its 100bp rate hike – the main rate now stands at 4.5%. Economists at ING think the market's underestimating future rate hike trajectories. The move is positive for the zloty.

NBP raises rates by 100bp and there’s more to come

“Strong move by Poland's Monetary Policy Committee takes its main rate to 4.5%. We see it reaching 6.5% this year and 7.5% in 2023. That's more than is being priced in by the markets. The move is positive for PLN and is likely to translate into a flattening of the yield curve.”

“The scale of monetary tightening in Poland will be larger than priced in by the market. It will put further downward pressure on EUR/PLN, pushing it towards 4.58-59 in the coming days. The higher pace of monetary tightening also paves the way for stronger zloty appreciation for the remainder of this quarter.” 

“EUR/PLN may reach 4.50 within the next couple of months. It is even more likely given signals that the EUR/USD decline is losing momentum.”

The bullish bias could push USD/JPY to the 124.30/60 region in the next weeks, commented FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Our expectations for ‘further USD strength to 124.30’ did not materialize as it rose to 124.05 before pulling back. The current movement is viewed as part of a consolidation and USD is likely to trade between 123.10 and 123.95 for today.”

Next 1-3 weeks: “Yesterday (06 Apr, spot at 123.85), we highlighted that upward momentum is building and USD is likely to trade with an upward bias towards 124.30, possibly 124.60. There is no change in our view even though we did not quite expect the subsequent subdued price actions (USD traded in a relatively narrow range of 123.46/124.05). On the downside, a breach of 122.40 (‘strong support’ level was at 121.00 yesterday) would indicate that the build-up in momentum has fizzled out.

Considering preliminary readings from CME Group for natural gas futures markets, open interest extended the uptrend for yet another session on Wednesday, this time by around 10.6K contracts. In the same line, volume rose for the second straight session, now by around 6.4K contracts.

Natural Gas in overbought levels

Prices of natural gas rose to fresh 2022 highs near $6.40 on Wednesday, although it later faded that spike and ended the session with modest losses. The move was amidst rising open interest and volume, indicative of further downside in the very near term. The latter is reinforced by the overbought conditions of the commodity, as per the daily RSI above 74.

The Reserve Bank of India’s first monetary policy statement for FY23 (fiscal year running from April to March) will be released on Friday, April 8 after a two-day meeting. Here are the expectations as forecast by the economists and researchers of eight major banks regarding the upcoming central bank's decision. 

This is the first monetary policy announcement by the RBI after Russia’s invasion of Ukraine. RBI is set to keep its policy stance and key rates unchanged even as surging oil prices are set to push up inflation and dent economic recovery. 

ANZ 

“We expect the policy repo rate to be unchanged but the RBI will recalibrate its economic outlook to take into account high oil prices, especially by revising up its inflation forecast for FY23. This, however, is unlikely to coax an immediate retreat from accommodation as growth remains in need of policy support. We expect headline inflation to remain elevated, averaging 5.2% for FY23. In our baseline forecasts, we envisage the first policy rate hike of 25bps in August. Part of the RBI’s broader economic policy will also entail keeping the rupee stable amid outflow pressures and a larger current account deficit. Not only will it anchor investors’ return expectations amid volatile markets, it will help limit imported inflation. This will help extend the runway for the RBI to sustain policy accommodation.”

Standard Chartered

“We expect RBI to keep both the repo rate and the reverse repo rate unchanged at 4% and 3.35%, respectively. Given that the RBI governor recently highlighted the crucial role of communication as a monetary policy tool, we will closely watch for any cues on possible policy reversal. We do not expect a change in stance from accommodative to neutral, although the MPC is likely to focus on inflation and signal the possibility of a change in case the current environment prevails, even if the tone of the statement remains balanced. In this regard, we expect a revision to the CPI forecast for FY23 (starts April 2022) from 4.5% (our forecast: 5.4%), given the sharp rise in inflation risks since February amid the spike in global commodity prices. We maintain our view of repo rate hikes from August and reverse repo rate increases from June. We see a risk of the repo rate hike being advanced to June from August and the possibility of a higher terminal rate, especially if oil prices stay above $100/bbl, thereby raising FY23 inflation closer to 6% (upper end of the target range).”

TDS

“We expect no change in the policy repo rate (4.0%). However, there is also a non-negligible risk that RBI shifts to a neutral stance from accommodative. We see a higher risk that the RBI raises its reverse repo rate at this meeting than consensus expectations and look for a 25bp hike in this rate. INR may benefit from a surprise reverse repo rate hike. However, we expect gains in the currency to be limited. We think RBI will want to avoid a much sharper INR rebound, to help maintain exports competitiveness, though the Bank will also be at hand to limit rapid INR declines given its considerable FX reserves war chest.”

SocGen

“We believe that RBI would substantially revise up its inflation forecast during its next meeting in April from a rather modest 4.5% announced in the previous meeting. We also believe that the central bank would likely use the meeting to announce a shift in focus of monetary policy from predominantly supporting growth and reinforce its role as inflation targeting central bank. The RBI, while likely keeping the policy unchanged at 4.0% would announce a change in the monetary policy stance from accommodative to neutral leaving the door open for a rate hike during the June meeting.”

BBH

“RBI is expected to keep the repo rate steady at 4.0%. At the last policy meeting on February 10, the central bank delivered a dovish hold. Governor Das note ‘Private consumption, the mainstay of domestic demand, continues to trail its pre-pandemic level. The persistent increase in international commodity prices, surge in volatility of global financial markets and global supply bottlenecks can exacerbate risks to the outlook.’ Next policy meeting is May 19. While another dovish hold seems likely, the bank should start inching towards hiking rates.  Bloomberg consensus sees Q3 liftoff and so the RBI’s dovish stance will eventually be tested.” 

HSBC

“The RBI is likely to stand pat on its policy rates while maintaining an accommodative tone given the current high level of macro uncertainty. The RBI may lower its projection for GDP growth and raise the CPI inflation forecast amid sharp rises in global commodity prices. That said, the central bank could view the current inflationary pressures as a supply-side phenomenon and prefer to wait for clear evidence of core price pressures given its concerns about weak demand in the economy.”

Credit Suisse

“We expect no change in policy rates following RBI Governor Das’ recent speech where he noted domestic growth remains a priority. With regard to the MPC’s vote on policy rates, we expect another unanimous vote for no change. For the RBI’s monetary stance (which requires a separate vote by the MPC), we think members will continue to vote 5-1 to maintain the RBI’s current stance of ‘accommodative.’ Although additional dissents in support of a ‘neutral’ stance are possible at the upcoming meeting, on balance we think that the same 5 person majority of voters will continue emphasizing growth support, thus keeping the same 5-1 vote from February.” 

UOB

“The looming inflation risks in FY2022/23 will be a persuasive factor for RBI to finally jump on the hike wagon and introduce its first rate hike in 2Q22 to 4.25%. We also pencil in further hikes of 25 bps for both 3Q22 and 4Q22 to finally bring the repo rate to 4.75% at the end of 2022.”

NZD/USD is still seen navigating within the 0.6870-0.7000 range in the next weeks, in opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we expected NZD to ‘trade in a lower range of 0.6910/0.6975’. NZD subsequently traded between 0.6900 and 0.6967. The underlying tone appears to be a tad soft and there is scope for NZD to edge lower from here. That said, the major support at 0.6870 is not expected to come into the picture (there is another support at 0.6900). Resistance is at 0.6935 followed by 0.6965.”

Next 1-3 weeks: “After NZD surged to 0.7034 and pulled back, we highlighted yesterday (06 Apr, spot at 0.6945) that NZD is not ready to head higher. We added, we continue to expect NZD to trade between 0.6870 and 0.7000. There is no change in our view for now.”

CME Group’s flash data for crude oil futures markets noted traders added around 21.6K contracts to their open interest positions on Wednesday. In the same line, volume reversed three daily pullbacks in a row and went up by nearly 300K contracts.

WTI: Door open to $95.00 and below

Wednesday’s downtick in prices of the WTI was on the back of increasing open interest and volume, leaving room for the continuation of the leg lower in the very near term at least. That said, the $95.00 region per barrel emerges as the next potential target for crude oil prices.

• USD/CAD is facing resistance near the 20-EMA and the trendline place from 1.2007.
• Falling oil prices have weakened the loonie.
• The Unemployment Rate of Canada will be a major event this week.

The USD/CAD pair has rebounded sharply after sensing a firmer responsive buying to near the round level support of 1.2400. The pair has witnessed a strong upside amid broader weakness in oil prices. The oil prices have been in the grip of bears after US President Joe Biden announced an additional release of 180 million barrels in six months from the Special Petroleum Reserve (SPR). Investors should be aware of the fact that Canada is a leading exporter of oil to the US and a plunge in the oil prices impact the loonie significantly.

Also, the hawkish comments from the Federal Reserve (Fed) policymakers in a while have brought a broader strength to the mighty greenback. The minutes from the Federal Open Market Committee (FOMC) of March on Wednesday have indicated one or more 50 basis points (bps) interest rate hikes this year. Therefore, two out of seven rate hikes promised by Fed Chair Jerome Powell may be an elevation of half a percent.

Going forward, the release of the Unemployment Rate by Statistics Canada will have a significant impact on the asset, which is due on Friday. A preliminary estimate for the jobless rate is 5.4% against the previous print of 5.5%.

USD/CAD Technical Analysis

On a daily scale, greenback bulls are attacking the 20-period Exponential Moving Average (EMA) at 1.2574. However, the trendline placed from June 2021 low at 1.2007 will continue to act as a major barricade for the asset.

USD/CAD daily chart

Industrial Production in Germany rose more than expected in February, the official data showed on Thursday, suggesting that the manufacturing sector activity is on a gradual recovery.

Eurozone’s economic powerhouse’s industrial output climbed by 0.2% MoM, the federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, vs. a 0.0% expected and 1.4% last.

On an annualized basis, German industrial production climbed by 3.2% in February versus a 1.1% increase registered in January.

FX implications

The shared currency is holding the higher ground near 1.0920 on the upbeat German industrial figures.

At the time of writing, EUR/USD is trading at 1.0914, up 0.22% on the day.

About German Industrial Production

The Industrial Production released by the Statistisches Bundesamt Deutschland measures outputs of the German factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. A high reading is seen as positive (or bullish) for the EUR, whereas a low reading is seen as negative (or bearish).

Bank of Japan (BOJ) policy board member Asahi Noguchi is back on the wires now, via Reuters, speaking on the recent depreciation of the yen.

Key quotes

Gold is looking to extend the downside this Thursday. As FXStreet’s Dhwanie Mehta notes, defending $1,915 is critical for XAU/USD.

XAU/USD looks south towards $1,915

“Risk-off sentiment remains in full swing heading into European trading amid new Russian sanctions and the Fed’s hawkishness. Traders also remain cautious ahead of a barrage of Fed speakers due on the docket, which could reinforce the bearish interests around gold price.”

“Gold’s daily chart shows that the price remains poised to test the horizontal trendline resistance near the $1,915 region. A sustained break below the latter will expose the $1,900 round figure. The last line of defense for bulls is seen at the March 29 low of $1,890.

“On the upside, the confluence of the 21 and 50-Simple Moving Averages (SMA) around $1,926 will offer immediate resistance. The horizontal 100-SMA at $1,931 is likely to guard the additional upside en-route the $1,940 barrier.”

Fuji News Network (FNN) reported on Thursday that US House speaker, Nancy Pelosi, is scheduled to visit Taiwan on Sunday, April 10.

The first visit by a serving US House Speaker since 1997 is likely to annoy Beijing and ramp up US-Sino tensions.

Global Times political editor, Hu Xijin, tweeted out already: “Pelosi is playing with fire, so is the US. There must be serious consequences for her visit."

Market reaction

AUD/USD is meandering to near-daily lows of 0.7474, undermined by the renewed US-China tensions and hawkish Fed minutes-led risk-aversion. The spot is down 0.41% on the day.

Cable could slip back further and retest the 1.3000 region in the next weeks, suggested FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we highlighted that GBP ‘could drop below 1.3050’. We added, ‘the major support at 1.3000 is likely out of reach’. While GBP subsequently took out 1.3050, it rebounded quickly from 1.3046 and ended the day little changed at 1.3069 (-0.02%). The underlying tone still appears to be a tad soft and the bias is on the downside. That said, 1.3000 is still likely out of reach (there is another support at 1.3040). Resistance is at 1.3095 followed by 1.3110.”

Next 1-3 weeks: “We highlighted yesterday (06 Apr, spot at 1.3070) that GBP could breach 1.3050 but it is left to be seen if GBP could crack the major support at 1.3000. GBP subsequently dropped to 1.3046 and there is no change in our view for now. Overall, only a breach of 1.3135 (no change in ‘strong resistance’ level) would indicate that the current downward bias has eased.”

Open interest in gold futures markets rose for the second session in a row on Wednesday, this time by around 4.3K contracts in light of advanced figures from CME Group. Volume followed suit and also went up for the second consecutive day, now by around 6.4K contracts.

Gold remains side-lined around $1920

Gold prices kept the familiar range on Wednesday amidst rising open interest and volume. Against that, the price action around the yellow metal is expected to remain consolidative for the time being, likely around the $1920 region.

• AUD/USD may witness a short-lived pullback towards the 50-EMA at 0.7540.
• A bear cross of 20- and 50-EMAs at 0.7565, adds to the downside filters.
• The RSI (14) has shifted into a bearish range of 20.00-40.00.

The AUD/USD pair has been through intense selling pressure after printing a fresh nine-month high at 0.7662 on Tuesday. The major has fallen like a house of cards and considering the ongoing price action, a bearish bias is likely to persist further. The major has eased more than 2.5% in the last two trading sessions.

On an hourly scale, AUD/USD is hovering around the critical demand zone, which is placed in a narrow range of 0.7456-0.7470. A sheer plunge in an asset is generally followed by a short-lived pullback which may drive the asset towards the 50-period Exponential Moving Average (EMA) at 0.7540.

A bear cross of 20- and 50-period Exponential Moving Averages (EMAs) at 0.7565, has infused an adrenaline rush into bears.

The Relative Strength Index (RSI) (14) has displayed a range shift after turning into a bearish range of 20.00-40.00 from the previous 40.00-60.00 range.

A short-lived pullback around the 50-EMA at 0.7540 will be a potential selling juncture for the market participants. This will drag the asset towards the demand zone of 0.7456-0.7470 range. Breach of the latter will expose the asset to further downside towards the March 21 low at 0.7373.

However, aussie bulls may regain strength if the asset surpasses Wednesday’s high at 0.7594. This will drive the asset towards the nine-month high at 0.7662, followed by the 11 June 2021 high at 0.7776.

AUD/USD hourly chart

According to FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, EUR/USD still risks a drop to the mid-1.0800s in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that EUR ‘could weaken further but oversold conditions suggests the next support at 1.0855 is likely out of reach’. We added, ‘there is another support at 1.0880’. Our view was not wrong as EUR dropped to 1.0873 before rebounding to close little changed at 1.0893 (-0.09%). Downward momentum has waned somewhat and this coupled with still oversold conditions suggests EUR is unlikely to weaken much further. For today, EUR is likely to trade between 1.0870 and 1.0935.”

Next 1-3 weeks: “Our narrative from yesterday (06 Apr, spot at 1.0905) still stands. As highlighted, the outlook for EUR is still negative and the next levels to focus on are at 1.0855 and 1.0820. That said, shorter-term conditions are oversold and this could lead to 1-2 days of consolidation first. Overall, only a breach of 1.0975 (‘strong resistance’ level was at 1.1000 yesterday) would indicate that the current downward pressure has eased.”

• USD/INR may find sellers near 76.00 amid easing uncertainty of the FOMC minutes.
• Oil prices are likely to see a decent correction amid a sluggish pullback.
• The RBI is expected to keep the repo rate unchanged on Friday.

The USD/INR pair has witnessed a sheer upside after rebounding sharply from weekly lows at 75.20. A mild pullback in the oil prices has harmed the Indian rupee, however, the pullback is likely to turn into a bearish impulsive wave soon amid easing supply concerns. This will lead to a correction in the asset around the round level resistance of 76.00

Uncertainty over the release of the Federal Open Market Committee (FOMC) minutes on Wednesday was underpinning the mighty greenback. However, the asset is likely to lose the upside momentum going forward as investors have shrugged off the fears of elevating interest rates by the Federal Reserve (Fed), whose impact reflects clearly in the US Treasury yields. The 10-year US Treasury yields have fallen to 2.58%, at the press time after printing a fresh three-year high at 2.66%.

Meanwhile, the US dollar index (DXY) is trading subdued in the Asian session despite the hawkish stance from the FOMC minutes.

Going forward, the market participants will keep an ever over the announcement of monetary policy by the Reserve Bank of India (RBI). This is the first monetary policy announcement by the RBI after Russia’s invasion of Ukraine.  The RBI is likely to maintain the status quo considering the higher oil prices in recent months, which are going to impact the GDP numbers of India. However, a higher forecast for inflation and a steep cut in the growth projections cannot be ruled out.

• Gold price remains offered despite risk-aversion, pullback in yields and the USD.
• Hawkish Fed’s outlook likely to dull gold’s appeal while Ukraine crisis to underpin.
• Gold Price Forecast: XAUUSD extends consolidation above $1,900.00.

Gold price is in the hands of sellers so far this Thursday, having settled almost unchanged on the day on Wednesday.

The hawkish Fed minutes unraveled the world’s most powerful central bank’s plans to pare the balance sheet and deliver a 50-basis points (bps) rate hike at its May meeting. The Fed’s aggressive stance is worrying investors, as it could cripple the economic growth while the Fed combats soaring inflation.

The sell-off in the techs and real estate stocks on Wall Street caused its Asian peers also to lean bearish, offering a heavy blow to the risk-on trades. Therefore, the haven demand for the US bond dragged the yields lower, invariably triggering a minor pullback in the US dollar.

With the Fed’s aggressive tightening plans in full swing, gold price is failing to benefit from the renewed weakness in the yields, as well as, the dollar. Gold price is also shrugging off any demand for it as a safe haven, as policy normalization remains a net negative for the bright metal in the longer run.

Markets also remain jittery amid the ongoing escalation in the Russia-Ukraine conflict following the Western sanctions against Russia’s war crimes in Ukraine. Attention now turns towards the speeches from the Fed policymakers Evans, Williams, Bostic and Bullard, which could have a significant impact on gold price in the coming days.

Gold Price Chart: Hourly 

Gold’s hourly technical picture shows that the price is eyeing a sharp drop towards the rising trendline support at $1,916.

The Relative Strength Index (RSI) is looking south below the midline, justifying the bias to the downside.

If the abovementioned support is breached, then a test of the $1,900 mark remains inevitable.

On the upside, immediate confluence resistance is seen around $1,925, where the 21 and 50-Hourly Moving Averages (HMA) close in.

The next critical upside target is seen near $1,928, where the 100 and 200-HMAs align.

Further up, the $1,930 round level could challenge the bearish commitments.

Gold Price: Additional levels to watch

• GBP/USD is scaling higher amid falling US Treasury yields.
• In coordination with the US, the UK has announced fresh sanctions on Russia.
•  Investors are shrugging off the impact of an aggressive tightening policy by the Fed.

The GBP/USD pair has rebounded sharply after hitting a low of 1.3048 on Wednesday. The cable is trading mildly positive on Thursday after the US Treasury yields lose steam. The 10-year benchmark US Treasury yields have fallen sharply after registering a fresh three-year high at 2.66%.

It seems that the market participants are shrugging off the impact of the hawkish stance from the Federal Reserve (Fed), which is likely to be revealed in May’s monetary policy. The minutes of March’s Federal Open Market Committee (FOMC) released on Wednesday have dictated that the Fed is looking to hike the interest rates by 50 basis points once or more this year. To contain the inflation mess, the Fed is left with no other option than to paddle the lending rates. Apart from that, a sheer balance sheet reduction will start from May in which $60B for Treasury securities, and $35B for mortgage-backed securities (MBS) will be reduced monthly.

Following the footprints of the US, the UK has announced fresh sanctions on Russia after its war crimes in Bucha, Ukraine. The UK administration has imposed an outright ban on all new outward investment into the country, reported Reuters. Adding to that, the UK has also announced an asset freeze on Russia's Sberbank and Credit Bank of Moscow, which hold more than one-third of Russia's total banking assets.

• USD/JPY corrects from six-day highs amid weaker yields, risk-off mood.
• Daily RSI has entered the overbought territory, cautioning bulls.
• Fed/BOJ divergence to favor the USD, keeping USD/JPY’s downside capped.

USD/JPY is off the lows but remains under pressure below 124.00, keeping its corrective downside intact from six-day highs of 124.06.

The major is tracking the US Treasury yields and the dollar lower, justifying the pullback. The hawkish Fed minutes spooked investors, as they scurried for safety in the US Treasury bonds, fuelling the sell-off in the yields.

Meanwhile, the BOJ policymakers defended the central bank’s ultra-loose monetary policy, cushioning the downside in the major. The Fed-BOJ policy divergence is playing out, offering support to the USD/JPY buyers.

Technically, USD/JPY’s daily chart shows that the price is lacking follow-through upside momentum, at the moment, as 14-day the Relative Strength Index (RSI) is trading within the overbought territory.

Therefore, a test of the 123.00 support level cannot be ruled out should the pullback regain traction.

USD/JPY: Daily chart

However, any retreat in the price is likely to emerge as a good buying opportunity, as the broader uptrend remains in place after the major confirmed a bull flag on the said timeframe earlier this week.

On the upside, if Wednesday’s high of 124.06 is taken out, then bulls will aim for the March 28 high of 125.10.

USD/JPY: Additional levels to consider

• Bears are hopeful of a weak pullback towards 89.00.
• A bear cross of 20- and 50-EMAs is likely to place at around 93.20.
• The RSI (14) has shifted into a bearish range of 20.00-40.00, which adds to the downside filters.

The USD/RUB pair is confined in Friday’s range of 81.00-89.00 from the last three trading sessions. The pair has turned balance after surrendering its entire gains, recorded on March 8 at 155.00 from pre-Ukraine-crisis levels.

On the daily scale, USD/RUB has witnessed a sluggish pullback to near 89.00 after nosediving below previous ground on March 24 low at 95.88. The 20- and 50-period Exponential Moving Averages (EMAs) are on the verge of giving a bearish crossover at around 93.20, which will establish a bearish setup for the asset.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped below 40.00 for the first time in the last five months. This has triggered a bearish bias and the greenback bulls may lose control. The RSI (14) is not displaying any sign of divergence and oversold scenario, which possesses the potential to call for a pullback.

Should the asset drop below Friday’s low at 81.00, bears will get activated and the asset will be exposed to more downside near the February 16 low and the round level support at 74.88 and 70.00 respectively.

On the contrary, if the asset overstep Friday’s high at 89.00, bulls may regain control and will drive the asset towards the 50-EMA at 93.25, followed by the psychological resistance of $100.00.

USD/RUB daily chart

• GBP/JPY sees a quick rebound amid dovish BOJ comments.
• Risk-off mood lifts the demand for the bonds, weighing down on the yields.
• GBP/JPY bulls stay hopeful whilst above the 21-SMA support.

GBP/JPY is recovering from lower levels this Thursday while snapping a four-day uptrend to six-day highs of 162.28.

At the time of writing, the cross is posting small losses on the day to trade at 161.80, weighed down by the risk-off market profile, which has revived the safe-haven flows into the US Treasuries. This has triggered a fresh corrective decline in the Treasury yields across the curve, collaborating with the downside on the spot.

The hawkish Fed minutes combined with the lingering Russia-Ukraine war-driven risks are tempering risk sentiment, as the US dollar looks to regain its upward trajectory. Meanwhile, the latest dovish remarks from the Bank of Japan (BOJ) officials, defending the country’s ultra-loose monetary policy, are helping keep the cross afloat.

The pair is likely to remain at the mercy of the broader market sentiment, yields’ price action, the upcoming Ukraine updates and Fedspeak.

GBP/JPY: Technical outlook

From a short-term technical perspective, GBP/JPY bulls remain hopeful so long as they defend the bullish 21-Simple Moving Average (SMA) at 161.36.

A breach of the latter could bring the horizontal 50-SMA at 161.08 into play. The April 5 lows at 160.51 will be the line in the sand for buyers.

GBP/JPY four-hour chart

The 14-day Relative Strength Index (RSI), however, is inching higher while above the midline, allowing room for more upside.

Immediate resistance is seen at 162.28 (the previous day’s high), above which buyers will gear up for a fresh run-up towards 165.00.

GBP/JPY additional levels to watch

• EUR/USD is marching towards 1.0920 on optimism of monthly Retail Sales.
• The ECB minutes will dictate the mathematics behind the unchanged policy stance in March.
• Falling US Treasury yields have kept the DXY on the sidelines.

The EUR/USD pair is displaying a bullish open drive trading session on Thursday as investors are awaiting the release of European Central Bank (ECB) meeting minutes and Retail Sales data, which are due on Thursday. The major started scaling higher right from the first opening tick at 1.0898

The minutes from the ECB will dictate detailed insights regarding the stance of the ECB policymakers on the monetary policy announced in March. Apart from that, the monthly and yearly Retail Sales by Eurostat will have a significant impact on the shared currency. A preliminary estimate for the monthly and yearly Retail Sales is 0.6% and 4.8% respectively. However, the previous prints of monthly and yearly Retail Sales were 0.2% and 7.8% respectively.

Earlier, the major has remained vulnerable in the past few trading sessions amid the escalation of recession fears due to the Ukraine crisis. The discussions over the European Union (EU)’s embargo on Russian oil brought an intensified sell-off in the asset. Europe addresses more than 25% of its oil demand from Russia and an overnight ban on Russian oil may raise hopes of stagflation in the Eurozone.

Meanwhile, the US dollar index (DXY) is oscillating in a narrow range of 99.55-99.65 in the Tokyo session amid falling US Treasury yields. The 10-year US Treasury yields have slipped near 2.58% after registering a fresh three-year high at 2.66%.

Bank of Japan (BOJ) Executive Director Shinichi Uchida is defending Japan’s ultra-loose monetary policy, citing that the benefits of BOJ’s easy policy have spread across the economy.

Additional quotes

Earlier on, BOJ policymaker Asahi Noguchi said, “BOJ must maintain an easy policy to ensure labor market improves and lead to an appropriate level of wage growth.”

Market reaction

USD/JPY is keeping its recovery mode intact towards 124.00, as the renewed weakness in the US dollar and Treasury yields make it an uphill battle for bulls.

European Central Bank (ECB) Governing Council member and Bundesbank President Joachim Nagel said early Thursday that the ECB has agreed to make a decision in June.

Additional comments

"Inflation may average 6% this year."

"We can't allow high prices to become entrenched."

Analysts at Morgan Stanley have turned neutral on the British pound, still hinting at downside risks amid the UK economic growth concerns.

Key quotes

"We turn neutral on GBP and closed our short GBP/NOK position as risk/reward for short GBP has become less attractive. That said, we think risks are still skewed to the downside for GBP as the UK faces slowing growth and the largest real disposable income hit on consumers since the 1970s.

“Despite this, markets are still pricing in too much policy tightening in our view, with more than five 25bp hikes priced in for this year. Our economists expect only two 25bp hikes for this year, in May and June respectively."

• NZD/USD bulls are under pressure as the US dollar firms. 
• Bears are taking the lead on the back of a firmly hawkish Fed. 

NZD/USD is under pressure as the US dollar remains firm following a hawkish outcome at the Federal Reserve with Wednesday's release of the Federal Open Market Committee meeting minutes. At the time of writing, NZD/USD is trading at 0.75 the figure that has ranged between a low of 0.7491 and a high of 0.7519. 

''A bout of volatility was seen around 6am when the Fed minutes were released, with the USD and bond yields initially coming off despite clear hawkish overtones (news that 50bps was considered last month, confirmation that 50bp hikes are on the table at future meetings, and a strong signal that QT of up $95/month could begin as soon as next month),'' analysts at ANZ Bank said.

''Markets were already expecting a lot of this, but it was still hawkish and once the dust settled, the USD and US bond yields eventually rose a touch. The NZD is still tracking the AUD; with oil and commodity prices lower overnight, it has been a less rosy backdrop – in the short term at least.''

Bank of Japan (BOJ) policy board member Asahi Noguchi is making some comments on the impact of higher inflation on the economy, courtesy of rising energy prices.

Key quotes

Market reaction

USD/JPY bulls are taking back control, as the major recovers losses to recapture 123.50. The pullback in the pair could be attributed to the renewed downside in the US Treasury yields across the curve. The spot is down 0.13% on the day.

• AUD/USD holds the lower ground, near0.7500 amid broad risk-aversion.
• Stronger yields on hawkish Fed minutes weigh on the sentiment.
• Australian Trade data comes in mixed, focus shifts to US data, Fedspeak.

AUD/USD remains pressured around 0.7500, having challenged the post-FOMC minutes lows at 0.7487, as the mixed Australian Trade data fail to impress bulls.

Read: Aussie Trade Balance, imports far higher than expected

The aussie remains undermined by the broad risk-aversion, as investors weigh in the hawkish Fed March meeting’s minutes. The Fed minutes signaled plans for the balance sheet reduction by more than $1 trillion a year while raising the rates alongside.

Tech and real estate stocks on Wall Street tumbled on the hawkish Fed minutes-led surge in the US Treasury yields. The Asian equities are tracking the US stocks lower, adding to the weight on the risk-sensitive aussie.

Meanwhile, the escalating tensions over the Russian invasion of Ukraine are also keeping investors away from higher-yielding assets such as the aussie, as they seek safety in the US dollar.

The antipodean is moving further away from the multi-month highs of 0.7663, reached earlier this week on a hawkish surprise from the Reserve Bank of Australia (RBA). The RBA dropped the ‘patient’ pledge on inflation development, hinting at a likely rate hike as early as this quarter. Analysts at Westpac now see the RBA rate hike in June.

Looking ahead, the US Jobless Claims will offer some cues on the dollar trades while a slew of Fed speeches will hog the limelight.

AUD/USD: Technical levels to consider

The Australian trade balance released by the Australian Bureau of Statistics could weigh on the Aussie currency as imports came in far higher than expected. 

Trade Balance

• Australia's Trade Balance for February 7.46bn AUD surplus vs. the expected surplus 12bn AUD and prior surplus 12.891bn AUD.
• Exports (MoM) Feb: 0% (est 0%; prev 8%).
•  Imports (MoM) Feb: 12% (est 2%; prev -2%).

AUD/USD is losing ground in general but the price has been established on the data, despite the rise in imports and a miss in the surplus as a consequence. AUD/USD is still down some 0.15% for the session at 0.7495 and below the 0.7518 highs. 

About the Trade Balance

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Review Alex Nekritin's Article - Trading the Aussie with Australia Trade Balance

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3659 vs. the last close of 6.3588.

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 closing level and quotations taken from the inter-bank dealer.

Australia’s Trade Balance is coming up at the top of the hour. Analysts at Westpac are expecting a $13.2bn trade surplus, within a whisker of the $13.3bn peaks last July (median forecast $11.7bn).

The analysts forecast export to push higher still in February, +2.2%, up $1.1bn. They note that coal and LNG likely advanced, at higher prices and volumes. I

''Iron ore is expected to ease a little despite higher prices, with shipments soft in the month. Imports dipped in January, -1.6%, after a 13% jump over the previous two months associated with the post delta reopening. For February, a resumption of the uptrend is expected, +2.2%, +$0.8bn, on higher volumes and rising prices.''

What to expect from AUD?

AUD/USD has failed to rally higher despite the Reserve Bank of Australia (RBA) that shifted towards a hawkish pivot as it dropped its ‘patient’ stance on the inflation developments. The monetary policy statement read that the Australian economy remains resilient and spending is picking up following the omicron setback.

AUD/USD rallied to a high of 0.7661 but quickly dropped back to the 0.7480s on a firm US dollar. Unless the surplus surprises in a positive way, the Aussie is likely to remain pressured by the firmness of US yields and the greenback. 

About the Trade Balance

The trade balance released by the Australian Bureau of Statistics is the difference in the value of its imports and exports of Australian goods. Export data can give an important reflection of Australian growth, while imports provide an indication of domestic demand. Trade Balance gives an early indication of the net export performance. If a steady demand in exchange for Australian exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Review Alex Nekritin's Article - Trading the Aussie with Australia Trade Balance

• USD/JPY has slipped to near 123.50 as falling US Treasury yields weaken the greenback against yen.
• The 10-year US Treasury yields attracted offers after printing a three-year high at 2.66%.
• IIMF has advocated a prolonged ultra-loose policy for the BOJ.

The USD/JPY has slipped sharply in the Asian session at around 123.50 after juggling in a narrow range of 123.71-123.93. On Thursday, the asset is displaying a bearish open rejection-reverse trading session. The USD/JPY opened at 123.80, moved higher to 123.93, and then the yen bulls attacked the asset, which dragged the major sharply below the opening price to a low near 123.50.

The asset has been offered by the market participants on the subdued performance of US Treasury yields on Thursday. The 10-year benchmark US Treasury yields have retreated from the highs of 2.66% while the 2-year US Treasury yields, which are more sensitive to the interest rates, have faced more heat. The reason behind bears gaining control over the Treasury yields is that the market participants have already discounted the hawkish Federal Open Market Committee (FOMC) minutes.  

Meanwhile, the report from the International Monetary Fund (IMF) advocates that the Bank of Japan (BOJ) should stick to its ultra-loose monetary policy for a prolonged period. Higher commodity prices and a rebound in the consumption pattern may pressure BOJ to paddle the interest rates but a consistent dovish stance will be beneficial for the economy. Apart from that, IMF has cut Japan's 2022 economic growth projection to 2.4%, significantly lower than the forecast of 3.3% reported in January.

• USD/CAD bears are moving in as the bulls start to lose interest. 
• The US dollar was firm overnight but has not managed to move higher in Asia, so far. 

USD/CAD is trying to break out to the upside but the bulls are making hard work of it as the price stalls on the bid. The central banks are a focus as are commodities, but the US dollar has been unable to break to fresh highs despite a hawkish Federal Reserve. The following illustrates prospects of a meanwhile bearish correction prior to a move to the upside. 

USD/CAD daily chart

USD/CAD has firmed from the daily chart's consolidation area between the low 1.24 area and the 1.2550s. The bulls are breaking out towards a 38.2% Fibonacci area through 1.2580 but a downside correction could be in order if the US dollar cannot maintain trajectory.

• Failing to surpass the 20-EMA will bring more pain for the sterling bulls.
• The RSI (14) has tumbled below 40.00, showing no signs of divergence and an oversold situation.
• An establishment below the symmetrical triangle will fetch significant offers for the cable.

The GBP/USD pair has sensed selling pressure to near 1.3167 after remaining choppy in the first three trading sessions of April. The 20-period Exponential Moving Average (EMA) at 1.3095 has acted as a major barrier for the pound bulls.

On a four-hour scale, the cable has comfortably established below the symmetrical triangle formation. This is going to bring significant volumes in the asset going forward. The upper boundary of the chart pattern is placed from March 25 high at 1.3225 while the lower boundary is marked from March 15 low at 1.3000.

The 50-EMA is scaling lower at 1.3114, which adds to the downside filters. Adding to that, the Relative Strength Index (RSI) (14) has plunged below 40.00, which signals more pain ahead. The RSI (14) is not displaying any sign of divergence and oversold scenario.

A slippage below Tuesday’s low at 1.3067, will strengthen the greenback bulls and the pair may hit the downside to near March 16 low at 1.3036, followed by the psychological support at 1.3000.

On the flip side, after overstepping the 50-EMA at 1.3114, the asset will march towards Tuesday’s high at 1.3167. Breach of the latter will drive the asset towards the round level resistance at 1.3200.

GBP/USD four-hour chart

• The FOMC finalized its plans to shrink bond holdings.
• RBA shifted towards a hawkish pivot as it dropped its ‘patient’ stance on the inflation developments.

AUD/USD was under pressure on Wednesday, despite the hawkish twist at the Reserve Bank of Australia in the prior Asian session. AUD/USD succumbed to a hawkish Federal Reserve Open market Committee meeting minutes instead, falling from 0.7593 to a low of 0.7485 and losing 1.14% in the move. 

At the time of writing, AUD/USD is trading around 0.75 the figure and flat o the session so far as traders get set for the Trade Balance figures. ''For February, we anticipate a $13.2bn trade surplus, within a whisker of the $13.3bn peak last July (median forecast $11.7bn). Export earnings surged 7.6% in January (+$3.5bn), led by metal ores (+$1.9bn),'' analysts at Westpac said. 

Meanwhile, according to the minutes of the March FOMC meeting, participants judged that it would be appropriate to move the stance of monetary policy towards a neutral posture expeditiously, reported Reuters. The FOMC finalized its plans to shrink bond holdings in an aggressive effort to curb rising prices.

The Fed is preparing to shrink the $9tn balance sheet at a pace of roughly $95bn a month. Additionally,  "many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified," the minutes said.

As for the Reserve Bank of Australia (RBA), the central bank shifted towards a hawkish pivot as it dropped its ‘patient’ stance on the inflation developments. Board members decided to keep the official cash rate (OCR) steady at a record low of 0.10% during their April 5 monetary policy meeting. The monetary policy statement read that the Australian economy remains resilient and spending is picking up following the omicron setback.